Document:

<PAGE>

                                                                     EXHIBIT 4.3

                                                                  EXECUTION COPY

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

                             AMENDED AND RESTATED

                             DECLARATION OF TRUST

                                    between

                 COMMONWEALTH BANKSHARES, INC., as Depositor,

                           WILMINGTON TRUST COMPANY,
                             as Property Trustee,

                           WILMINGTON TRUST COMPANY,
                             as Delaware Trustee,

                                      and

                   THE ADMINISTRATIVE TRUSTEES NAMED HEREIN

                           Dated as of _____________

                    COMMONWEALTH BANKSHARES CAPITAL TRUST I

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

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                                Page
                                                                                                                                ----
<S>                                                                                                                             <C>
ARTICLE I - Defined Terms......................................................................................................    1
     SECTION 1.01.       Definitions...........................................................................................    1
                         -----------

ARTICLE II - Continuation of the Trust.........................................................................................   11

     SECTION 2.01.       Name.................................................................................................... 11
                         ----
     SECTION 2.02.       Office of the Delaware Trustee; Principal Place of Business............................................. 11
                         -----------------------------------------------------------
     SECTION 2.03.       Organizational Expenses................................................................................. 11
                         -----------------------
     SECTION 2.04.       Issuance of the Capital Securities...................................................................... 11
                         ----------------------------------
     SECTION 2.05.       Issuance of the Common Securities Subscription and Purchase of Junior Subordinated Debt Securities...... 11
                         --------------------------------------------------------------------------------------------------
     SECTION 2.06.       Declaration of Trust.................................................................................... 12
                         --------------------
     SECTION 2.07.       Authorization to Enter into Certain Transactions........................................................ 12
                         ------------------------------------------------
     SECTION 2.08.       Assets of Trust......................................................................................... 16
                         ---------------
     SECTION 2.09.       Title to Trust Property................................................................................. 16
                         -----------------------

ARTICLE III - Payment Account..................................................................................................   16

     SECTION 3.01.       Payment Account.......................................................................................   16
                         ---------------

ARTICLE IV - Distributions; Redemption; Conversion.............................................................................   17

     SECTION 4.01.       Distributions.........................................................................................   17
                         -------------
     SECTION 4.02.       Redemption............................................................................................   18
                         ----------
     SECTION 4.03.       Subordination of Common Securities....................................................................   20
                         ----------------------------------
     SECTION 4.04.       Payment Procedures....................................................................................   21
                         ------------------
     SECTION 4.05.       Tax Returns and Reports...............................................................................   21
                         -----------------------
     SECTION 4.06.       Payment of Taxes; Duties of the Trust.................................................................   21
                         -------------------------------------
     SECTION 4.07.       Payments Under Indenture..............................................................................   21
                         ------------------------
     SECTION 4.08.       Conversion Rights.....................................................................................   21
                         -----------------

ARTICLE V - Trust Securities Certificates......................................................................................   26

     SECTION 5.01.       Initial Ownership.....................................................................................   26
                         -----------------
     SECTION 5.02.       Trust Securities Certificates.........................................................................   26
                         -----------------------------
     SECTION 5.03.       Execution and Delivery of Trust Securities Certificates...............................................   26
                         -------------------------------------------------------
     SECTION 5.04.       Global Capital Security...............................................................................   27
                         -----------------------
     SECTION 5.05.       Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Capital Securities
                         ----------------------------------------------------------------------------------------------------
                         Certificates..........................................................................................   28
                         ------------
     SECTION 5.06.       Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates....................................   30
                         ------------------------------------------------------------------
     SECTION 5.07.       Persons Deemed Securityholders........................................................................   30
                         ------------------------------
     SECTION 5.08.       Access to List of Securityholders' Names and Addresses................................................   31
                         ------------------------------------------------------
     SECTION 5.09.       Maintenance of Office or Agency; Transfer Agent.......................................................   31
                         -----------------------------------------------
     SECTION 5.10.       Appointment of Paying Agent...........................................................................   31
                         ---------------------------
     SECTION 5.11.       Ownership of Common Securities by Depositor...........................................................   32
                         -------------------------------------------
     SECTION 5.12.       Notices to Clearing Agency............................................................................   32
                         --------------------------
</TABLE>

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<PAGE>

<TABLE>

<S>                                                                                                                             <C>
     SECTION 5.13.       Rights of Securityholders.............................................................................   32
                         -------------------------

ARTICLE VI - Acts of Securityholders; Meetings; Voting.........................................................................   34

     SECTION 6.01.       Limitations on Capital Securityholder's Voting Rights.................................................   34
                         -----------------------------------------------------
     SECTION 6.02.       Notice of Meeting.....................................................................................   35
                         -----------------
     SECTION 6.03.       Meetings of Securityholders...........................................................................   35
                         ---------------------------
     SECTION 6.04.       Voting Rights.........................................................................................   36
                         -------------
     SECTION 6.05.       Proxies...............................................................................................   36
                         -------
     SECTION 6.06.       Securityholder Action by Written Consent..............................................................   36
                         ----------------------------------------
     SECTION 6.07.       Record Date for Voting and Other Purposes.............................................................   37
                         -----------------------------------------
     SECTION 6.08.       Acts of Securityholders...............................................................................   37
                         -----------------------
     SECTION 6.09.       Inspection of Records.................................................................................   38
                         ---------------------

ARTICLE VII - Representations and Warranties...................................................................................   38
     SECTION 7.01.       Representations and Warranties of the Property Trustee and the Delaware Trustee.......................   38
                         -------------------------------------------------------------------------------
     SECTION 7.02.       Representations and Warranties of Depositor...........................................................   39
                         -------------------------------------------

ARTICLE VIII -The Trustees.....................................................................................................   39
     SECTION 8.01.       Certain Duties and Responsibilities...................................................................   39
                         -----------------------------------
     SECTION 8.02.       Events of Default Notices; Deferral of Interest Payment Notices.......................................   41
                         ---------------------------------------------------------------
     SECTION 8.03.       Certain Rights of Property Trustee....................................................................   41
                         ----------------------------------
     SECTION 8.04.       Not Responsible for Recitals..........................................................................   43
                         ----------------------------
     SECTION 8.05.       May Hold Securities...................................................................................   43
                         -------------------
     SECTION 8.06.       Compensation, Indemnity Fees..........................................................................   44
                         ----------------------------
     SECTION 8.07.       Corporate Property Trustee Required; Eligibility of Trustees..........................................   45
                         ------------------------------------------------------------
     SECTION 8.08.       Conflicting Interests.................................................................................   45
                         ---------------------
     SECTION 8.09.       Co-Trustees and Separate Trustee......................................................................   47
                         --------------------------------
     SECTION 8.10.       Resignation and Removal; Appointment of Successor.....................................................   48
                         -------------------------------------------------
     SECTION 8.11.       Acceptance of Appointment by Successor................................................................   49
                         --------------------------------------
     SECTION 8.12.       Merger, Conversion Consolidation or Succession to Business............................................   50
                         ----------------------------------------------------------
     SECTION 8.13.       Preferential Collection of Claims Against Depositor or Trust..........................................   50
                         ------------------------------------------------------------
     SECTION 8.14.       Reports by Property Trustee...........................................................................   51
                         ---------------------------
     SECTION 8.15.       Reports to the Property Trustee.......................................................................   52
                         -------------------------------
     SECTION 8.16.       Evidence of Compliance with Conditions Precedent......................................................   52
                         ------------------------------------------------
     SECTION 8.17.       Number of Trustees....................................................................................   52
                         ------------------
     SECTION 8.18.       Delegation of Power...................................................................................   53
                         -------------------

ARTICLE IX - Termination, Liquidation and Merger...............................................................................   53
     SECTION 9.01.       Termination Upon Expiration Date; Termination Upon Special Event......................................   53
                         ----------------------------------------------------------------
     SECTION 9.02.       Early Termination.....................................................................................   53
                         -----------------
     SECTION 9.03.       Termination...........................................................................................   54
                         -----------
     SECTION 9.04.       Liquidation...........................................................................................   54
                         -----------
</TABLE>

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<S>                                                                                                                             <C>
     SECTION 9.05.       Mergers, Consolidations, Amalgamations or Replacements of the Trust...................................   54
                         -------------------------------------------------------------------

ARTICLE X - Miscellaneous Provisions...........................................................................................   55
     SECTION 10.01.      Limitation of Rights of Securityholders...............................................................   55
                         ---------------------------------------
     SECTION 10.02.      Liability of the Depositor............................................................................   55
                         --------------------------
     SECTION 10.03.      Amendment.............................................................................................   55
                         ---------
     SECTION 10.04.      Separability..........................................................................................   57
                         ------------
     SECTION 10.05.      Governing Law.........................................................................................   57
                         -------------
     SECTION 10.06.      Payments Due on Non-Business Day......................................................................   57
                         --------------------------------
     SECTION 10.07.      Successors............................................................................................   57
                         ----------
     SECTION 10.08.      Headings..............................................................................................   57
                         --------
     SECTION 10.09.      Reports, Notices and Demands..........................................................................   57
                         ----------------------------
     SECTION 10.10.      Agreement Not to Petition.............................................................................   58
                         -------------------------
     SECTION 10.11.      Trust Indenture Act; Conflict with Trust Indenture Act................................................   58
                         ------------------------------------------------------
     SECTION 10.12.      Acceptance of Terms of Declaration of Trust, Guarantee and Indenture..................................   59
                         --------------------------------------------------------------------
     SECTION 10.13.      Execution in Counterparts.............................................................................   59
                         -------------------------
</TABLE>

                                      iii
<PAGE>

                    COMMONWEALTH BANKSHARES CAPITAL TRUST I

     Certain Sections of this Declaration of Trust relating to Sections 310
through 318 of the Trust Indenture Act of 1939:

Trust Indenture                                             Declaration of
Act Section                                                 Trust Section
-----------                                                 -------------
(S).310   (a)(1)........................................        8.07
          (a)(2)........................................        8.07
          (a)(3)........................................        8.09
          (a)(4)........................................        2.07(a)(ii)
          (b)...........................................        8.08
(S).311   (a)...........................................        8.13
          (b)...........................................        8.13
(S).312   (a)...........................................        5.08
          (b)...........................................        5.08
          (c)...........................................        5.08
(S).313   (a)...........................................        8.14 (a)
          (a)(4)........................................        8.14 (b)
          (b)(1)........................................        8.14 (a)
          (b)(2)........................................        8.14 (b)
          (c)...........................................       10.09
          (d)...........................................        8.14 (c)
(S).314   (a)...........................................        8.15
          (b)...........................................        Not Applicable
          (c)(1)........................................        8.16
          (c)(2)........................................        8.16
          (c)(3)........................................        Not Applicable
          (d)...........................................        Not Applicable
          (e)...........................................        1.01, 8.16
(S).315   (a)...........................................        8.01(a), 8.03(a)
          (b)...........................................        8.02
          (c)_..........................................        8.01(a)
          (d)...........................................        8.01, 8.03
          (e)...........................................        Not Applicable
(S).316   (a)...........................................        Not Applicable
          (a)(1)(A).....................................        Not Applicable
          (a)(1)(B).....................................        Not Applicable
          (a)(2)........................................        Not Applicable
          (b)...........................................        5.13
          (c)...........................................        6.07
(S).317   (a)(1)........................................        Not Applicable
          (a)(2)........................................        Not Applicable
          (b)...........................................        5.10
(S).318   (a)...........................................       10.11

_______________________
Note:   This reconciliation and tie shall not, for any purpose, be deemed to be
        a part of the Declaration of Trust.

<PAGE>

     AMENDED AND RESTATED DECLARATION OF TRUST, dated as of ______________,
2000, between (i) COMMONWEALTH BANKSHARES, INC., a Virginia corporation
(including any successors or assigns, the "Depositor"), (ii) WILMINGTON TRUST
COMPANY, a Delaware corporation, as property trustee (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Trust Company"), (iii) WILMINGTON TRUST
COMPANY, a Delaware corporation, as Delaware trustee (the "Delaware Trustee"),
(iv) EDWARD J. WOODARD, JR., an individual, and JOHN H. GAYLE, an individual,
each of whose address is c/o Commonwealth Bankshares, Inc. (each an
"Administrative Trustee" and, collectively, the "Administrative Trustees") (the
Property Trustee, the Delaware Trustee and the Administrative Trustees are
referred to collectively herein as the "Trustees") and (v) the several Holders,
as hereafter defined.

                              W I T N E S S E T H

     WHEREAS the Depositor, the Delaware Trustee and the Administrative Trustees
have heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act by entering into a certain Declaration of Trust,
dated as of _____________, 2000 (the "Original Declaration of Trust"), and by
the execution and filing by the Delaware Trustee and the Administrative Trustees
with the Secretary of State of the State of Delaware of the Certificate of
Trust, filed on November __, 2000 (the "Certificate of Trust"); and attached as
Exhibit A; and
---------

     WHEREAS the Depositor, the Delaware Trustee and the Administrative Trustees
desire to amend and restate the Original Declaration of Trust in its entirety as
set forth herein to provide for, among other things (i) the issuance and sale of
the Common Securities by the Trust to the Depositor, (ii) the issuance and sale
of the Capital Securities (the "Capital Securities") by the Trust pursuant to
the Underwriting Agreement, as hereafter defined, (iii) the acquisition by the
Trust from the Depositor of all of the right, title and interest in the Junior
Subordinated Debt Securities, as hereafter defined, and (iv) the appointment of
Wilmington Trust Company, a Delaware corporation (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and not in its
capacity as Property Trustee, the "Trust Company");

     NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, as hereafter defined, hereby amends
and restates the Original Declaration of Trust in its entirety and agrees as
follows:

                                   ARTICLE I

                                 Defined Terms
                                 -------------

     SECTION 1.01.  Definitions.  For all purposes of this Declaration of Trust,
                    -----------
except as otherwise expressly provided or unless the context otherwise requires:

                                       1
<PAGE>

          (a)  the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;

          (b)  all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;

          (c)  unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Declaration of Trust; and

          (d)  the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Declaration of Trust as a whole and not to any
particular Article., Section or other subdivision; and

     "Act" has the meaning specified in Section 6.08.

     "Additional Distribution" has the meaning specified in Section 4.01(c).

     "Administrative Action" has the meaning specified in the definition of "Tax
Event" in this Section 1.01.

     "Administrative Trustee" means each of Edward J. Woodard, Jr. and John H.
Gayle, solely in such Person's capacity as Administrative Trustee of the Trust
continued hereunder and not in such Person's individual capacity, or such
Administrative Trustee's successor in interest in such capacity, or any
successor trustee appointed as herein provided.

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

     "Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Capital Security or beneficial interest therein, the rules
and procedures of the depositary for such Capital Security, in each case to the
extent applicable to such transaction and as in effect from time to time.

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

          (a)  the entry of a decree or order by a court having jurisdiction in
the premises adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication or
composition of or in respect of such Person under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or ordering
the winding up or liquidation of its

                                       2
<PAGE>

affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or

          (b)  the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
such Person or of any substantial part of its property or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due and its willingness
to be adjudicated a bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.

     "Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on, the date of
such certification and delivered to the Trustees.

     "Business Day" means a day other than (a) a Saturday or Sunday, (b) a day
on which banking institutions in the City of Norfolk, Virginia are authorized or
required by law or executive order to remain closed or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.

     "Capital Securities" means each of the $8.00 Convertible Preferred
Securities to be issued on the date hereof, each representing an undivided
beneficial interest in the assets of the Trust, having a Liquidation Amount of
$25.00 per Capital Security and having the rights provided therefor in this
Declaration of Trust, including the right to receive Distributions and a
Liquidation Distribution as provided herein.

     "Capital Securities Certificate" means a certificate evidencing ownership
of Capital Securities, substantially in the form attached as Exhibit B.

     "Capital Securityholder" means a Person in whose name a Capital Security or
Capital Securities is registered in the Securities Register; and any such Person
shall be deemed to be a beneficial owner within the meaning of the Delaware
Business Trust Act.

     "Capital Treatment Event" has the meaning specified in Section 1.01 of the
Indenture.

     "Cede" has the meaning specified in Section 5.04(a).

     "Certificate of Trust" has the meaning specified in the preamble to this
Declaration of Trust.

                                       3
<PAGE>

     "Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934.  The Depository
Trust Company shall be the initial Clearing Agency.

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

     "Closing Date" has the meaning specified in the Underwriting Agreement.

     "Closing Price" shall have the meaning specified in Section 4.08(h)(iv).

     "Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.

     "Common Securities" means the Common Securities, each representing an
undivided beneficial interest in the assets of the Trust, having a Liquidation
Amount of $25.00 and having the rights provided therefor in this Declaration of
Trust, including the right to receive Distributions and a Liquidation
Distribution as provided herein.

     "Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit C.

     "Common Stock" means the common stock, par value $2.50 per share, of the
Depositor.

     "Conversion Agent" has the meaning specified in Section 4.08(c).

     "Conversion Date" has the meaning specified in Section 4.08(b).

     "Conversion Price" has the meaning specified in Section 4.08(a).

     "Conversion Request" has the meaning specified in Section 4.08(b).

     "Conversion Termination Date" has the meaning specified in Section
4.08(h)(ii).

     "Corporate Trust Office" means the principal office of the Property Trustee
located in Wilmington, Delaware which, at the time of the execution of this
Declaration of Trust, is located at 1100 N. Market Street, Attention:  Corporate
Trust Administration, Wilmington, Delaware 19890.

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

     "Debenture Trustee" means Wilmington Trust Company, a Delaware corporation
and any successor.

                                       4
<PAGE>

     "Declaration of Trust" means this Amended and Restated Declaration of
Trust, as the same may be modified, amended or supplemented in accordance with
the applicable provisions hereof, including all exhibits hereto, including, for
all purposes of this Amended and Restated Declaration of Trust, the provisions
of the Trust Indenture Act that are deemed to be a part of and govern this
Amended and Restated Declaration of Trust and any modification, amendment or
supplement of either, respectively.

     "Definitive Capital Securities Certificate" means Capital Securities
Certificates issued in certificated, fully registered form.

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

     "Delaware Trustee" means the corporation identified as the "Delaware
Trustee" in the preamble to this Declaration of Trust solely in its capacity as
Delaware Trustee of the Trust continued hereunder and not in its individual
capacity, or its successor in interest in such capacity, or any successor
trustee appointed as herein provided.

     "Depositor" has the meaning specified in the preamble to this Declaration
of Trust.

     "Distribution Date" has the meaning specified in Section 4.01(a).

     "Distributions" means amounts payable in respect of the Trust Securities as
provided in Section 4.01.

     "Early Termination Event" has the meaning specified in Section 9.02.

     "Escrow Agent" means Wilmington Trust Company.

     "Event of Default" means any one of the following events (whatever the
reason for such Event of Default 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 a Debenture Event of Default; or

          (b)  default by the Trust in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or

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

          (d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Declaration of Trust (other
than a covenant or warranty, a default in the performance or breach of which is
addressed in clause (b) or (c)

                                       5
<PAGE>

above), and continuation of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the defaulting Trustee
or Trustees 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

          (e)  the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property Trustee
within 60 days thereof.

     "Expiration Date" has the meaning specified in Section 9.01.

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

     "Global Capital Securities" means a beneficial interest in the Capital
Securities, ownership and transfers of which shall be made through book entries
by a Clearing Agency as described in Section 5.11.

     "Global Capital Securities Certificate" means a certificate evidencing
ownership of Global Capital Securities, substantially in the form attached as
Exhibit B.
---------

     "Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, contemporaneously with the
execution and delivery of this Declaration of Trust, for the benefit of the
Holders of the Trust Securities, as amended from time to time.

     "Holder" or "Securityholder" means a Person in whose name a Trust Security
or Trust Securities is registered in the Securities Register; any such Person
shall be deemed to be a beneficial owner of such Trust Securities within the
meaning of the Delaware Business Trust Act; provided, however, that in
                                            --------  -------
determining whether the Holders of the requisite amount of Capital Securities
have voted on any matter provided for in this Declaration of Trust, then for the
purpose of any such determination, so long as Definitive Capital Securities
Certificates have not been issued, the term Securityholders or Holders as used
herein shall refer to the Owners.

     "Indenture" means the Junior Subordinated Indenture, dated as of
___________, 2000, between the Depositor and the Debenture Trustee, as trustee,
(as amended or supplemented from time to time) relating to the issuance of the
Junior Subordinated Debt Securities.

     "Investment Company Event" has the meaning specified in Section 1.01 of the
Indenture.

     "Junior Subordinated Debt Securities" means [$8,050,000 in aggregate
principal amount of the Depositor's Junior Subordinated Debt Securities due
January 15, 2031, issued pursuant to the Indenture.

     "Junior Subordinated Debt Securities Redemption Date" means, with respect
to any Junior Subordinated Debt Securities to be redeemed under the Indenture,
the date fixed for

                                       6
<PAGE>

redemption under the Indenture or pursuant to an Officers' Certificate in
accordance with the terms of the Indenture.

     "Letter of Representations" means the agreement between the Trust, the
Property Trustee and The Depository Trust Company ("DTC"), as the initial
Clearing Agency, dated as of the Closing Date.

     "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.

     "Like Amount" means (a) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Junior Subordinated Debt Securities to be contemporaneously
redeemed in accordance with the Indenture allocated to the Trust Securities
based upon their relative Liquidation Amounts and the proceeds of which will be
used to pay the Redemption Price of such Trust securities, and (b) with respect
to a distribution of Junior Subordinated Debt Securities to Holders in
connection with a dissolution or liquidation of the Trust, Junior Subordinated
Debt Securities having a principal amount equal to the Liquidation Amount of the
Trust Securities of the Holder to whom such Junior Subordinated Debt Securities
are distributed.

     "Liquidation Amount" means the stated amount of $25.00 per Trust Security.

     "Liquidation Date" means the date on which Junior Subordinated Debt
Securities are to be distributed to Holders of Trust Securities in connection
with a termination and liquidation of the Trust pursuant to Section 9.04(a).

     "Liquidation Distribution" has the meaning specified in Section 9.04(d).

     "1940 Act" means the Investment Company Act of 1940.

     "Notice of Conversion Termination" has the meaning specified in Section
4.08(h)(iii).

     "NYSE" means the New York Stock Exchange.

     "Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President or a Vice President, and by the Treasurer, an
Associate Treasurer, an Assistant Treasurer, the Controller, the Secretary or an
Assistant Secretary, of the Depositor, and delivered to the appropriate Trustee.
One of the officers signing an Officers' Certificate given pursuant to Section
8.16 shall be the principal executive, financial or accounting officer of the
Depositor.  Any Officers' Certificate delivered with respect to compliance with
a condition or covenant provided for in this Declaration of Trust shall include:

          (a)  a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;

                                       7
<PAGE>

          (b)  a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;

          (c)  a statement that each 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.

     "Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Trust, the Property Trustee or the Depositor, but not an employee of any
thereof, and which opinion shall be reasonably acceptable to the Property
Trustee.

     "Original Declaration of Trust" has the meaning specified in the preamble
to this Declaration of Trust.

     "Other Capital Securities" means Capital Securities that are not Global
Capital Securities.

     "Outstanding," with respect to Capital Securities, means, as of the date of
determination, all Capital Securities theretofore executed and delivered under
this Declaration of Trust, except;
                           ------

          (a)  Capital Securities theretofore canceled by the Property Trustee,
delivered to the Property Trustee for cancellation, or exchanged by the
Conversion Agent in accordance with Section 4.08;

          (b)  Capital Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee or any
Paying Agent for the benefit of the Holders of such Capital Securities; provided
                                                                        --------
that, if such Capital Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Declaration of Trust; and

          (c)  Capital Securities that have been paid or in exchange for or in
lieu of which other Capital Securities have been executed and delivered pursuant
to Sections 5.02, 5.04, 5.05, 5.11 and 5.13; provided, however, that in
                                             --------  -------
determining whether the Holders of the requisite Liquidation Amount of the
Outstanding Capital Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Capital Securities owned by the
Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be outstanding, except that (a) in determining
whether any Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Capital Securities
that a Responsible Officer of such Trustee actually knows to be so owned shall
be so disregarded and (b) the foregoing shall not apply at any time when all of
the outstanding Capital Securities are owned by the Depositor, one or more of
the Trustees and/or any such Affiliate.  Capital Securities so owned that have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Administrative

                                       8
<PAGE>

Trustees the pledgee's right so to act with respect to such Capital Securities
and that the pledgee is not the Depositor or any Affiliate of the Depositor.

     "Owner" means each Person who is the beneficial owner of a Global Capital
Security as reflected in the records of the Clearing Agency or, if a Clearing
Agency Participant is not the owner, then as reflected in the records of a
Person maintaining an account with such Clearing Agency (directly or
indirectly), in accordance with the rules of such Clearing Agency.

     "Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 5.10 and shall initially be the Trust Company.

     "Payment Account" means a segregated corporate trust account, without
interest, maintained by the Property Trustee with the Trust Company in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Junior Subordinated Debt Securities will be held and from which
the Property Trustee shall make payments to the Securityholders in accordance
with Sections 4.01 and 4.02.

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

     "Press Release" has the meaning specified in Section 4.08(h)(ii).

     "Property Trustee" means the commercial bank or trust company identified as
the "Property Trustee" in the preamble to this Declaration of Trust solely in
its capacity as Property Trustee of the Trust continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.

     "Redemption Date" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Declaration of Trust,
provided, however, that each Junior Subordinated Debt Securities Redemption Date
--------  -------
and the Stated Maturity of the Junior Subordinated Debt Securities shall be a
Redemption Date for a Like Amount of Trust Securities.

     "Redemption Price," when used with respect to any Trust Security to be
redeemed or prepaid, means an amount in cash equal to one hundred percent (100%)
of the Liquidation Amount to be redeemed, together with accumulated
Distributions to but excluding the date fixed for such redemption.

     "Relevant Trustee" has the meaning specified in Section 8.10.

     "Responsible Officer" means, when used with respect to the Property
Trustee, any officer assigned to the Corporate Trust Office, including any
managing director, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the Property Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration for
this Declaration of Trust, and

                                       9
<PAGE>

also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.

     "Securities Act" means the Securities Act of 1933.

     "Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.05.

     "Securityholder" or "Holder" means a Person in whose name a Trust Security
or Trust Securities is registered in the Securities Register; any such Person
shall be deemed to be a beneficial owner within the meaning of the Delaware
Business Trust Act; provided, however, that in determining whether the Holders
                    --------  -------
of the requisite amount of Capital Securities have voted on any matter provided
for in this Declaration of Trust, then for the purpose of any such
determination, so long as Definitive Capital Securities Certificates have not
been issued, the term Securityholders or Holders as used herein shall refer to
the Owners.

     "Stated Maturity" has the meaning specified in Section 1.01 of the
Indenture.

     "Tax Event" has the meaning specified in Section 1.01 of the Indenture.

     "Transfer Agent" means the Trust Company as set forth in the preamble to
this Declaration of Trust.

     "Trust" means Commonwealth Bankshares Capital Trust I.

     "Trust Company" has the meaning specified in the preamble to this
Declaration of Trust.

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

     "Trust Property" means (a) the Junior Subordinated Debt Securities, (b) the
rights of the Property Trustee under the Guarantee, (c) any cash or deposit in,
or owing to, the Payment Account and (d) all proceeds and rights in respect of
the foregoing.

     "Trust Securities Certificate" means any one of the Common Securities
Certificates or the Capital Securities Certificates.

     "Trust Security" means any one of the Common Securities or the Capital
Securities.

     "Trustees" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.

     "Underwriter" shall mean McKinnon & Company, Inc., a Virginia corporation.

     "Underwriting Agreement" means the Underwriting Agreement, dated as of
_____________, 2000, between the Trust, the Depositor and the Underwriter.

                                       10
<PAGE>

                                  ARTICLE II

                           Continuation of the Trust
                           -------------------------

     SECTION 2.01.  Name.  The Trust continued hereby shall be known as
                    ----
"Commonwealth Bankshares Capital Trust I," as such name may be modified from
time to time by the Administrative Trustees following written notice to the
Holders and the other Trustees, in which name the Trustees may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.

     SECTION 2.02.  Office of the Delaware Trustee; Principal Place of Business.
                    -----------------------------------------------------------
The address of the Delaware Trustee in the State of Delaware is Wilmington Trust
Company, 1100 N. Market Street, Attention:  Corporate Trust Administration,
Wilmington, Delaware 19890, or such other address in the State of Delaware as
the Delaware Trustee may designate by written notice to the Securityholders and
the Depositor.  The principal executive office of the Trust is in care of
Commonwealth Bankshares, Inc., 403 Boush Street, Norfolk, Virginia 23510.

     SECTION 2.03.  Organizational Expenses. The Depositor, as borrower on the
                    -----------------------
Junior Subordinated Debt Securities, shall pay all expenses of the Trust as they
arise or shall, upon request of any Trustee, promptly reimburse such Trustee for
any such expenses paid by such Trustee.  The Depositor shall make no claim upon
the Trust Property for the payment of such expenses.

     SECTION 2.04.  Issuance of the Capital Securities. The Capital Securities
                    ----------------------------------
to be issued will be limited to [$8,050,000.00] aggregate Liquidation Amount
outstanding at any one time.

     On ___________, 2000, the Depositor, on behalf of the Trust, and pursuant
to the Original Declaration of Trust, and the Underwriter executed and delivered
the Underwriting Agreement.  Contemporaneously with the execution and delivery
of this Declaration of Trust, an Administrative Trustee, on behalf of the Trust,
shall execute or cause to be executed in accordance with Section 5.02 and
delivered to the Escrow Agent, a Definitive Capital Securities Certificate,
registered in the names of the purchasers thereof, in an aggregate amount of
Capital Securities having an aggregate Liquidation Amount of [$8,050,000]
against receipt of the aggregate purchase price of such Capital Securities equal
to 100% of the Liquidation Amount multiplied by the number of Capital Securities
being purchased, which amount the Administrative Trustee shall promptly deliver
to the Property Trustee.

     SECTION 2.05.  Issuance of the Common Securities Subscription and Purchase
                    -----------------------------------------------------------
of Junior Subordinated Debt Securities.  Contemporaneously with the execution
--------------------------------------
and delivery of this Declaration of Trust, an Administrative Trustee, on behalf
of the Trust, shall execute or cause to be executed in accordance with Section
5.02(a) and delivered to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of ______ Common
Securities having an aggregate Liquidation Amount of $________ against payment
by the Depositor of $________ to the Trust.  Contemporaneously therewith, an
Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase
from the

                                       11
<PAGE>

Depositor Junior Subordinated Debt Securities, registered in the name of the
Property Trustee and held for the benefit of the Holders of the Capital
Securities having an aggregate principal amount equal to $8,050,000, and, in
satisfaction of the purchase price for such Junior Subordinated Debt Securities,
the Trust shall deliver to the Depositor the sum of $8,050,000.

     SECTION 2.06.  Declaration of Trust.  The exclusive purposes and functions
                    --------------------
of the Trust are to (a) issue and sell Trust Securities, (b) use the proceeds
from the sale of Trust Securities to acquire the Junior Subordinated Debt
Securities, (c) receive payments to be made with respect to the Junior
Subordinated Debt Securities, and (d) engage in only those other activities
necessary or incidental thereto such as registering the transfer of the Capital
Securities.  The Depositor hereby appoints the Trustees as trustees of the
Trust, to have all the rights, powers and duties to the extent set forth herein,
and the Trustees hereby accept such appointment.  The Property Trustee hereby
declares that it will hold the Trust Property in trust upon and subject to the
conditions set forth herein for the benefit of the Trust and the
Securityholders.  The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust.  The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein.  The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.

     SECTION 2.07.  Authorization to Enter into Certain Transactions.
                    ------------------------------------------------

          (a)  The Trustees shall conduct the affairs of the Trust in accordance
with the terms of this Declaration of Trust.  Subject to the limitations set
forth in paragraph (b) of this Section and in accordance with the following
provisions (i) and (ii), the Trustees 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
under this Declaration of Trust, and to perform all acts in furtherance thereof,
including without limitation, the following:

               (i)  As among the Trustees, each Administrative Trustee 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 Trust Securities;

               (B)  to cause the Trust to enter into, and to execute, deliver
          and perform on behalf of the Trust, the Underwriting Agreement, the
          Letter of Representations and such other agreements as may be
          necessary or desirable in connection with the purposes and function of
          the Trust;

               (C)  assisting in the registration of the Capital Securities
          under the Securities Act, and under state securities or blue sky laws,
          and the qualification of

          this Declaration of Trust as a trust indenture under the Trust
          Indenture Act;

                                       12
<PAGE>

               (D)  assisting in the listing, if any, of the Capital Securities
          upon such securities exchange or exchanges as shall be determined by
          the Depositor and the registration of the Capital Securities under the
          Securities Exchange Act of 1934 (the "Exchange Act"), and the
          preparation and filing of all periodic and other reports and other
          documents pursuant to the foregoing;

               (E)  the sending of notices (other than notices of default) and
          other information regarding the Trust Securities and the Junior
          Subordinated Debt Securities to the Securityholders in accordance with
          this Declaration of Trust;

               (F)  the appointment of a Paying Agent, Transfer Agent and
          Securities Registrar in accordance with this Declaration of Trust;

               (G)  registering transfer of the Trust Securities in accordance
          with this Declaration of Trust;

               (H)  to the extent provided in this Declaration of Trust, the
          winding up of the affairs 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)  unless otherwise determined by the Depositor, the Property
          Trustee or the Administrative Trustees or as otherwise required by the
          Delaware Business Trust Act or the Trust Indenture Act, to execute on
          behalf of the Trust (either acting alone or together with any or all
          of the Administrative Trustees) any documents that the Administrative
          Trustees have the power to execute pursuant to this Declaration of
          Trust; and

               (J)  the taking of any action incidental to the foregoing as the
          Trustees may from time to time determine is necessary or advisable to
          give effect to the terms of this Declaration of Trust for the benefit
          of the Securityholders (without consideration of the effect of any
          such action on any particular Securityholders).

               (ii) As among the Trustees, the Property 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 Payment Account;

               (B)  the receipt of the Junior Subordinated Debt Securities;

               (C)  the collection of interest, principal and any other payments
          made in respect of the Junior Subordinated Debt Securities in the
          Payment Account;

               (D)  the distribution of amounts owed to the Securityholders in
          respect of the Trust Securities;

                                       13
<PAGE>

               (E)  the exercise of all of the rights, powers and privileges of
          a holder of the Junior Subordinated Debt Securities;

               (F)  the sending of notices of default and other information
          regarding the Trust Securities and the Junior Subordinated Debt
          Securities to the Securityholders in accordance with this Declaration
          of Trust;

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

               (H)  to the extent provided in this Declaration of Trust, 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 an Event of Default (other than an Event of Default
          pursuant to paragraph (b), (c), (d) or (e) of the definition of such
          term if such Event of Default is by or with respect to the Property
          Trustee) the taking of any action incidental to the foregoing as the
          Property Trustee may from time to time determine is necessary or
          advisable to give effect to the terms of this Declaration of Trust and
          protect and conserve the Trust Property for the benefit of the
          Securityholders (without consideration of the effect of any such
          action on any particular Securityholder); and

               (J)  except as otherwise provided in this Section 2.07(a)(ii),
          the Property Trustee shall have none of the duties, liabilities,
          powers or authority of the Administrative Trustees set forth in
          Section 2.07(a)(i) .

          (b)  So long as this Declaration of Trust remains in effect, the Trust
(or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transactions except as expressly provided herein or
contemplated hereby.  In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this Declaration of
Trust, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or
otherwise dispose of any of the Trust Property or interests therein, including
to Securityholders, except as expressly provided herein, (iii) intentionally
take any action that would cause the Trust to fail or cease to qualify as a
"grantor trust" or as other than an association taxable as a corporation for
United States federal income tax purposes, (iv) incur any indebtedness for
borrowed money or issue any other debt, (v) take or consent to any action that
would result in the placement of a Lien on any of the Trust Property, (vi)
invest any proceeds received by the Trust from holding the Junior Subordinated
Debt Securities, but shall distribute all such proceeds to Holders pursuant to
the terms of this Declaration of Trust and of the Trust Securities, (vii)
acquire any assets other than the Trust Property, (viii) possess any power or
otherwise act in such a way as to vary the Trust Property, (ix) possess any
power or otherwise act in such a way as to vary the terms of the Trust
Securities in any way whatsoever (except to the extent expressly authorized in
this Declaration of Trust or by the terms of the Trust Securities), (x) issue
any securities or other evidences of

                                       14
<PAGE>

beneficial ownership of, or beneficial interest in, the Trust other than the
Trust Securities, or (xi) other than as provided in this Declaration of Trust or
by the terms of the Trust Securities, so long as any Junior Subordinated Debt
Securities are held by the Property Trustee, (A) direct the time, method and
place of exercising any trust or power conferred upon the Debenture Trustee with
respect to the Junior Subordinated Debt Securities, (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 Junior Subordinated Debt Securities
shall be due and payable, or (D) consent to any amendment, modification, or
termination of the Indenture or the Junior Subordinated Debt Securities where
such consent shall be required unless the Trust shall have received an Opinion
of Counsel of an independent law firm to the effect that such amendment,
modification or termination will not cause more than an insubstantial risk that
the Trust will be deemed an Investment Company required to be registered under
the 1940 Act, that the Trust will not be classified as a grantor trust or will
be classified as an association taxable as a corporation for United States
federal income tax purposes or that the Junior Subordinated Debt Securities will
not be classified as indebtedness for such purposes. The Administrative Trustees
shall 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
Securityholders in their capacity as Securityholders.

          (c)  In connection with the issuance and sale of the Trust Securities,
the Depositor 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 Depositor in furtherance of the following prior to the date of this
Declaration of Trust are hereby ratified and confirmed in all respects):

               (i)   the preparation by the Trust of a prospectus relating to
the Trust Securities and the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration statement
on the appropriate form in relation to the Trust Securities, including any
amendments thereto;

               (ii)  the determination of the states in which to take
appropriate action to qualify or register for sale all or part of the Trust
Securities and the determination of any and all such acts, other than actions
that 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 Depositor deems necessary or advisable in order
to comply with the applicable laws of any such states;

               (iii) the preparation for filing by the Trust with the Commission
and the execution on behalf of the Trust of a registration statement on Form 8-A
relating to the registration of the Trust Securities under Section 12 (b) or 12
(g) of the Exchange Act, including any amendments thereto;

               (iv)  the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the Trust
Securities and such other agreements as may be necessary or desirable in
connection with the consummation of the transactions contemplated thereby, all
in its capacity as Depositor and on behalf of the Trust; and

                                       15
<PAGE>

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

          (d)  Notwithstanding anything herein to the contrary, each
Administrative Trustee is authorized and directed to conduct the affairs of the
Trust and to operate the Trust so that the Trust will not (i) be deemed to be an
"investment company" required to be registered under the 1940 Act, or (ii) fail
to be classified as a grantor trust or as other than an association taxable as a
corporation for United States federal income tax purposes and so that the Junior
Subordinated Debt Securities will be treated as indebtedness of the Depositor
for United States federal income tax purposes.  In this connection, the
Depositor and each of the Administrative Trustees are authorized to take any
action, not inconsistent with applicable law, the Certificate of Trust or this
Declaration of Trust, that each of the Depositor and each Administrative Trustee
determines in its discretion to be necessary or desirable for such purposes, as
long as such action does not adversely affect in any material respect the
interests of the Holders of the Trust Securities.

     SECTION 2.08.  Assets of Trust.  The assets of the Trust shall consist
                    ---------------
solely of the Trust Property.

     SECTION 2.09.  Title to Trust Property.  Legal title to all Trust Property
                    -----------------------
shall be vested at all times in the Property Trustee (in its capacity as such)
and shall be held and administered by the Property Trustee for the benefit of
the Trust and the Securityholders in accordance with this Declaration of Trust.

                                  ARTICLE III

                                Payment Account
                                ---------------

     SECTION 3.01.  Payment Account.
                    ---------------

          (a)  On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account.  The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Declaration of
Trust.  All moneys and other property deposited or held from time to time in the
Payment Account shall be held by the Property Trustee in the Payment Account for
the exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein or by applicable law.

          (b)  The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Junior Subordinated Debt
Securities.  Amounts held in the Payment Account shall not be invested by the
Property Trustee pending distribution thereof.

                                       16
<PAGE>

                                  ARTICLE IV

                     Distributions; Redemption; Conversion
                     -------------------------------------

     SECTION 4.01.  Distributions.
                    -------------

          (a)  Distributions on the Trust Securities shall be cumulative and
will accumulate whether or not there are funds of the Trust available for the
payment of Distributions.  Distributions shall accrue from ___________, 2000,
and, except in the event (and to the extent) that the Depositor exercises its
right to defer the payment of interest on the Junior Subordinated Debt
Securities pursuant to the Indenture, shall be payable quarterly in arrears on
the 15th day of January, April, July and October of each year, commencing on
January 15, 2001.  If any date on which a Distribution is otherwise payable is
not a Business Day, then the payment of such Distribution shall 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), in each case with the same force and
effect as if made on such date (each date on which distributions are payable in
accordance with this Section 4.01(a), a "Distribution Date").  Accrued
Distributions that are not paid on the applicable Distribution Date will bear
interest on the amount thereof (to the extent permitted by law) at a fixed
annual rate equal to 8.0%, compounded quarterly from the relevant Distribution
Date in accordance with Section 2.02 of the Indenture.

          (b)  The Trust Securities represent undivided beneficial ownership
interests in the Trust Property, and, assuming payments of interest on the
Junior Subordinated Debt Securities are made when due (and before giving effect
to Additional Distributions, defined below, if applicable), Distributions on
each of the Trust Securities shall be payable at a fixed annual rate equal to
$2.00 (which is 8.0% of the Liquidation Amount of each of the Trust Securities)
in accordance with Section 2.02 of the Indenture.  The amount of Distributions
payable for any period shall be computed on the basis of the actual number of
days elapsed in a year of twelve 30-day months; except that the amount of
interest payable for any partial period shall be computed on the basis of the
actual number of days elapsed in a 360-day year.  The amount of Distributions
payable for any period shall include the Additional Distributions, if any.

          (c)  So long as no Debenture Event of Default has occurred and is
continuing, the Depositor has the right under the Indenture to defer the payment
of interest on the Junior Subordinated Debt Securities at any time and from time
to time for a period not exceeding 20 consecutive quarterly periods (an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debt Securities.  As a consequence of
any such deferral, quarterly Distributions on the Trust Securities by the Trust
will also be deferred during any Extension Period (and the amount of
Distributions to which Holders are entitled will accumulate additional
Distributions thereon at a fixed annual rate equal to 8.0% thereof, compounded
quarterly from the relevant payment date for such Distributions during any such
Extension Period, to the extent permitted by applicable law, but not exceeding
the interest rate then accruing on the Junior Subordinated Debt Securities (each
such increase in Distribution, as described in this Section 4.01(c), an
"Additional Distribution").  No interest or other amounts shall be due and
payable during an Extension Period except at the end thereof.

                                       17
<PAGE>

          (d)  Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on-hand and
available in the Payment Account for the payment of such Distributions.

          (e)  Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders of record as they appear on
the securities Register for the Trust Securities at the close of business on the
Business Day next preceding each 1st day of January, April, July and October.

     SECTION 4.02.  Redemption.
                    ----------

          (a)  On each Junior Subordinated Debt Securities Redemption Date and
on the Stated Maturity of the Junior Subordinated Debt Securities, the Trust
will be required to redeem a Like Amount of Trust Securities at the applicable
Redemption Price.

          (b)  Other than on the Stated Maturity, notice of redemption shall be
given by the Property Trustee by first class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date to each Holder
of Trust Securities to be redeemed, at such Holder's address appearing in the
Security Register.  All notices of redemption shall identify the Trust
Securities to be redeemed (including CUSIP numbers) and shall state:

               (i)   the Redemption Date;

               (ii)  the applicable Redemption Price, or, if the Redemption
Price cannot be calculated prior to the time the notice is required to be sent,
the estimate of the Redemption Price provided pursuant to the Indenture together
with a statement that it is an estimate and that the actual Redemption Price
will be calculated on the third Business Day prior to the Redemption Date (and,
if an estimate is provided, a further notice shall be sent of the actual
Redemption Price on the date, or as soon as practicable thereafter, that notice
of such actual Redemption Price is received pursuant to the Indenture);

               (iii) the CUSIP number or CUSIP numbers of the Capital
Securities affected;

               (iv)  if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the particular
Trust Securities to be redeemed; and

               (v)   that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accrue on and after such date.

     In issuing the Trust Securities, the Trust  may use "CUSIP," and/or
"private placement" numbers (if then generally in use), and, if so, the Property
Trustee shall indicate the "CUSIP" or "private placement" numbers of the Trust
Securities in notices of redemption and related

                                       18
<PAGE>

materials 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 Trust Securities or as contained in any notice of
redemption and related material. The Depositor shall promptly notify the
Property Trustee of any change in such numbers.

          (c)  The Trust Securities redeemed on each Redemption Date shall be
redeemed at the applicable Redemption Price with the proceeds from the
contemporaneous redemption of Junior Subordinated Debt Securities.  Redemptions
of the Trust Securities shall be made and the applicable Redemption Price shall
be payable on each Redemption Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of such
Redemption Price.

          (d)  If the Property Trustee gives a notice of redemption in respect
of any Trust Securities, then, by 12:00 noon, Norfolk, Virginia time, on the
Redemption Date, subject to Section 4.02(c), the Property Trustee will, so long
as the Capital Securities are in book-entry-only form, irrevocably deposit with
the Clearing Agency for the Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof.
With respect to Capital Securities held in certificated form, the Property
Trustee, subject to Section 4.02(c), will irrevocably deposit with the Paying
Agent funds sufficient to pay the applicable Redemption Price and will give the
Paying Agent irrevocable instructions and authority to pay the Redemption Price
to the Holders thereof upon surrender of their Capital Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Securities
Register on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required, then
upon the date of such deposit, all rights of Securityholders holding Trust
Securities so called for redemption will cease, except the right of such
Securityholders to exercise their conversion rights pursuant to Section 4.08 or
to receive the applicable Redemption Price and any Distribution payable on or
prior to the Redemption Date, but without interest. In the event that any date
on which any applicable Redemption Price is payable is not a Business Day, then
payment of the applicable 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. In the event that payment of the applicable Redemption Price in
respect of any Trust Securities called for redemption is improperly withheld or
refused and not paid either by the Trust or by the Depositor pursuant to the
Guarantee, Distributions on such Trust Securities will continue to accrue, at
the then applicable rate, from the Redemption Date originally established by the
Trust for such Trust Securities to the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the applicable Redemption Price.

          (e)  Payment of the applicable Redemption Price on, and any
distributions of Junior Subordinated Debt Securities to Holders of, the Trust
Securities shall be made to the Holders thereof as they appear on the Securities
Register on the relevant record date, and, with

                                       19
<PAGE>

respect to Trust Securities held in certificated form, upon surrender of such
certificated Trust Securities to the Paying Agent.

          (f)  Subject to Section 4.03(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Trust Securities. The
particular Trust Securities to be redeemed shall be selected on a pro rata basis
(based upon Liquidation Amounts) not more than 60 days prior to the Redemption
Date by the Property Trustee from the Outstanding Trust Securities not
previously called for redemption, by such method as the Property Trustee shall
deem fair and appropriate. The Property Trustee shall promptly notify the
Securities Registrar in writing of the Trust Securities selected for redemption
and, in the case of any Trust Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of this Declaration
of Trust, unless the context otherwise requires, all provisions relating to the
redemption of Trust Securities shall relate, in the case of any Trust Securities
redeemed or to be redeemed only in part, to the portion of the Liquidation
Amount of Trust Securities that has been or is to be redeemed.

     SECTION 4.03.  Subordination of Common Securities.
                    ----------------------------------

          (a)  Payment of Distributions (including Additional Distributions, if
applicable) on, and the Redemption Price of the Trust Securities, as applicable,
shall be made subject to Section 4.02(f), pro rata to the Holders of the Trust
Securities based on the Liquidation Amount of the Trust Securities; provided,
                                                                    --------
however, that if on any Distribution Date or Redemption Date any Debenture Event
-------
of Default (or other event that, with notice or the passage of time or both,
would become such an Event of Default) or an Event of Default shall have
occurred and be continuing, no payment of any Distribution (including Additional
Distributions, if applicable) on, or Redemption Price of, any of the Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of such Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions (including Additional
Distributions, if applicable) on all outstanding Capital Securities for all
Distribution Dates occurring on or prior thereto, or, in the case of payment of
the applicable Redemption Price the full amount of such Redemption Price on all
outstanding Capital Securities, shall have been made or provided for, and all
funds immediately available to the Property Trustee shall first be applied to
the payment in full in cash of all Distributions (including Additional
Distributions, if applicable) on, or the Redemption Price of, Capital Securities
then due and payable.

          (b)  In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of Default
under this Declaration of Trust until all such Events of Default with respect to
the Capital Securities have been cured, waived or otherwise eliminated.  Until
all such Events of Default under this Declaration of Trust with respect to the
Capital Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the Holders of the Capital
Securities and not on behalf of the Holder of the Common Securities, and only
the Holders of the Capital Securities will have the right to direct the Property
Trustee to act on their behalf.

                                       20
<PAGE>

     SECTION 4.04.  Payment Procedures.  In the event Definitive Capital
                    ------------------
Securities Certificates are issued, payments of Distributions (including
Additional Distributions, if applicable) in respect of the Capital Securities
shall be made by check mailed to the address of the Person entitled thereto at
such address as shall appear on the Securities Register.  If the Capital
Securities are held by a Clearing Agency, such Distributions shall be made to
the Clearing Agency in immediately available funds, which shall credit the
relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates.  Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Common Securityholder.

     SECTION 4.05.  Tax Returns and Reports.  The Administrative Trustees shall
                    -----------------------
prepare (or cause to be prepared), at the Depositor's expense, and file all
United States federal, state and local tax and information returns and reports
required to be filed by or in respect of the Trust.  In this regard, the
Administrative Trustees shall (a) prepare and file (or cause to be prepared and
filed) the appropriate Internal Revenue Service forms required to be filed in
respect of the Trust in each taxable year of the Trust and (b) prepare and
furnish (or cause to be prepared and furnished) to each Securityholder all
Internal Revenue Service forms required to be provided by the Trust.  The
Administrative Trustees shall provide the Depositor and the Property Trustee
with a copy of all such returns and reports promptly after such filing or
furnishing.  The Administrative Trustees shall comply with United States federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders.

     SECTION 4.06.  Payment of Taxes; Duties of the Trust.  Pursuant to Section
                    -------------------------------------
10.06 of the Indenture, the Depositor, as borrower on the Junior Subordinated
Debt Securities, has agreed to, and it shall, promptly pay any taxes, duties or
governmental charges of whatever nature (other than United States withholding
taxes) imposed on the Trust by the United States or any other taxing authority.

     SECTION 4.07.  Payments Under Indenture.  Any amount payable hereunder to
                    ------------------------
any Holder (and any Owner with respect thereto) shall be reduced by the amount
of any corresponding payment such Holder (and Owner) has directly received
pursuant to Section 5.08 of the Indenture or Section 5.13 of this Declaration of
Trust.

     SECTION 4.08.  Conversion Rights.  Holders of Trust Securities shall have
                    -----------------
the right at any time prior to 5:00 p.m. (Norfolk, Virginia time) on the earlier
of (i) the Business Day immediately preceding the date of repayment of such
Trust Securities, whether at maturity or upon redemption, and (ii) the
Conversion Termination Date, if any, to cause the Conversion Agent to exchange
Trust Securities, on behalf of the converting Holders, for Junior Subordinated
Debt Securities, which Junior Subordinated Debt Securities will be converted
into shares of Common Stock in the manner described herein on and subject to the
following terms and conditions:

          (a)  The Trust Securities will be exchangeable for Junior Subordinated
Debt Securities which will be convertible at the office of the Conversion Agent
into fully paid and nonassessable shares of Common Stock pursuant to the
Holder's direction to the Conversion

                                       21
<PAGE>

Agent to exchange such Trust Securities for a portion of the Junior Subordinated
Debt Securities theretofore held by the Trust on the basis of one Trust Security
per $25 principal amount of Junior Subordinated Debt Securities, and immediately
convert such amount of Junior Subordinated Debt Securities into fully paid and
nonassessable shares of Common Stock at an initial per share conversion price of
$8.00, subject to certain adjustments set forth in the terms of the Junior
Subordinated Debt Securities (as so adjusted, the "Conversion Price").

          (b)  To exchange the Trust Securities for Junior Subordinated Debt
Securities and to convert the Junior Subordinated Debt Securities into Common
Stock, the Holder shall submit to the Conversion Agent at the office designated
therefor an irrevocable request to convert Trust Securities on behalf of such
Holder (the "Conversion Request"), together, if the Trust Securities are in
certificated form, with such certificates.  The Conversion Request shall (i) set
forth the number of Trust Securities to be exchanged and the name or names, if
other than the Holder, in which the shares of Common Stock should be issued and
(ii) direct the Conversion Agent (A) to exchange such Trust Securities for a
portion of the Junior Subordinated Debt Securities held by the Trust (at the
rate of exchange specified in the preceding paragraph) and (B) to immediately
convert such Junior Subordinated Debt Securities, on behalf of such Holder, into
Common Stock at the Conversion Price.  The Conversion Agent shall notify the
Trust of the Holder's election to exchange Trust Securities for a portion of the
Junior Subordinated Debt Securities held by the Trust, and the Trust shall, upon
receipt of such notice, deliver to the Conversion Agent the appropriate
principal amount of Junior Subordinated Debt Securities for exchange in
accordance with this Section 4.08.  The Conversion Agent shall thereupon notify
the Depositor of the Holder's election to convert such Junior Subordinated Debt
Securities into shares of Common Stock.

     Holders of Trust Securities at 5:00 p.m. (Norfolk, Virginia time) on a
record date for a Distribution Date will be entitled to receive the Distribution
payable on such Trust Securities on the corresponding Distribution Date
notwithstanding the conversion of such Trust Securities following such record
date but on or prior to such Distribution Date.  Except as provided in the
immediately preceding sentence, neither the Trust nor the Depositor will make,
or be required to make, any payment, allowance or adjustment for accumulated and
unpaid Distributions, whether or not in arrears, on converted Trust Securities;
provided, however, that if notice of redemption of Trust Securities is mailed or
otherwise given to Holders of Trust Securities or the Trust issues a Press
Release announcing a Conversion Termination Date, then, if any Holder of Trust
Securities converts any Trust Securities into Common Stock on any date on or
after the date on which such notice of redemption is mailed or otherwise given
or the date of such Press Release, as the case may be, and if such Conversion
Date falls on any day from and including the first day of an Extension Period
and on or prior to the Distribution Date upon which such Extension Period ends,
such converting holder shall be entitled to receive either (i) if the Conversion
Date falls after a record date and on or prior to the next succeeding
Distribution Date, all accrued and unpaid Distributions on such Trust Securities
(including interest thereon, if any, to the extent permitted by applicable law)
to such Distribution Date or (ii) if the Conversion Date does not fall on a date
described in clause (i) above, all accrued and unpaid Distributions on such
Trust Securities (including interest thereon, if any, to the extent permitted by
applicable law) to the most recent Distribution Date prior to the Conversion
Date, which Distributions shall, in either such case, be paid to such converting
holder unless the Conversion Date of such Trust Securities

                                       22
<PAGE>

is on or prior to the Distribution Date upon which such Extension Period ends
and after the record date for such Distribution Date, in which case such
Distributions shall be paid to the Person who was the Holder of such Trust
Securities (or one or more predecessor Trust Securities) at 5:00 p.m. (Norfolk,
Virginia time) on such record date.

     The Depositor shall make no payment or allowance for distributions on the
shares of Common Stock issued upon such conversion, except to the extent that
such shares of Common Stock are held of record on the record date for any such
distributions.  Trust Securities shall be deemed to have been converted
immediately prior to 5:00 p.m. (Norfolk, Virginia time) on the day on which a
Conversion Request relating to such Trust Securities is received by the Trust in
accordance with the foregoing provision (the "Conversion Date").  The Person or
Persons entitled to receive Common Stock issuable upon conversion of the Junior
Subordinated Debt Securities shall be treated for all purposes as the record
holder or holders of such Common Stock at such time.  As promptly as practicable
on or after the Conversion Date, the Depositor shall issue and deliver at the
office of the Conversion Agent a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion, together with the
cash payment, if any, in lieu of any fraction of any share, to the Person or
Persons entitled to receive the same, unless otherwise directed by the Holder in
the Conversion Request, and the Conversion Agent shall distribute such
certificate or certificates to such Person or Persons.

          (c)  Each Holder of a Trust Security, by his acceptance thereof,
appoints Wilmington Trust Company as conversion agent (the "Conversion Agent")
for the purpose of effecting the exchange of Trust Securities and conversion of
Junior Subordinated Debt Securities in accordance with this Section 4.08.  In
effecting the exchange and conversion transactions described in this Section
4.08, the Conversion Agent shall be acting as agent of the Holders of Trust
Securities directing it to effect such transactions.  The Conversion Agent is
hereby authorized (i) to exchange Trust Securities from time to time for Junior
Subordinated Debt Securities held by the Trust in connection with the conversion
of such Trust Securities in accordance with this Section 4.08 and (ii) to
convert all or a portion of the Junior Subordinated Debt Securities into Common
Stock and thereupon to deliver such shares of Common Stock in accordance with
the provisions of this Section 4.08 and to deliver to the Trust a new Junior
Subordinated Debt Security for any resulting unconverted principal amount.

          (d)  No fractional shares of Common Stock will be issued as a result
of conversion, but in lieu thereof, such fractional interest will be paid in
cash (based on the Closing Price of Common Stock on the Conversion Date) by the
Depositor to the Trust, which in turn will make such payment to the Holder or
Holders of Trust Securities so exchanged.

          (e)  The Depositor shall at all times reserve and keep available out
of its authorized and unissued Common Stock, solely for issuance upon the
conversion of the Junior Subordinated Debt Securities, free from any preemptive
or other similar rights, such number of such shares of Common Stock as shall
from time to time be issuable upon the conversion of all of the Junior
Subordinated Debt Securities then outstanding. Notwithstanding the foregoing,
the Depositor shall be entitled to deliver, upon conversion of Junior
Subordinated Debt Securities, shares of Common Stock reacquired and held in the
treasury of the Depositor (in lieu of the issuance of authorized and unissued
shares of Common Stock), so long as any such treasury

                                       23
<PAGE>

shares are free and clear of all liens, charges, security interests or
encumbrances. Any shares of Common Stock issued upon conversion of the Junior
Subordinated Debt Securities shall be duly authorized, validly issued, fully
paid and nonassessable. The Trust shall deliver the shares of Common Stock
received upon conversion of the Junior Subordinated Debt Securities to the
converting Holder free and clear of all liens, charges, security interests and
encumbrances, except for United States withholding taxes. Each of the Depositor
and the Trust shall prepare and shall use its best efforts to obtain and keep in
force such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all applicable requirements as to
registration or qualification of the Common Stock issuable upon conversion of
Junior Subordinated Debt Securities (and all requirements to list such Common
Stock on any national securities exchange or quotation system that are at the
time applicable), to enable the Depositor lawfully to issue Common Stock to the
Trust upon conversion of the Junior Subordinated Debt Securities and to enable
the Trust lawfully to deliver Common Stock to each Holder upon such conversion.

          (f)  The Depositor shall pay any and all taxes that may be payable in
respect of the issuance or delivery of shares of Common Stock on conversion of
Junior Subordinated Debt Securities and the delivery of shares of Common Stock
by the Trust to the Holder upon conversion.  The Depositor shall not, however,
be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock in a name other
than that in which the Trust Securities so converted were registered, and no
such issue or delivery shall be made unless and until the Person requesting such
issue has paid to the Trust the amount of any such tax or has established to the
satisfaction of the Trust that such tax has been paid.

          (g)  Nothing in the preceding Section 4.08(f) shall limit the
requirement of the Trust to withhold taxes pursuant to the terms of the Trust
Securities or as set forth in this Declaration of Trust or otherwise require the
Property Trustee or the Trust to pay any amounts on account of such withholding.

          (h)  (i)  On and after January 15, 2000, the Depositor shall have the
right, at its option, to cause the conversion rights of holders of the Junior
Subordinated Debt Securities to convert the Junior Subordinated Debt Securities
into Common Stock to terminate, in which case the rights of Holders of the Trust
Securities to convert the Trust Securities into Common Stock pursuant to this
Section 4.08 will likewise terminate, if (x) the Trust is current in the payment
of Distributions on the Trust Securities (except to the extent that the payment
of Distributions may have been deferred as the result of an Extension Period)
and (y) for at least 20 trading days within any period of 30 consecutive trading
days ending on or after January 15, 2004, including the last trading day of such
period, the Closing Price of the Common Stock on each of such 20 trading days
shall have exceeded 115% of the Conversion Price in effect on such trading day.

               (ii) To exercise its option to cause the conversion rights of
Holders of the Trust Securities to terminate, the Depositor must cause the Trust
to issue a press release for publication on the Dow Jones News Service or on a
comparable news service (the "Press Release") prior to the opening of business
on the second trading day after any period in which

                                       24
<PAGE>

the conditions in Section 4.08(h)(i) have been satisfied (which date shall not
be prior to January 15, 2004), which Press Release shall state that the
Depositor has elected to exercise its right to terminate the conversion rights
of holders of Junior Subordinated Debt Securities and Holders of Trust
Securities, specify the Conversion Termination Date and provide the current
Conversion Price of the Trust Securities and the Closing Price of the Capital
Securities and the Common Stock, in each case as of the close of business on the
trading day next preceding the date of the Press Release. If the Depositor
exercises the option described in this Section 4.08(h), the "Conversion
Termination Date" shall be the Business Day selected by the Depositor which
shall not be less than 30 nor more than 60 calendar days after the date on which
the Trust issues the Press Release. If the Depositor does not exercise the
option described in this Section 4.08(h), and the Trust Securities are otherwise
called for redemption, the Trust Securities will be convertible until 5:00 p.m.
(Richmond, Virginia time) on the Business Day immediately preceding the date of
such redemption.

          (iii) In addition to the Press Release, notice of the termination of
conversion rights of Holders of the Trust Securities (a "Notice of Conversion
Termination") must be given by the Trust by first-class mail to each Holder of
Trust Securities not more than four Business Days after the Trust issues the
Press Release.  Each such mailed Notice of Conversion Termination shall state:
(1) the Conversion Termination Date; (2) the Conversion Price of the Trust
Securities and the Closing Price of the Capital Securities and the Common Stock,
in each case as of the close of business on the trading day next preceding the
date of the Notice of Conversion Termination; (3) that Trust Securities will be
convertible until 5:00 p.m. (Richmond, Virginia time) on the Conversion
Termination Date and the place or places at which a Conversion Request may be
given and Trust Securities (if not in book-entry form) may be surrendered for
conversion into shares of Common Stock; and (4) such other information or
instructions as the Trust deems necessary or advisable to enable a Holder to
exercise its conversion rights hereunder.  For purposes of the calculation of
the Conversion Termination Date and the dates on which notices are given
pursuant to this Section 4.08(h)(iii), a Notice of Conversion Termination shall
be deemed to have been given on the day that such notice is first mailed by
first-class mail, postage prepaid, to each Holder of Trust Securities at the
address of such Holder appearing in the books and records of the Trust (whether
or not any such Holder receives the Notice of Conversion Termination).  No
defect in the Notice of Conversion Termination or in the mailing thereof with
respect to any Trust Security shall affect the validity of such notice with
respect to any other Trust Security.  As of 5:00 p.m. (Richmond, Virginia time)
on the Conversion Termination Date, the Trust Securities shall be deemed to be
non-convertible securities.

          (iv)  The term "Closing Price" of any security on any day means the
last reported sale price of such security on such day, regular way, or, if no
sale takes place on such day, the average of the reported closing bid and asked
prices of such security on such day, regular way, in either case as reported on
the NYSE Composite Tape, or, if such security is not listed or admitted to
trading on the NYSE, on the principal national securities exchange on which such
security is listed or admitted to trading, or, if such security is not listed or
admitted to trading on a national securities exchange, on the National Market
System of the National Association of Securities Dealers, Inc., or, if such
security is not quoted or admitted to trading on such quotation system, on the
principal quotation system on which such security may be listed or

                                       25
<PAGE>

admitted to trading or quoted, or, if not listed or admitted to trading or
quoted on any national securities exchange or quotation system, the average of
the closing bid and asked prices of such security in the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or, if not so
available in such manner, as furnished by any NYSE member firm selected from
time to time by the Board of Directors of the Depositor for that purpose or, if
not so available in such manner, as otherwise determined in good faith by the
Board of Directors of the Depositor.

                                   ARTICLE V

                         Trust Securities Certificates
                         -----------------------------

     SECTION 5.01.  Initial Ownership.  Upon the formation of the Trust and
                    -----------------
until the issuance of the Trust Securities, and at any time during which no
Trust Securities are outstanding, the Depositor shall be the sole beneficial
owner of the Trust.

     SECTION 5.02.  Trust Securities Certificates.
                    -----------------------------

          (a)  The Capital Securities Certificates shall be issued only in
minimum denominations of $25.00 Liquidation Amount and multiples of $25.00 in
excess thereof, and the Common Securities Certificates shall be issued in
denominations of $25.00 Liquidation Amount.  The Trust Securities Certificates
shall be executed on behalf of the Trust by the manual or facsimile signature of
at least one Administrative Trustee.  Trust Securities Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued and entitled to the benefits of this Declaration of
Trust, notwithstanding that such individuals or any of them shall have ceased to
be so authorized prior to the delivery of such Trust Securities Certificates or
did not hold such offices at the date of delivery of such Trust Securities
Certificates.  A transferee of a Trust Securities Certificate shall become a
Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 5.04, 5.05
and 5.06.

          (b)  Upon their original issuance, Capital Securities Certificates
representing Other Capital Securities shall be issued in definitive form and may
not be represented by the Global Security.

          (c)  A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.

     SECTION 5.03.  Execution and Delivery of Trust Securities Certificates.  At
                    -------------------------------------------------------
or prior to the Closing Date, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.04 and 2.05, to be executed on behalf of the Trust and delivered to
the Property Trustee and upon such delivery the Property Trustee shall
countersign such Trust Securities Certificates and make available for delivery
such

                                       26
<PAGE>

Trust Securities Certificates upon the written order of the Depositor, signed by
its chairman of the board, president, any executive vice president or any vice
president, treasurer or assistant treasurer or controller without further
corporate action by the Depositor, in authorized denominations.

     SECTION 5.04.  Global Capital Security.
                    -----------------------

          (a)  Any Global Capital Security issued under this Declaration of
Trust shall be registered in the name of Cede & Co. ("Cede") as nominee of the
Clearing Agency and delivered to its custodian therefor, and such Global Capital
Security shall constitute a single Capital Security for all purposes of this
Declaration of Trust.

          (b)  Notwithstanding any other provision in this Declaration of Trust,
the Global Capital Security may not be exchanged in whole or in part for Capital
Securities registered, and no transfer of the Global Capital Security in whole
or in part may be registered, in the name of any Person other than the Clearing
Agency for such Global Capital Security, Cede, or other nominee thereof unless
(i) such Clearing Agency advises the Property Trustee in writing that such
Clearing Agency is no longer willing or able to properly discharge its
responsibilities as Clearing Agency with respect to such Global Capital
Security, and the Depositor is unable to locate a qualified successor, (ii) the
Trust at its sole option advises DTC in writing that it elects to terminate the
book-entry system through the Clearing Agency, or (iii) there shall have
occurred and be continuing a Debenture Event of Default.  In addition,
beneficial interests in a Global Capital Security may be exchanged by or on
behalf of DTC for certificated Capital Securities upon request by DTC, but only
upon at least 20 days prior written notice given to the Property Trustee in
accordance with the Applicable Procedures.

          (c)  If a Global Capital Security is to be exchanged for Other Capital
Securities or canceled in whole,   it shall be surrendered by or on behalf of
the Clearing Agency or its nominee to the Securities Registrar for exchange or
cancellation as provided in this Article V.  If a Global Capital Security is to
be exchanged for Other Capital Securities or canceled in part, or if an Other
Capital Security is to be exchanged in whole or in part for a beneficial
interest in the Global Capital Security, then either (i) such Global.  Capital
Security shall be, so surrendered for exchange or cancellation as provided in
this Article V or (ii) the aggregate Liquidation Amount thereof shall be
reduced, subject to Section 5.02, or increased by an amount equal to the portion
thereof to be so exchanged or canceled, or equal to the aggregate Liquidation
Amount of such Other Capital Security to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate adjustment made
on the records of the Securities Registrar, whereupon the Property Trustee, in
accordance with the Applicable Procedures, shall instruct the Clearing Agency or
its authorized representative to make a corresponding adjustment to its records.
Upon any such surrender or adjustment of the Global Capital Security by the
Clearing Agency and Clearing Agency Participants, accompanied by registration
instructions executed by an Administrative Trustee on behalf of the Trust, the
Property Trustee shall, subject to this Article V, countersign and make
available for delivery any executed Capital Securities delivered to it issuable
in exchange for such Global Capital Security (or any portion thereof) in
accordance with the instructions of the Clearing Agency.  The Property Trustee
shall not be liable for any delay in

                                       27
<PAGE>

delivery of such instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.

          (d)  The Clearing Agency or its nominee, as the registered owner of
the Global Capital Security, shall be considered the Holder of the Capital
Securities represented by the Global Capital Security for all purposes under
this Declaration of Trust and the Capital Securities, and owners of beneficial
interests in the Global Capital Security shall hold such interests pursuant to
the Applicable Procedures and, except as otherwise provided herein, shall not be
entitled to have any of the individual Capital Securities represented by the
Global Capital Security registered in their names, shall not receive or be
entitled to receive physical delivery of any such Capital Securities in
definitive form and shall not be considered the Holders thereof under this
Declaration of Trust. Accordingly, any such owner's beneficial interest in the
Global Capital Security shall be shown only on, and the transfer of such
interest shall be effected only through, records maintained by the Clearing
Agency or its nominee. The Securities Registrar and the Trustees shall be
entitled to deal with the Clearing Agency for all purposes of this Declaration
of Trust relating to the Global Capital Securities (including the payment of the
Liquidation Amount of and Distributions on the Global Capital Securities and the
giving of instructions or directions to Owners of Global Capital Securities) as
the sole Holder of Global Capital Securities and shall have no obligations to
the Owners thereof. Neither the Property Trustee nor the Securities Registrar
shall have any liability in respect of any transfers effected by the Clearing
Agency.

          (e)  The rights of Owners of beneficial interests in the Global
Capital Security shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such owners and
the Clearing Agency. Neither the Clearing Agency nor its nominee will consent or
vote with respect to the Capital Securities. Under its usual procedures, the
Clearing Agency or its nominee would mail an Omnibus Proxy to the Trust as soon
as possible after the relevant record date. The Omnibus Proxy assigns the
consenting or voting rights of the Clearing Agency or its nominee to those
Clearing Agency Participants, identified in a listing attached to such Omnibus
Proxy, to whose accounts the Capital Securities are credited on such record
date.

     SECTION 5.05.  Registration of Transfer and Exchange Generally; Certain
                    --------------------------------------------------------
Transfers and Exchanges; Capital Securities Certificates.
--------------------------------------------------------

          (a)  The Property Trustee shall keep or cause to be kept at its
Corporate Trust Office a register or registers for the purpose of registering
Capital Securities Certificates and Common Securities Certificates and transfers
and exchanges of Capital Securities Certificates and Common Securities
Certificates in which the registrar and transfer agent with respect to the
Capital Securities (the "Securities Registrar"), subject to such reasonable
regulations as it may prescribe, shall provide for the registration of Capital
Securities Certificates and Common Securities Certificates (subject to Section
5.11 in the case of Common Securities Certificates) and registration of
transfers and exchanges of Capital Securities Certificates and Common Securities
Certificates as herein provided.  Such register is herein sometimes referred to
as the "Securities Register."  The Property Trustee is hereby appointed
"Securities Registrar" for the purpose of registering Capital Securities and
transfers of Capital Securities as herein provided.

                                       28
<PAGE>

The provisions of Sections 8.01, 8.03 and 8.06 shall apply to the Property
Trustee also in its role as Securities Registrar.

     Upon surrender for registration of transfer of any Capital Security at the
offices or agencies of the Property Trustee designated for that purpose, the
Administrative Trustees shall execute, and the Property Trustee shall
countersign and make available for delivery, in the name of the designated
transferee or transferees, one or more new Capital Securities of any authorized
denominations of like tenor and aggregate liquidation amount and bearing such
restrictive legends as may be required by this Declaration of Trust.

     At the option of the Holder, Capital Securities may be exchanged for other
Capital Securities of any authorized denominations, of like tenor and aggregate
Liquidation Amount and bearing such restrictive legends as may be required by
this Declaration of Trust, upon surrender of the Capital Securities to be
exchanged at such office or agency.  Whenever any securities are so surrendered
for exchange, an Administrative Trustee shall execute and the Property Trustee
shall countersign and make available for delivery the Capital Securities that
the Holder making the exchange is entitled to receive.

     All Capital Securities issued upon any transfer or exchange of Capital
Securities shall be the valid obligations of the Trust, entitled to the same
benefits under this Declaration of Trust as the Capital Securities surrendered
upon such transfer or exchange.

     Every Capital Security presented or surrendered for transfer or exchange
shall (if so required by the Property Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Property Trustee and the Securities Registrar, duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing.

     No service charge shall be made to a Holder for any transfer or exchange of
Capital Securities, but the Property Trustee or the Securities Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Capital Securities.

     Neither the Trust nor the Property Trustee shall be required, pursuant to
the provisions of this Section, (i) to issue, register the transfer of or
exchange any Capital Security during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of Capital
Securities pursuant to Article IV and ending at the close of business on the day
of such mailing of the notice of redemption, or (ii) to register the transfer of
or exchange any Capital Security so selected for redemption in whole or in part,
except, in the case of any such Capital Security to be redeemed in part, any
portion thereof not to be redeemed.

          (b)  Certain Transfers and Exchanges.  Subject to Section 5.04(c), but
               -------------------------------
notwithstanding any other provision of this Declaration of Trust, transfers and
exchanges of Capital Securities and beneficial interests in a Global Capital
Security shall be made only in accordance with this Section 5.05 (b) and Section
5.04(c).

                                       29
<PAGE>

          (i)  Non-Global Capital Security to Global Capital Security.  If the
               ------------------------------------------------------
Holder of an Other Capital Security (other than the Global Capital Security)
wishes at any time to transfer all or any portion of such other Capital Security
to a Person who wishes to take delivery thereof in the form of a beneficial
interest in the Global Capital Security, such transfer may be effected only in
accordance with the provisions of this Clause (b)(i) and subject to the
Applicable Procedures.  Upon receipt by the Securities Registrar of (A) such
Other Capital Security as provided in Section 5.05(a) and instructions
satisfactory to the Securities Registrar directing that a beneficial interest in
the Global Capital Security in a specified liquidation amount not greater than
the liquidation amount of such Other Capital Security be credited to a specified
Clearing Agency Participant's account and (B) a Capital Securities Certificate
duly executed by such Holder or such Holder's attorney duly authorized in
writing, then the Securities Registrar shall cancel such Other Capital Security
(and issue a new Other Capital Security in respect of any untransferred portion
thereof) as provided in Section 5.01(a) and increase the aggregate liquidation
amount of the Global Capital Security by the specified liquidation amount as
provided in Section 5.04(c).

          (ii)  Non-Global Capital Security to Non-Global Capital Security.  A
                ----------------------------------------------------------
Capital Security that is not a Global Capital Security may be transferred, in
whole or in part, to a Person who takes delivery in the form of another Capital
Security that is not a Global Capital Security as provided in Section 5.05(a).

          (iii) Exchanges Between Global Capital Security and Non-Global
                --------------------------------------------------------
Capital Security.  A beneficial interest in the Global Capital Security may be
----------------
exchanged for a Capital Security that is not a Global Capital Security as
provided in Section 5.04.

     SECTION 5.06.  Mutilated, Destroyed, Lost or Stolen Trust Securities
                    -----------------------------------------------------
Certificates. Provided Definitive Capital Securities Certificates are issued, if
------------
(a) any mutilated Trust Securities Certificate shall be surrendered to the
Securities Registrar, or if the Securities Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate and (b) there shall be delivered to the Securities Registrar and the
Administrative Trustees such security or indemnity as may be required by them to
save each of them harmless, then in the absence of notice that such Trust
Securities Certificate shall have been acquired by a bona fide purchaser, the
Administrative Trustees, or any one of them, on behalf of the Trust shall
execute and make available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust
Securities Certificate of like class, tenor and denomination.  In connection
with the issuance of any new Trust Securities Certificate under this Section,
the Administrative Trustees or the Securities Registrar 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 Trust Securities Certificate
issued pursuant to this Section shall constitute conclusive evidence of an
undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.

     SECTION 5.07.  Persons Deemed Securityholders.  The Trustees or the
                    ------------------------------
Securities Registrar shall treat the Person in whose name any Trust Securities
are issued as the owner of such Trust Securities for the purpose of receiving
Distributions and for all other purposes

                                       30
<PAGE>

whatsoever, and neither the Trustees nor the Securities Registrar shall be bound
by any notice to the contrary.

     SECTION 5.08.  Access to List of Securityholders' Names and Addresses.
                    ------------------------------------------------------
Each Owner of Trust Securities acknowledges that the Depositor, the Property
Trustee, the Delaware Trustee or the Administrative Trustees may from time to
time make reasonable use of information consisting of such Owner's name and
address, including the furnishing of a list of such names and addresses as
contemplated hereunder, and each Owner shall be deemed to have agreed not to
hold the Depositor, the Property Trustee or the Administrative Trustees
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.

     SECTION 5.09.  Maintenance of Office or Agency; Transfer Agent.  The
                    -----------------------------------------------
Administrative Trustees shall maintain an office or offices or agency or
agencies where Definitive Capital Securities Certificates, if issued, may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustees in respect of the Trust Securities may be
served.  The Administrative Trustees initially designate Wilmington Trust
Company, 1100 N. Market Street, Attention:  Corporate Trust Administration,
Wilmington, Delaware 19890, as its corporate trust office for such purposes.
The Administrative Trustees shall give prompt written notice to the Depositor
and to the Securityholders of any change in the location of the Securities
Register or any such office or agency.  The Trust Company shall act as initial
transfer agent for the Trust Securities.

     SECTION 5.10.  Appointment of Paying Agent.  The Paying Agent shall make
                    ---------------------------
Distributions to Securityholders from the Payment Account and shall report the
amounts of such Distributions to the Property Trustee and the Administrative
Trustees.  Any Paying Agent shall have the revocable power to withdraw funds
from the Payment Account for the purpose of making the distributions referred to
above.  The Administrative Trustees may revoke such power and remove any Paying
Agent if such Administrative Trustees determine in their sole discretion that
such Paying Agent shall have failed to perform its obligations under this
Declaration of Trust in any material respect.  The Paying Agent shall initially
be the Trust Company, and any co-paying agent chosen by the Trust Company and
acceptable to the Administrative Trustees and the Depositor.  Any Person acting
as Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Administrative Trustees, the Property Trustee and the
Depositor.  In the event that the Trust Company shall no longer be the Paying
Agent or a successor Paying Agent shall resign or its authority to act be
revoked, the Administrative Trustees shall appoint a successor that is
acceptable to the Property Trustee and the Depositor to act as Paying Agent
(which shall be a bank or trust company).  The Administrative Trustees shall
cause such successor Paying Agent or any additional Paying Agent appointed by
the Administrative Trustees to execute and deliver to the Trustees an instrument
in which such successor Paying Agent or additional Paying Agent shall agree with
the Trustees that, as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Securityholders in trust for the benefit of the Securityholders entitled thereto
until such sums shall be paid to such Securityholders.  The Paying Agent shall
return all unclaimed funds to the Property Trustee and, upon removal of a Paying
Agent, such Paying Agent shall also return all funds in its possession to the
Property Trustee.  The provisions of

                                       31
<PAGE>

Sections 8.01, 8.03 and 8.06 herein shall apply to the Trust Company also in its
role as Paying Agent, for so long as the Trust Company shall act as Paying Agent
and to the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Declaration of Trust to the Paying Agent shall include any co-
paying agent, unless the context requires otherwise.

     SECTION 5.11.  Ownership of Common Securities by Depositor.  The Depositor
                    -------------------------------------------
shall acquire and retain beneficial and record ownership of the Common
Securities.  To the fullest extent permitted by law, other than a transfer in
connection with a consolidation or merger of the Depositor into another
corporation, or any conveyance, transfer or lease by the Depositor of its
properties and assets substantially as an entirety to any Person, pursuant to
Section 8.01 of the Indenture, any attempted transfer of the Common Securities
shall be void.  The Administrative Trustees shall cause each Common Securities
Certificate issued to the Depositor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE."

     SECTION 5.12.  Notices to Clearing Agency.  To the extent that a notice or
                    --------------------------
other communication to the Owners is required under this Declaration of Trust,
for so long as Capital Securities are represented by a Global Securities
Certificate, the Trustees shall give all such notices and communications
specified herein to be given to Owners to the Clearing Agency, and shall have no
obligations to give duplicates thereof to the Owners.

     SECTION 5.13.  Rights of Securityholders.
                    -------------------------

          (a)  The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 2.09,
and the Securityholders shall not have any right or title therein other than the
undivided beneficial ownership interest in the assets of the Trust conferred by
their Trust 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 Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Declaration of Trust. The Trust
Securities shall have no preemptive or singular rights and, when issued and
delivered to Securityholders against payment of the purchase price therefor will
be fully paid and nonassessable. The Holders, in their capacities as such, 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.

          (b)  For so long as any Capital Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails, or the Holders
of not less than 25% in principal amount of the outstanding Junior Subordinated
Debt Securities fail, to declare the principal amount of all of the Junior
Subordinated Debt Securities to be immediately due and payable, the Holders of
at least 25% in Liquidation Amount of the Capital Securities then Outstanding
shall have such right by a notice in writing to the Depositor and the Debenture
Trustee with a copy to the Property Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Junior Subordinated
Debt Securities shall become immediately due and payable; provided that the
                                                          --------
payment of principal and interest on such Junior Subordinated Debt Securities
shall remain subordinated to the extent provided in the Indenture.

                                       32
<PAGE>

     At any time after such a declaration of acceleration with respect to the
Junior Subordinated Debt Securities 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, the holders of a majority in principal amount of
the outstanding Junior Subordinated Debt Securities, by written notice to the
Property Trustee, the Depositor and the Debenture Trustee, may rescind and annul
such declaration and its consequences if:

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

               (A)  all overdue installments of interest (including any
          Additional Interest (as defined in the Indenture)) on all of the
          Junior Subordinated Debt Securities,

               (B)  the principal of any Junior Subordinated Debt Securities
          that have become due otherwise than by such declaration of
          acceleration and interest thereon at the rate borne by the Junior
          Subordinated Debt Securities, and

               (C)  all sums paid or advanced by the Debenture Trustee under the
          Indenture and the reasonable compensation, expenses, disbursements and
          advances of the Debenture Trustee, its agents and counsel; and

               (ii) all Events of Default with respect to the Junior
Subordinated Debt Securities, other than the nonpayment of the principal of the
Junior Subordinated Debt Securities that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.13 of the
Indenture.

     If such holders of the Junior Subordinated Debt Securities fail to annul
any such declaration and waive such default, the Holders of Capital Securities
representing a majority in aggregate Liquidation Amount of all the Outstanding
Capital Securities shall also have the right to rescind and annul such
declaration and its consequences by written notice to the Depositor, the
Property Trustee and the Debenture Trustee, subject to the satisfaction of the
conditions set forth in Clause (i) and (ii) of this Section 5.13(b).

     Should the holders of a majority in aggregate principal amount of the
outstanding Junior Subordinated Debt Securities fail to take such actions, the
Holders of a majority in aggregate Liquidation Amount of the Capital Securities
may, on behalf of the Holders of all the Capital Securities, waive any past
default under the Indenture, except a default in the payment of principal or
interest (unless such 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 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 Junior
Subordinated Debt Security.  No such rescission shall affect any subsequent
default or impair any right consequent thereon.

                                       33
<PAGE>

     Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of the Capital
Securities all or part of which is represented by Global 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 Property 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 5.13(b).

          (c)  For so long as any Capital Securities remain outstanding, to the
fullest extent permitted by law and subject to the terms of this Declaration of
Trust and the Indenture, upon a Debenture Event of Default specified in Section
5.01(1) or 5.01(2) of the Indenture, any Holder of Capital Securities shall have
the right to institute a proceeding directly against the Depositor, pursuant to
Section 5.08 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or interest (including any Additional Interest) on Junior
Subordinated Debt Securities having a principal amount equal to the aggregate
Liquidation Amount of the Capital Securities held by such Holder (a "Direct
Action").  Except as set forth in Sections 5.13(b) and 5.13(c) hereof, the
Holders of Capital Securities shall have no right to exercise directly any right
or remedy available to the Holders of, or in respect of, the Junior Subordinated
Debt Securities.

          (d)  A Securityholder may institute a legal proceeding directly
against the Guarantor under the Guarantee to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust or any
person or entity.

                                  ARTICLE VI

                   Acts of Securityholders; Meetings; Voting
                   -----------------------------------------

     SECTION 6.01.  Limitations on Capital Securityholder's Voting Rights.
                    -----------------------------------------------------

          (a)  Except as provided in this Declaration of Trust and in the
Indenture and as otherwise required by law, no Holder of Capital Securities
shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Capital Securityholders from time to time as partners or members of an
association.  Unless a Debenture Event of Default shall

                                       34
<PAGE>

have occurred and be continuing, any Trustee may be removed at any time by the
vote of the Common Securityholder. The right to vote to appoint, remove or
replace the Administrative Trustees is vested exclusively in the Depositor as
the Holder of the Common Securities.

          (b)  So long as any Junior Subordinated Debt Securities are held by
the Property Trustee, the Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Property Trustee with
respect to such Junior Subordinated Debt Securities, (ii) waive any past default
that is waivable under Section 5.13 of the Indenture, (iii) exercise any right
to rescind or annul a declaration that the principal of all the Junior
Subordinated Debt Securities shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debt Securities, where such consent shall be required, without, in
each case, obtaining the prior approval of the Holders of at least a majority in
aggregate Liquidation Amount of all Outstanding Capital Securities; provided,
                                                                    --------
however, that where a consent under the Indenture would require the consent of
-------
each holder of Junior Subordinated Debt Securities affected thereby, no such
consent shall be given by the Property Trustee without the prior written consent
of each Holder of Capital Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Holders of Capital
Securities, except by a subsequent vote of the Holders of Capital Securities.
The Property Trustee shall notify all Holders of the Capital Securities of any
notice of default received from the Debenture Trustee with respect to the Junior
Subordinated Debt Securities. In addition to obtaining the foregoing approvals
of the Holders of the Capital Securities, prior to taking any of the foregoing
actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion
of Counsel experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes as a result of such action and that such action would not
cause the Trust to be classified as other than a grantor trust.

          (c)  If any proposed amendment to this Declaration of Trust provides
for, or the Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the interests, powers, preferences or
special rights of the Trust Securities, whether by way of amendment to this
Declaration of Trust or otherwise, or (ii) the dissolution, winding-up or
termination of the Trust, other than pursuant to the towns of this Declaration
of Trust, then the Holders of Outstanding Trust Securities as a class will be
entitled to vote on such amendment or proposal.

     SECTION 6.02.  Notice of Meeting.  Notice of all meetings of the
                    -----------------
Securityholders, stating the time, place and purpose of the meeting, shall be
given by the Property Trustee pursuant to Section 10.09 to each Securityholder
of record, at his registered address, at least 15 days and not more than 90 days
before the meeting.  At any such meeting, any business properly before the
meeting may be so considered whether or not stated in the notice of the meeting.
Any adjourned meeting may be held as adjourned without further notice.

     SECTION 6.03.  Meetings of Securityholders.  No annual meeting of
                    ---------------------------
Securityholders is required to be held.  The Administrative Trustees, however,
shall call a meeting of Securityholders to vote on any matter upon the written
request of the Securityholders

                                       35
<PAGE>

of record of 25% of the Securities (based upon their Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Securityholders to vote on any matters as to which
Securityholders are entitled to vote.

     Securityholders of record of 50% of the Outstanding Securities (based upon
their Liquidation Amount), present in person or represented by proxy, shall
constitute a quorum at any meeting of Securityholders.

     If a quorum is present at a meeting, an affirmative vote by the
Securityholders of record present, in person or by proxy, holding more than a
majority of the Securities (based upon their Liquidation Amount) held by the
Securityholders of record present, either in person or by proxy, at such meeting
shall constitute the action of the Securityholders, unless this Declaration of
Trust requires a greater number of affirmative votes.

     SECTION 6.04.  Voting Rights.  Securityholders shall be entitled to one
                    -------------
vote for each $25.00 of Liquidation Amount represented by their Outstanding
Trust Securities in respect of any matter as to which such Securityholders are
entitled to vote.

     SECTION 6.05.  Proxies.  At any meeting of Securityholders, any
                    -------
Securityholder entitled to vote thereat may vote by proxy; provided that no
                                                           --------
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken.  Proxies may be solicited in the name of
the Property Trustee or one or more officers of the Property Trustee.  Only
Securityholders of record shall be entitled to vote.  When Trust Securities are
held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such Trust Securities, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Trust Securities.  A proxy purporting
to be executed by or on behalf of a Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger.  No proxy shall be valid more than three years
after its date of execution.

     SECTION 6.06.  Securityholder Action by Written Consent.  Any action that
                    ----------------------------------------
may be taken by Securityholders at a meeting may be taken without a meeting if
Securityholders holding more than a majority of all Outstanding Securities
(based upon their Liquidation Amount) entitled to vote in respect of such action
(or such larger proportion thereof as shall be required by any express provision
of this Declaration of Trust) shall consent to the action in writing.

     SECTION 6.07.  Record Date for Voting and Other Purposes.  For the purposes
                    -----------------------------------------
of determining the Securityholders who are entitled to notice of and to vote at
any meeting or by written consent, or to participate in any Distribution in
respect of which a record date is not otherwise provided for in this Declaration
of Trust, or for the purpose of any other action, the Administrative Trustees
may from time to time fix a date, not more than 90 days prior to the date of any
meeting of Securityholders or the payment of a Distribution or other action, as
the case

                                       36
<PAGE>

may be, as a record date for the determination of the identity of the
Securityholders of record for such purposes.

     SECTION 6.08.  Acts of Securityholders.  Any request, demand,
                    -----------------------
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Declaration of Trust to be given, made or taken by
Securityholders or Owners may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Securityholders or
Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee.  Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners signing such instrument or instruments.  Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Declaration of Trust and (subject to Section 8.01) conclusive in
favor of the Trustees, if made in the manner provided in this Section.

     The fact and date of the execution by any Person of any such instrument or
writing may be provided by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof.  Where such execution is
by a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.  The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that any Trustee receiving the same deems sufficient.

     The ownership of Trust Securities shall be proved by the Securities
Registrar.

     Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered.
to be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.

     Without limiting the foregoing, a Securityholder entitled hereunder to take
any action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.

     If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.

                                       37
<PAGE>

     A Holder may institute a legal proceeding directly against the Depositor
under the Guarantee to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee (as defined in the
Guarantee), the Trust, any Trustee or any person or entity.

     SECTION 6.09.  Inspection of Records.  Upon reasonable notice to the
                    ---------------------
Administrative Trustees and the Property Trustee, the records of the Trust shall
be open to inspection by Securityholders during normal business hours for any
purpose reasonably related to such Securityholder's interest as a
Securityholder.

                                  ARTICLE VII

                        Representations and Warranties
                        ------------------------------

     SECTION 7.01.  Representations and Warranties of the Property Trustee and
                    ----------------------------------------------------------
the Delaware Trustee.  The Property Trustee and the Delaware Trustee, each
--------------------
severally on behalf of and as to itself, hereby represents and warrants for the
benefit of the Depositor and the Securityholders that:

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

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

          (c)  The execution, delivery and performance of this Declaration of
Trust by the Property Trustee does not conflict with or constitute a breach of
the certificate of incorporation or by-laws of the Property Trustee.

          (d)  At the Closing Date, the Property Trustee has not knowingly
created any liens or encumbrances on such Trust Securities.

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

                                       38
<PAGE>

          (f)  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 of Trust.

          (g)  The execution, delivery and performance by the Delaware Trustee
of this Declaration of Trust have been duly authorized by all necessary
corporate action on the part of the Delaware Trustee; and this Declaration of
Trust has been duly executed and delivered by the Delaware Trustee, and
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' right generally and to general principles of equity and the
discretion of the court regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).

          (h)  The execution, delivery and performance of this Declaration of
Trust by the Delaware Trustee do not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Delaware Trustee.

          (i)  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 of Trust.

          (j)  The Delaware Trustee is an entity that has its principal place of
business in the State of Delaware.

     SECTION 7.02.  Representations and Warranties of Depositor.  The Depositor
                    -------------------------------------------
hereby represents and warrants for the benefit of the Securityholders that the
Trust Securities Certificates issued at the Closing Date on behalf of the Trust
have been duly authorized and will have been duly and validly executed, issued
and delivered by an Administrative Trustee pursuant to the terms and provisions
of, and in accordance with the requirements of, this Declaration of Trust, and
the Securityholders will be, as of each such date, entitled to the benefits of
this Declaration of Trust.

                                 ARTICLE VIII

                                 The Trustees
                                 ------------

     SECTION 8.01.  Certain Duties and Responsibilities.
                    -----------------------------------

          (a)  The duties and responsibilities of the Trustees shall be as
provided by this Declaration of Trust and, in the case of the Property Trustee,
by the Trust Indenture Act; provided, however, that the Property Trustee shall
                            --------  -------
not be subject to the provisions of the Trust Indenture Act until such time as
this Declaration of Trust becomes qualified under the Trust Indenture Act.
Notwithstanding the foregoing, no provisions of this Declaration of Trust shall
require the Trustees 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, if they shall have reasonable
grounds for believing that repayment of such funds or

                                       39
<PAGE>

indemnity satisfactory to it against such risk or liability is not reasonably
assured to it. Whether or not herein expressly so provided, every provision of
this Declaration of Trust relating to the conduct or affecting the liability of,
or affording protection to, the Trustees shall be subject to the provisions of
this Article. Nothing in this Declaration of Trust shall be construed to release
an Administrative Trustee from liability for his own grossly negligent action,
his own grossly negligent failure to act, or his own willful misconduct. To the
extent that, at law or in equity, an Administrative Trustee has duties
(including fiduciary duties) and liabilities relating to the Trust or to the
Securityholders, such Administrative Trustee shall not be liable to the Trust or
to any Securityholder for such Trustee's good faith reliance on the provisions
of this Declaration of Trust. The provisions of this Declaration of Trust, to
the extent that they restrict the duties and liabilities of the Administrative
Trustees otherwise existing at law or in equity, are agreed by the Depositor and
the Securityholders to replace such other duties and liabilities of the
Administrative Trustees.

          (b)  All payments made by the Property Trustee or a Paying Agent in
respect of the Trust 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 Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof.  Each
Securityholder, by its acceptance of a Trust 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 are
not personally liable to it for any amount distributable in respect of any Trust
Security or for any other liability in respect of any Trust Security.  This
Section 8.01(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Declaration of Trust or, in the case of the Property Trustee,
in the Trust Indenture Act, if applicable.

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

               (i)   the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property Trustee,
unless it shall be proved that the Property Trustee was negligent in
ascertaining the pertinent facts;

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

               (iii) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Junior Subordinated Debt
Securities and the Payment Account shall be to deal with such Property in a
similar manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on

                                       40
<PAGE>

liability afforded to the Property Trustee under this Declaration of Trust and
the Trust Indenture Act;

               (iv) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with the Depositor;
and money held by the Property Trustee need not be segregated from other funds
held by it, except in relation to the Payment Account maintained by the Property
Trustee pursuant to Section 3.01 and except to the extent otherwise required by
law; and

               (v)  the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Depositor with their
respective duties under this Declaration of Trust nor shall the Property Trustee
be liable for the default or misconduct of the Administrative Trustees or the
Depositor.

     SECTION 8.02.  Events of Default Notices; Deferral of Interest Payment
                    -------------------------------------------------------
Notices.  Within five Business Days after the occurrence of any Event of Default
-------
actually known to a Responsible Officer of the Property Trustee, the Property
Trustee shall transmit, in the manner and to the extent provided in Section
10.09, notice of such Event of Default to the Securityholders, the
Administrative Trustees and the Depositor, unless such Event of Default shall
have been cured or waived.  The Depositor and the Administrative Trustees are
required to file annually with the Property Trustee a certificate as to whether
or not they are in compliance with all the conditions and covenants applicable
to them under this Declaration of Trust.

     Within five Business Days after the receipt of notice of the Depositor's
exercise of its right to defer the payment of interest on the Junior
Subordinated Debt Securities pursuant to the Indenture, the Administrative
Trustee shall transmit, in the manner and to the extent provided in Section
10.09, notice of such exercise to the Securityholders and the Property Trustee,
unless such exercise shall have been revoked.

     SECTION 8.03.  Certain Rights of Property Trustee.  Subject to the
                    ----------------------------------
provisions of Section 8.01:

          (a)  the Property Trustee may conclusively rely and shall be fully
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, 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 or presented by the proper
party or parties;

          (b)  if (i) in performing its duties under this Declaration of Trust
the Property Trustee is required to decide between alternative courses of action
or (ii) in construing any of the provisions of this Declaration of Trust the
Property Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein or (iii) the Property Trustee is unsure of the
application of any provision of this Declaration of Trust, then, except as to
any matter as to which the Securityholders are entitled to vote under the terms
of this Declaration of Trust, the Property Trustee shall deliver a notice to the
Depositor requesting written instructions of the

                                       41
<PAGE>

Depositor as to the course of action to be taken, and the Property Trustee shall
take such action, or refrain from taking such action, as the Property Trustee
shall be instructed in writing to take, or to refrain from taking, by the
Depositor; provided, however, that if the Property Trustee does not receive such
           --------  -------
instructions of the Depositor within ten Business Days after it has delivered
such notice, or such reasonably shorter period of time set forth in such notice
(which, to the extent practicable, shall not be less than two Business Days), it
may, but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Declaration of Trust as it shall deem advisable and in
the best interests of the Securityholders, in which event the Property Trustee
shall have no liability except for its own bad faith, negligence or willful
misconduct;

          (c)  any direction or act of the Depositor or the Administrative
Trustee contemplated by this Declaration of Trust shall be sufficiently
evidenced by an Officers' Certificate;

          (d)  whenever in the administration of this Declaration of Trust, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees (which Officers' Certificate will
be evidence only for purposes of determining entitlement to indemnification of
the Property Trustee from the Depositor but not with respect to any liability to
Securityholders);

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

          (f)  the Property Trustee may consult with counsel of its selection
(which counsel may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees), 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, such counsel may be counsel to the Depositor or any
of its Affiliates, and may include any of its employees; the Property Trustee
shall have the right at any time to seek instructions concerning the
administration of this Declaration of Trust from any court of competent
jurisdiction;

          (g)  the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration of Trust at the request
or direction of any of the Securityholders pursuant to this Declaration of
Trust, unless such Securityholders shall have offered to the Property Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction;

          (h)  the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, 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 Securityholders,

                                       42
<PAGE>

but the Property Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;

          (i)  the Property Trustee may execute any of its trusts or powers
hereunder or perform any of its duties hereunder either directly or by or
through its agents or attorneys, and the Property 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 by it with due care
hereunder;

          (j)  whenever in the administration of this Declaration of Trust the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (i) may request instructions from the Holders of the Trust Securities,
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust 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 by this Declaration of
Trust, the Property Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration of Trust;

          (l)  when the Property 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; and

          (m)  the Property Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer of the Property Trustee obtains
actual knowledge of such event or the Property Trustee receives written notice
of such event from Securityholders holding at least 250 of the Outstanding Trust
Securities (based upon Liquidation Amount).

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

     SECTION 8.04.  Not Responsible for Recitals.  The recitals contained herein
                    ----------------------------
and in the Trust Securities Certificates shall be taken as the statements of
Trust, and the Trustees do not assume any responsibility for their correctness.
The Trustees shall not be accountable for the use or application by the
Depositor of the proceeds of the Junior Subordinated Debt Securities.

     SECTION 8.05.  May Hold Securities.  Except as provided in the definition
                    -------------------
of the term "Outstanding" in Article I, any Trustee or any other agent of any
Trustee or the Trust, in its

                                       43
<PAGE>

individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 8.08 and 8.13, may otherwise deal with the
Trust with the same rights that it would have if it were not a Trustee or such
other agent.

     SECTION 8.06.  Compensation, Indemnity Fees.  Pursuant to Section 10.06 of
                    ----------------------------
the Indenture, the Depositor, as borrower on the Junior Subordinated Debt
Securities, agrees:

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

          (b)  to the fullest extent permitted by applicable law and 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 of Trust
(including the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable (i) to the negligence or willful misconduct of the Property
Trustee, and (ii) to the gross negligence or willful misconduct of any of the
other Trustees;

          (c)  to the fullest extent permitted by applicable law, to indemnify
and hold harmless each Trustee and any employee or agent of the Trust or its
Affiliates (each referred to herein as an "Indemnified Person") from and against
any loss, damage, liability, tax, penalty, expense or claim of any kind or
nature whatsoever incurred by such Indemnified Person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Declaration of Trust,
except that (i) the Property Trustee shall not be entitled to be indemnified in
respect of any loss, damage or claim incurred by the Property Trustee by reason
of negligence or willful misconduct with respect to such acts or omissions, and
(ii) no other 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;
and

          (d)  to the fullest extent permitted by applicable law, to advance
expenses (including legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding, from time to time, prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Depositor of (i) a written affirmation by or on behalf of the Indemnified
Person of its or his good faith belief that it or he has met the standard of
conduct set forth in this Section 8.06 and (ii) an undertaking by or on behalf
of the Indemnified Person to repay such amount if it shall be determined that
the Indemnified Person is not entitled to be indemnified as authorized in the
preceding subsection.

     The provisions of this Section 8.06 shall survive the termination of this
Declaration of Trust or the earlier resignation or removal of any Trustee.

                                       44
<PAGE>

     No Trustee may claim any lien or charge on any Trust Property as a result
of any amount due pursuant to this Section 8.06.

     The Depositor and any Trustee (in the case of the Property Trustee, subject
to Section 8.08 hereof) 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 none of the Trust, the Holders, the
Depositor or any such Trustee shall have any rights by virtue of this
Declaration of Trust 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.  Neither the Depositor, nor any 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 the Depositor or any 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 Trustee may
engage or be interested in any financial or other transaction with the Depositor
or any Affiliate of the Depositor, or may act as depository for, trustee or
agent for, or act on any committee or body of holders of, securities or other
obligations of the Depositor or its Affiliates.

     SECTION 8.07.  Corporate Property Trustee Required; Eligibility of
                    ---------------------------------------------------
Trustees.

          (a)  There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities.  The Property Trustee shall be a Person that is
a national or state chartered bank or trust company and eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus of at
least $50 million.  If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person 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
the Property Trustee with respect to the Trust Securities shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereafter specified in this
Article; provided, however, that the Property Trustee need not qualify under the
         --------  -------
Trust Indenture Act until such time as this Declaration of Trust is qualified
under the Trust Indenture Act.

          (b)  There shall at all times be one or more Administrative Trustees
hereunder.  Each Administrative Trustee shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
persons authorized to bind that entity.

          (c)  There shall at all times be a Delaware Trustee.  The Delaware
Trustee shall either be (i) a natural person who is at least 21 years of age and
a resident of the State of Delaware or (ii) a legal entity with its principal
place of business in the State of Delaware, and that otherwise meets the
requirements of applicable Delaware law, that shall act through one or more
persons authorized to bind such entity.

     SECTION 8.08.  Conflicting Interests.  If the Property Trustee has or shall
                    ---------------------
acquire a conflicting interest within the meaning of the Trust Indenture Act,
the Property Trustee shall

                                       45
<PAGE>

either eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act and this
Declaration of Trust.

     SECTION 8.09.  Co-Trustees and Separate Trustee.  Unless an Event of
                    --------------------------------
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be located,
the Depositor and the Administrative Trustees, by agreed action of the majority
of such Trustees, shall have power to appoint, and upon the written request of
the Administrative Trustees, the Depositor shall for such purpose join with the
Administrative Trustees in the execution, delivery, and performance of all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Property Trustee either to act as co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to the extent
required by law to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions of
this Section.  If the Depositor does not join in such appointment within 15 days
after the receipt by it of a request so to do, or in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.  Any co-trustee or separate trustee appointed
pursuant to this Section shall either be (i) a natural person who is at least 21
years of age and a resident of the United States or (ii) a legal entity with its
principal place of business in the United States that shall act through one or
more persons authorized to bind such entity.

     Should any written instrument from the Depositor be required by any co-
trustee or separate trustee so appointed for more fully confirming to such co-
trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Depositor.

     Every co-trustee or separate trustee shall, to the extent permitted by law,
but to such extent only, be appointed subject to the following terms, namely:

          (a)  The Trust Securities shall be executed and made available for
delivery, and all rights, powers, duties, and obligations hereunder in respect
of the custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustees specified hereunder shall
be exercised solely by such Trustees and not by such co-trustee or separate
trustee.

          (b)  The rights, powers, duties and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such co-
trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.

                                       46
<PAGE>

          (c)  The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor.  Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal.  A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.

          (d)  No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any other
trustee hereunder.

          (e)  The Property Trustee shall not be required to supervise any co-
trustee or separate trustee, nor shall it be liable by reason of any act of a
co-trustee or separate trustee or any employees or agents of a co-trustee or
separate trustee.

          (f)  Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.

     SECTION 8.10.  Resignation and Removal; Appointment of Successor.  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 Section 8.11.

     Subject to the immediately preceding paragraph, a Relevant Trustee may
resign at any time by giving written notice thereof to the Securityholders.  If
the instrument of acceptance by the successor Trustee required by Section 8.11
shall not have been delivered to the Relevant Trustee within 30 days after the
giving of such notice of resignation or removal, the Relevant Trustee may
petition, at the expense of the Trust, any court of competent jurisdiction for
the appointment of a successor Relevant Trustee.

     Unless a Debenture Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by Act of the Common Securityholder.  If
a Debenture Event of Default shall have occurred and be continuing, the Property
Trustee or the Delaware Trustee, or both of them, may be removed at such time by
Act of the Holders of a majority in Liquidation Amount of the Outstanding
Capital Securities, delivered to the Relevant Trustee (in its individual
capacity and on behalf of the Trust).  An Administrative Trustee may be removed
by Act of the Common Securityholder at any time.

     If any Trustee shall resign, be removed or become incapable of acting as
Trustee, or if a vacancy shall occur in the office of any Trustee for any cause,
at a time when no Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees and the retiring Trustee shall comply with the applicable requirements
of

                                       47
<PAGE>

Section 8.11.  If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Capital Securityholders, by
Act of the Capital Securityholders of a majority in Liquidation Amount of the
Capital Securities then outstanding delivered to the retiring Relevant Trustee,
shall promptly appoint a successor Relevant Trustee or Trustees, and such
successor Trustee shall comply with the applicable requirements of Section 8.11.
If an Administrative Trustee shall resign, be removed or become incapable of
acting as Administrative Trustee, at a time when a Debenture Event of Default
shall have occurred and be continuing, the Common Securityholder, by Act of the
Common Securityholder delivered to such Administrative Trustee, shall promptly
appoint a successor Administrative Trustee or Administrative Trustees and such
successor Administrative Trustee or Trustees shall comply with the applicable
requirements of Section 8.11.  If no successor Relevant Trustee shall have been
so appointed by the Common Securityholder or the Capital Securityholders and
accepted appointment in the manner required by Section 8.11, any Securityholder
who has been a Securityholder of Trust Securities for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Relevant Trustee.

     The Property Trustee shall give notice of each resignation and each removal
of a Trustee and each appointment of a successor Trustee to all Securityholders
in the manner provided in Section 10.08 and shall give notice to the Depositor.
Each notice shall include the name of the successor Relevant Trustee and the
address of its Corporate Trust Office if it is the Property Trustee.

     Notwithstanding the foregoing or any other provision of this Declaration of
Trust, in the event any Administrative Trustee or a Delaware Trustee who is a
natural person dies, or becomes, in the opinion of the Depositor, incompetent or
incapacitated, or, in the case of an Administrative Trustee, ceases to be an
employee of the Depositor, the vacancy created by such death, incompetence,
incapacity or ceasing to be an employee of the Depositor may be filled by (a)
the unanimous act of remaining Administrative Trustees if there are at least two
of them or (b) otherwise by the Depositor (with the successor in each case being
a Person who satisfies the eligibility requirement for Administrative Trustees
or Delaware Trustee, as the case may be, set forth in Section 8.07).

     SECTION 8.11.  Acceptance of Appointment by Successor.  In the case of the
                    --------------------------------------
appointment hereunder of a successor Trustee, such successor Trustee so
appointed shall execute, acknowledge and deliver to the Trust and to the
retiring Trustee any instrument accepting such appointment, 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 the rights, powers, trusts and duties of the retiring Trustee, but,
on the request of the Depositor or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee, and, if the Property Trustee is the resigning Trustee, the
Property Trustee shall duly assign, transfer and deliver to the successor
Property Trustee all Trust Property and money held by such retiring Property
Trustee hereunder.

                                       48
<PAGE>

     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
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Declaration of Trust 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 of the same trust and that each such Relevant
Trustee shall be Trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Relevant Trustee;
and, upon the execution and delivery of such amendment, the resignation or
removal of the retiring Relevant Trustee shall become effective to the extent
provided therein, and each such successor Relevant Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Relevant Trustee; but, on request of the Trust or any
successor Relevant Trustee, such retiring Relevant Trustee shall duly assign,
transfer and deliver to such successor Relevant Trustee all Trust Property, all
proceeds thereof and money held by such retiring Relevant Trustee hereunder with
respect to the Trust Securities and the Trust.

     Upon written request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.

     No successor Relevant Trustee shall accept its appointment unless, at the
time of such acceptance, such successor Relevant Trustee shall be qualified and
eligible under this Article.

     SECTION 8.12.  Merger, Conversion Consolidation or Succession to Business.
                    ----------------------------------------------------------
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Relevant Trustee shall be a
party, or any Person succeeding to all or substantially all the corporate trust
business of such Relevant Trustee, shall be the successor of such Relevant
Trustee 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.

     SECTION 8.13.  Preferential Collection of Claims Against Depositor or
                    ------------------------------------------------------
Trust.  In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:

                                       49
<PAGE>

          (a)  to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and

          (b)  to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.

     Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or compensation affecting the Trust
Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such proceeding.

     SECTION 8.14.  Reports by Property Trustee.  Upon qualification of this
                    ---------------------------
Declaration of Trust under the Trust Indenture Act,

          (a)  Not later than the last calendar day in February of each year
commencing with the last calendar day in February of 1999, the Property Trustee
shall transmit to all Securityholders in accordance with Section 10.09, and to
the Depositor, a brief report dated as of the prior December 31 with respect to:

               (i)  its eligibility under Section 8.07 or, in lieu thereof, if
to the best of its knowledge it has continued to be eligible under such Section,
a written statement to such effect; and

               (ii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action taken by the
Property Trustee in the performance of its duties hereunder that it has not
previously reported and that in its opinion materially affects the Trust
Securities.

          (b)  In addition, the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Declaration of Trust as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.

                                       50
<PAGE>

          (c)  A copy of each such report shall, at the time of such
transmission to the Holders, be filed with the Commission and with the
Depositor.

     SECTION 8.15.  Reports to the Property Trustee.  Upon qualification of this
                    -------------------------------
Declaration of Trust under the Trust Indenture Act, the Depositor and the
Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents,  reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.

     SECTION 8.16.  Evidence of Compliance with Conditions Precedent.  Upon
                    ------------------------------------------------
qualification of this Declaration of Trust under the Trust Indenture Act, each
of the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Declaration of Trust that relate to any
of the matters set forth in Section 314 (c) of the Trust Indenture Act.  Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers'
Certificate.

     SECTION 8.17.  Number of Trustees.
                    ------------------

          (a)  The number of Trustees shall be four (4); provided that the
                                                         --------
Holder of all of the common Securities by written instrument may increase or
decrease the number of Administrative Trustees. The Property Trustee and the
Delaware Trustee may be the same Person.

          (b)  If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur.  The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.

          (c)  The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust.  Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Declaration of Trust.

     SECTION 8.18.  Delegation of Power.
                    -------------------

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

                                       51
<PAGE>

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

                                  ARTICLE IX

                      Termination, Liquidation and Merger
                      -----------------------------------

     SECTION 9.01.  Termination Upon Expiration Date; Termination Upon Special
                    ----------------------------------------------------------
Event.  Unless earlier terminated, the Trust shall automatically terminate on
-----
May 5, 2038 (the "Expiration Date"), following the distribution of the Trust
Property in accordance with Section 9.04.

     SECTION 9.02.  Early Termination.  The first to occur of any of the
                    -----------------
following events is an "Early Termination Event":

          (a)  the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor or the Holder of the Common
Securities;

          (b)  the written direction to the Property Trustee from the Depositor,
as borrower with respect to the Junior Subordinated Debt Securities, at any time
(which direction is optional and wholly within the discretion of the Depositor,
subject to receipt of prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve
(including upon the occurrence and continuation of a Tax Event or a Capital
Treatment Event in respect of the Trust)) to terminate the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, distribute a Like Amount of the Junior Subordinated Debt Securities to
Securityholders;

          (c)  the redemption or conversion of all of the Trust Securities in
connection with the redemption or conversion of all of the Junior Subordinated
Debt Securities (including upon the occurrence and continuation of a Tax Event
or a Capital Treatment Event pursuant to Section 11.07(b) of the Indenture); and

          (d)  the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.

     SECTION 9.03.  Termination.  The respective obligations and
                    -----------
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following:  (a) the payment of
any expenses owed by the Trust, (b) the distribution by the Property Trustee to
Securityholders upon the liquidation of the Trust pursuant to Section 9.04, or
upon the redemption of all of the Trust Securities pursuant to Section 4.02, of
all amounts required to be distributed hereunder upon the final payment of the
Trust Securities, and (c) the

                                       52
<PAGE>

discharge of all administrative duties of the Administrative Trustees, including
the performance of any tax reporting obligations with respect to the Trust or
the Securityholders.

     SECTION 9.04.  Liquidation.
                    -----------

          (a)  If an Early Termination Event specified in clause (a), (b) or (d)
of Section 9.02 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, to each Securityholder a Like Amount of
Junior Subordinated Debt Securities, subject to Section 9.04(d).  Notice of
liquidation shall be given by the Property Trustee by first-class mail, postage
prepaid, mailed not later than 30 nor more than 90 days prior to the Liquidation
Date to each Holder at such Holder's address appearing in the Securities
Register.  All notices of liquidation shall:

               (i)   state the Liquidation Date (which, in the case of any
liquidation following the occurrence of a Special Event, shall not be more than
90 days following such occurrence);

               (ii)  state that, from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be outstanding and any Trust Securities
Certificates not surrendered for exchange will be deemed to represent a Like
Amount of Junior Subordinated Debt Securities; and

               (iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for Junior Subordinated
Debt Securities, or, if Section 9.04(d) applies, receive a Liquidation
Distribution, as the Administrative Trustees or the Property Trustee shall deem
appropriate.

          (b)  Except where Section 9.02(c) or 9.04(d) applies, in order to
effect the liquidation of the Trust and distribution of the Junior Subordinated
Debt Securities to Securityholders, the Property Trustee shall establish a
record date for such distribution (which shall be not more than 45 days prior to
the Liquidation Date) and, either itself acting as exchange agent or through the
appointment of a separate exchange agent, shall establish such procedures as it
shall deem appropriate to effect the distribution of Junior Subordinated Debt
Securities in exchange for the outstanding Trust Securities Certificates.

          (c)  Except where Section 9.02(c) or 9.04(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Junior Subordinated
Debt Securities will be issued to Holders, upon surrender of such certificates
to the Administrative Trustees or their agent for exchange, (iii) any Trust
Securities Certificates not so surrendered for exchange will be deemed to
represent a Like Amount of Junior Subordinated Debt Securities accruing interest
at the rate provided for in the Junior Subordinated Debt Securities from the
last Distribution Date on which a Distribution was made on such Trust Securities
Certificates until such certificates are so surrendered (or until such
certificates are so surrendered, no payments of interest or principal will be
made to the Holders of Trust Securities Certificates with respect to such Junior

                                       53
<PAGE>

Subordinated Debt Securities) and (iv) all rights of Securityholders holding
Trust Securities will cease, except the right of such Securityholders to receive
Junior Subordinated Debt Securities upon surrender of Trust Securities
Certificates.

          (d)  In the event that, notwithstanding the other provisions of this
Section 9.04, whether because of an order for dissolution entered by a court of
competent jurisdiction or otherwise, distribution of the Junior Subordinated
Debt Securities in the manner provided  herein is determined by the Property
Trustee not to be practical, the Trust Property shall be liquidated, and the
Trust shall be dissolved, wound-up or terminated, by the Property Trustee in
such manner as the Property Trustee determines.  In such event, on the date of
the dissolution, winding-up or other termination of the Trust, Securityholders
will be entitled to receive out of the assets of the Trust available for
distribution to Securityholders after satisfaction of liabilities to creditors
of the Trust as provided by applicable law, an amount equal to the aggregate of
the Liquidation Amount plus accumulated and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution").  If, upon
any such dissolution, winding up or termination, 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, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust Securities
shall be paid on a pro rata basis (based upon Liquidation Amounts).  Holders of
the Common Securities will be entitled to receive Liquidation Distributions upon
any such dissolution, winding-up or termination pro rata (determined as
aforesaid) with Holders of Capital Securities, except that, if a Debenture Event
of Default has occurred and is continuing, the Capital Securities shall have a
priority over the Common Securities, and no payments shall be made with respect
to the Common Securities until Holders of Capital Securities have been paid in
full.  Any such determination and liquidation by the Property Trustee shall be
conclusive upon the Securityholders and the Property Trustee shall have no
liability in connection therewith.

     SECTION 9.05.  Mergers, Consolidations, Amalgamations or Replacements of
                    ---------------------------------------------------------
the Trust.  The Trust may not merge with or into, consolidate, amalgamate, or be
---------
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Section 9.05.  At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Capital
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; provided, however, that (i) such
                                               --------  -------
successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Capital Securities or (b) substitutes for the Capital
Securities other securities having substantially the same terms as the Capital
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Capital Securities rank in priority with respect to
Distributions and payments upon liquidation, redemption and otherwise, (ii) the
Depositor expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Junior
Subordinated Debt Securities, (iii) the Successor Securities (if Capital
Securities are listed or traded, or any successor Securities will be listed or
traded upon notification of issuance, on any national securities exchange or
other organization on which the Capital Securities are then listed or traded, if
any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease 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, replacement,
conveyance, transfer

                                       54
<PAGE>

or lease does not adversely affect the rights, preferences and privileges of the
Holders of the Capital Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose identical and limited
to that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of the Capital
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be required
to register as an investment company under the 1940 Act and (viii) the Depositor
or any permitted successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
Holders of 100% in Liquidation Amount of the Trust Securities, 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 other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity to be classified
as an association taxable as a corporation or as other than a grantor trust for
United States federal income tax purposes.

                                   ARTICLE X

                           Miscellaneous Provisions
                           ------------------------

     SECTION 10.01. Limitation of Rights of Securityholders.  The death,
                    ---------------------------------------
incapacity, liquidation, dissolution, termination or bankruptcy of any Person
having an interest, beneficial or otherwise, in Trust Securities shall not
operate to terminate this Declaration of Trust, or entitle the legal
representatives or heirs of such person, or any Securityholder for such person,
to claim an accounting, take any action or bring any proceeding in any court for
a partition or winding-up of the arrangements contemplated hereby, or otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them.

     SECTION 10.02. Liability of the Depositor.  The Depositor, as borrower with
                    --------------------------
respect to the Junior Subordinated Debt Securities, shall be liable for all the
debts and obligations of the Trust (other than with respect to payments of
principal, interest, or premium, if any, on the Trust Securities) to the extent
not satisfied out of the Trust's assets.

     SECTION 10.03. Amendment.
                    ---------

          (a)  This Declaration of Trust may be amended from time to time by the
Property Trustee, the Administrative Trustees and the Depositor, without the
consent of any Securityholders (i) to cure any ambiguity, correct or supplement
any provision herein that may be inconsistent with any other provision herein,
or to make any other provisions with respect to

                                       55
<PAGE>

matters or questions arising under this Declaration of Trust that shall not be
inconsistent with the other provisions of this Declaration of Trust; or (ii) to
modify, eliminate or add to any provisions of this Declaration of Trust to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust or as other than an
association taxable as a corporation at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
investment company under the 1940 Act; provided, however, that in the case of
clause (i), such action shall not adversely affect in any material respect the
interests of any Securityholder, and any amendments of this Declaration of Trust
shall become effective when notice thereof is given to the Securityholders.

          (b)  Except as provided in Section 10.02(c), any provision of this
Declaration of Trust may be amended by the Trustees and the Depositor with (i)
the consent of Securityholders representing not less than a majority (based upon
Liquidation Amounts) of the Trust Securities then Outstanding and (ii) receipt
by the Trustees of an Opinion of Counsel to the effect that such amendment or
the exercise of any power granted to the Trustees in accordance with such
amendment will not affect the Trust's status as a grantor trust or as other than
an association taxable as a corporation for United States federal income tax
purposes or the Trust's exemption from the status of an investment company under
the 1940 Act.

          (c)  In addition to and notwithstanding any other provision in this
Declaration of Trust, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.03 or 6.08), this
Declaration of Trust may not be amended to (i) change the amount or timing of
any Distribution on the Trust Securities or otherwise adversely affect the
amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a Securityholder
to institute suit for the enforcement of any such payment on or after such date.
Notwithstanding any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section 6.03 or
6.08), this paragraph (c) of this Section 10.02 may not be amended.

          (d)  Notwithstanding any other provisions of this Declaration of
Trust, no Trustee shall enter into or consent to any amendment to this
Declaration of Trust that would cause the Trust to fail or cease to qualify for
the exemption from status of an investment company under the 1940 Act or fail or
cease to be classified as a grantor trust or as other than an association
taxable as a corporation for United States federal income tax purposes.

          (e)  Notwithstanding anything in this Declaration of Trust to the
contrary, without the consent of the Depositor this Declaration of Trust may not
be amended in a manner that imposes any additional obligation on the Depositor.

          (f)  Notwithstanding any other provision of this Declaration of Trust,
no amendment to this Declaration of Trust may be made if, as a result of such
amendment, it would cause the Trust to fail to be classified as a grantor trust
or as other than an association taxable as a corporation for United States
federal income tax purposes.

                                       56
<PAGE>

          (g)  In the event that any amendment to this Declaration of Trust is
made, the Administrative Trustees shall promptly provide to the Depositor a copy
of such amendment.

          (h)  Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Declaration of Trust that affects
its own rights, duties or immunities under this Declaration of Trust or would
otherwise expose the Property Trustee to any liability or be contrary to
applicable law.  The Property Trustee shall be entitled to receive an Officers'
Certificate stating that any amendment to this Declaration of Trust is in
compliance with this Declaration of Trust.

     SECTION 10.04. Separability.  In case any provision in this Declaration of
                    ------------
Trust or in the Trust Securities Certificates shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

     SECTION 10.05. Governing Law.  This Declaration of Trust and the rights and
                    -------------
obligations of each of the Securityholders, the Trust and the Trustees with
respect to this Declaration of Trust and the Trust Securities shall be construed
in accordance with and governed by the laws of the State of Delaware without
regard to its conflict of laws principles.  The provisions of Sections 3540 and
3561 of Title 12 of the Delaware Code shall not apply to this Trust.

     SECTION 10.06. Payments Due on Non-Business Day.  If the date fixed for any
                    --------------------------------
payment on any Trust Security shall be a day that is not a Business Day, then
such payment need not be made on such date but may be made on the next
succeeding day that is a Business Day (except as otherwise provided in Section
4.02(d)), with the same force and effect as though made on the date fixed for
such payment, and no interest shall accrue thereon for the period after such
date.

     SECTION 10.07. Successors.  This Declaration of Trust shall be binding upon
                    ----------
and shall inure to the benefit of any successor to the Depositor, the Trust or
the Relevant Trustee, including any successor by operation of law.  Except in
connection with a consolidation, merger or sale involving the Depositor that is
permitted under Article VI of the Indenture and pursuant to which the assignee
agrees in writing to perform the Depositor's obligations hereunder, the
Depositor shall not assign its obligations hereunder.

     SECTION 10.08. Headings.  The Article and Section headings are for
                    --------
convenience only and shall not affect the construction of this Declaration of
Trust.

     SECTION 10.09. Reports, Notices and Demands.  Any report, notice, demand or
                    ----------------------------
other communication that, by any provision of this Declaration of Trust, is
required or permitted to be given or served to or upon any Securityholder or the
Depositor may be given or served in writing by deposit thereof, first class
postage prepaid, in the United States mail, hand delivery or facsimile
transmission, in each case, addressed, (a) in the case of a Capital
Securityholder, to such Capital Securityholder as such Securityholder's name and
address may appear on the Securities Register, and (b) in the case of the Common
Securityholder or the Depositor, to

                                       57
<PAGE>

Commonwealth Bankshares, Inc., 403 Boush Street, Norfolk, Virginia 23510,
facsimile no.: (757) 446-6929. Any notice to Capital Securityholders may also be
given to such owners as have, within two years preceding the giving of such
notice, filed their names and addresses with the Property Trustee for that
purpose. Such notice, demand or other communication to or upon a Securityholder
shall be deemed to have been sufficiently given or made, for all purposes, upon
hand delivery, mailing or transmission.

     Any notice, demand or other communication that by any provision of this
Declaration of Trust is required or permitted to be given or served to or upon
the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows:  (a) with respect to the Property Trustee to
Wilmington Trust Company, 1100 N. Market Street, Attention:  Corporate Trust
Administration, Wilmington, Delaware 19890, facsimile no.:  (302) 651-8882; (b)
with respect to the Delaware Trustee to Wilmington Trust Company, 1100 N. Market
Street, Attention:  Corporate Trust Administration, Wilmington, Delaware 19890,
facsimile no.:  (302) 651-8882; and (c) with respect to the Administrative
Trustees, to them at the address above for notices to the Depositor, marked
"Attention:  Administrative Trustees of Commonwealth Bankshares Capital Trust
I."  Such notice, demand or other communication to or upon the Trust or the
Property Trustee shall be deemed to have been sufficiently given or made only
upon actual receipt of the writing by the Trust or the Property Trustee.

     SECTION 10.10. Agreement Not to Petition.  Each of the Trustees and the
                    -------------------------
Depositor agree for the benefit of the Securityholders that, until at least one
year and one day after the Trust has been terminated in accordance with Article
IX, they shall not file, or join in the filing of, a petition against the Trust
under any bankruptcy, insolvency, reorganization or other similar law
(including, without limitation, the United States Bankruptcy Code)
(collectively, "Bankruptcy Laws") or otherwise join in the commencement of any
proceeding against the Trust under any Bankruptcy Laws.  In the event the
Depositor takes action in violation of this Section 10.10, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the
Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert.  The provisions of this Section 10.10 shall survive the
termination of this Declaration of Trust.

     SECTION 10.11. Trust Indenture Act; Conflict with Trust Indenture Act.
                    ------------------------------------------------------
This Declaration of Trust will be qualified under the Trust Indenture Act.  By
its terms, this Declaration of Trust incorporates certain provisions of the
Trust Indenture Act.

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

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

                                       58
<PAGE>

          (c)  If any provision hereof limits, qualifies or conflicts with
another provision hereof that is required to be included in this Declaration of
Trust by any of the provisions of the Trust Indenture Act, such required
provision shall control.  If any provision of this Declaration of Trust modifies
or excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Declaration of
Trust as so modified or excluded, as the case may be.

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

     SECTION 10.12. Acceptance of Terms of Declaration of Trust, Guarantee and
                    ----------------------------------------------------------
Indenture.  THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST
---------
THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY
SIGNATURE OR FURTHER MANIFESTATION OF ABSENT, SHALL CONSTITUTE THE UNCONDITIONAL
ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN
SUCH TRUST SECURITY OF ALL OF THE TERMS AND PROVISIONS OF THIS DECLARATION OF
TRUST AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE
GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST,
SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS
DECLARATION OF TRUST SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE
TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.

     SECTION 10.13. Execution in Counterparts.  This instrument may be executed
                    -------------------------
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.

     WITNESS the following signatures:

                              COMMONWEALTH BANKSHARES, INC.,
                              as Depositor

                             By:_________________________________________
                             Name: Edward J. Woodard, Jr.
                                  ---------------------------------------
                             Title:  Chairman of the Board, President and Chief
                                   --------------------------------------------
                                     Executive Officer
                                     -----------------

                                       59
<PAGE>

                             WILMINGTON TRUST COMPANY
                             (as Delaware Trustee and not in its individual
                             capacity)

                             By:_________________________________________
                             Name:  Donald G. MacKelcan
                                  ---------------------------------------
                             Title:  Assistant Vice President
                                   --------------------------------------

                             ____________________________________________
                             Edward J. Woodard, Jr., as Administrative Trustee

                             ____________________________________________
                             John H. Gayle, as
                             Administrative Trustee

                                       60
<PAGE>

                                                                       EXHIBIT A

                            CERTIFICATE OF TRUST OF
                    COMMONWEALTH BANKSHARES CAPITAL TRUST I

     THIS CERTIFICATE OF TRUST of Commonwealth Bankshares Capital Trust I (the
"Trust"), dated as of November __, 2000, is being duly executed and filed by
Wilmington Trust Company, a Delaware corporation, as trustee, Edward J. Woodard,
Jr., an individual, as trustee, and John H. Gayle, an individual, as trustee, to
form a business trust under the Delaware Business Trust Act (12 Del. C. Section
3801 et seq.).
     ------

     1.   Name.  The name of the business trust formed hereby is Commonwealth
          ----
Bankshares Capital Trust I.

     2.   Delaware Trustee.  The name and business address of the trustee of the
          ----------------
Trust with a principal place of business in the State of Delaware are as
follows:  Wilmington Trust Company, 1100 N. Market Street, Attention:  Corporate
Trust Administration, Wilmington, Delaware 19890.

     3.   Effective Date.  This Certificate of Trust shall be effective upon
          --------------
filing with the Secretary of State of the State of Delaware.

     IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first written above.

                              WILMINGTON TRUST COMPANY, not in its
                              individual capacity but solely as trustee

                              By: __________________________________________
                              Name: ________________________________________
                              Title:________________________________________

                              ______________________________________________
                              Edward J. Woodard, Jr., as Trustee

                              ______________________________________________
                              John H. Gayle, as Trustee
<PAGE>

                                                                       EXHIBIT B

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

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

     NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), NO ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN
THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN, MAY ACQUIRE OR HOLD THIS CONVERTIBLE PREFERRED SECURITIES CERTIFICATE OR
ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH
PURCHASE OR HOLDING.  ANY PURCHASER OR HOLDER OF THIS CONVERTIBLE PREFERRED
SECURITIES CERTIFICATE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED
BY ITS PURCHASE AND HOLDING HEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN
ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN
ASSETS" OF ANY PLAN, OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER
PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR
HOLDING.
<PAGE>

                              Liquidation Amount of
Certificate Number            Convertible Preferred Securities
                              $______________

                              CUSIP NO. [     ]

         Certificate Evidencing Commonwealth Bankshares Capital Trust I
                 $___________ Convertible Preferred Securities
         (Liquidation Amount $25.00 per Convertible Preferred Security)

     Commonwealth Bankshares Capital Trust I, a statutory business trust formed
under the laws of the state of Delaware (the "Trust"), hereby certifies that
_____________________ (the "Holder") is the registered owner of
________________________ (___________) Convertible Preferred Securities of the
Trust in an aggregate liquidation amount of $____________, representing an
undivided beneficial interest in the assets of the Trust and designated
Commonwealth Bankshares Capital Trust I Convertible Preferred Trust Securities
(Liquidation Amount $25.00 per Convertible Preferred Security) (the "Preferred
Securities").  The Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for transfer as provided in
Section 5.05 of the Declaration of Trust (as defined below).  The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Preferred Securities are set forth in, and this certificate and the
Preferred Securities represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Declaration of
Trust of the Trust, dated as of _______________, 2000, as the same may be
amended from time to time (the "Declaration of Trust"), between Commonwealth
Bankshares, Inc., as Depositor, Wilmington Trust Company, as Property Trustee,
Wilmington Trust Company, as Delaware Trustee, and the Administrative Trustees
named therein, including the designation of the terms of the Preferred
Securities as set forth therein.  The Holder is entitled to the benefits of the
Guarantee Agreement entered into by Commonwealth Bankshares, Inc., a Virginia
corporation, and Wilmington Trust Company, as Guarantee Trustee, dated as of
______________, 2000 (the "Guarantee"), to the extent provided therein.  The
Trust will furnish a copy of the Declaration of Trust and the Guarantee to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office.

     Terms used but not defined herein have the meanings set forth in the
Declaration of Trust.  The Declaration of Trust and this Preferred Security
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to conflicts of laws principles thereof.

     The Preferred Securities shall be convertible into shares of Common Stock,
through (a) the exchange of Preferred Securities for an appropriate principal
amount of Junior Subordinated Debt Securities and (b) the immediate conversion
of such Junior Subordinated Debt Securities into shares of Common Stock, in the
manner and according to the terms set forth in the Declaration of Trust and in
the Indenture.  The conversion rights of the Holders of Preferred Securities are
subject to termination at the option of Commonwealth Bankshares, Inc. on and

                                       2
<PAGE>

after January 15, 2004, subject to and upon satisfaction of certain conditions
set forth in the Declaration of Trust and in the Indenture.

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

     IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this Certificate this ____ day of ______________.

                              COMMONWEALTH BANKSHARES
                              CAPITAL TRUST I

                              By:___________________________________
                              Name:_________________________________
                              Title:    Administrative Trustee

                              COUNTERSIGNED AND REGISTERED:

                              WILMINGTON TRUST COMPANY, as
                              Property Trustee

                              By:___________________________________
                                         Authorized Signatory

                              Dated:

                                       3
<PAGE>

                                  ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:

        (Insert assignee's social security or tax identification number)

                   (Insert address and zip code of assignee)

and irrevocably appoints

agent to transfer this Preferred 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 Preferred Security
                                  Certificate)

_______________________________________
The signatures) should be guaranteed by
an eligible guarantor institution
(banks, stockbrokers, savings and loan
associations and credit unions with
membership in an approved signature
guarantee medallion program), pursuant
to SEC Rule 17Ad-15.
<PAGE>

                                                                       EXHIBIT C

                     THIS CERTIFICATE IS NOT TRANSFERABLE

                                      Liquidation Amount of
Certificate Number                    Common Securities
                                      $_______________

             Certificate Evidencing Convertible Common Securities
                                      of
                    Commonwealth Bankshares Capital Trust I

                               Common Securities
                (Liquidation Amount $25.00 per Common Security)

     Commonwealth Bankshares Capital Trust I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
Commonwealth Bankshares, Inc. (the "Holder") is the registered owner of
______________________________ (_________) common securities of the Trust
representing beneficial interests of the Trust and designated the Convertible
Common Securities (Liquidation Amount $25.00 per Common Security) (the "Common
Securities"). Except as provided in Section 5.11 of the Declaration of Trust (as
defined below) the Common Securities are not transferable and any attempted
transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Declaration of Trust of the Trust,
dated as of ________________, 2000, as the same may be amended from time to time
(the "Declaration of Trust"), between Commonwealth Bankshares, Inc., as
Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust
Company as Delaware Trustee, and the Administrative Trustees named therein,
including the designation of the terms of the Common Securities as set forth
therein. The Trust will furnish a copy of the Declaration of Trust to the Holder
without charge upon written request to the Trust at its principal place of
business or registered office.

     Terms used but not defined herein have the meanings set forth in the
Declaration of Trust. The Declaration of Trust and this Common Security shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to conflicts of laws principles thereof.

     The Common Securities shall be convertible into shares of Common Stock,
through (a) the exchange of Common Securities for an appropriate principal
amount of Junior Subordinated Debt Securities and (b) the immediate conversion
of such Junior Subordinated Debt Securities into shares of Common Stock, in the
manner and according to the terms set forth in the Declaration of Trust and in
the Indenture. The conversion rights of the Holders of Common Securities are
subject to termination at the option of Commonwealth Bankshares, Inc. on and
after January 15, 2004, subject to and upon satisfaction of certain conditions
set forth in the Declaration of Trust and in the Indenture.
<PAGE>

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

     IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this ____ day of ______________.

                              COMMONWEALTH BANKSHARES
                              CAPITAL TRUST I

                              By:_______________________________
                              Name:_____________________________
                              Title:  Administrative Trustee

                              COUNTERSIGNED AND REGISTERED:

                              WILMINGTON TRUST COMPANY, as
                              Property Trustee

                              By:_______________________________
                                      Authorized Signatory

                              Dated:<PAGE>

                                                                     EXHIBIT 4.4

                                                                  EXECUTION COPY

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

                   COMMONWEALTH BANKSHARES, INC. CORPORATION

                                      to

                           WILMINGTON TRUST COMPANY

                                    Trustee

                     ______________________________________

                         JUNIOR SUBORDINATED INDENTURE

                                  Dated as of____________

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

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                Page
                                                                                                ----
<S>                                                                                             <C>
ARTICLE I - Definitions and Other Provisions of General Application............................  1

SECTION 1.01.    Definitions ..................................................................  1
                 -----------
SECTION 1.02.    Compliance Certificate and Opinions ..........................................  11
                 -----------------------------------
SECTION 1.03.    Forms of Documents Delivered to Trustee ......................................  12
                 ---------------------------------------
SECTION 1.04.    Acts of Holders ..............................................................  12
                 ---------------
SECTION 1.05.    Notices to Trustee and Company ...............................................  13
                 ------------------------------
SECTION 1.06.    Notice to Holders:  Waiver ...................................................  14
                 --------------------------
SECTION 1.07.    Conflict with Trust Indenture Act ............................................  14
                 ---------------------------------
SECTION 1.08.    Effect of Headings and Table of Contents .....................................  14
                 ----------------------------------------
SECTION 1.09.    Successors and Assigns .......................................................  14
                 ----------------------
SECTION 1.10.    Separability Clause ..........................................................  14
                 -------------------
SECTION 1.11.    Benefits of Indenture ........................................................  14
                 ---------------------
SECTION 1.12.    Governing Law ................................................................  14
                 -------------
SECTION 1.13.    Non-Business Day .............................................................  14
                 ----------------
SECTION 2.01.    Forms Generally ..............................................................  15
                 ---------------
SECTION 2.02.    Form of Face of Security .....................................................  15
                 ------------------------
SECTION 2.03.    Form of Reverse of Security ..................................................  19
                 ---------------------------
SECTION 2.04.    Additional Provisions Required in Global Security ............................  21
                 -------------------------------------------------
SECTION 2.05.    Form of Trustee's Certificate of Authentication ..............................  22
                 -----------------------------------------------

ARTICLE III - The Securities ..................................................................  22

SECTION 3.01.    Title and Terms ..............................................................  22
                 ---------------
SECTION 3.02.    Denominations ................................................................  25
                 -------------
SECTION 3.03.    Execution, Authentication, Delivery and Dating ...............................  25
                 ----------------------------------------------
SECTION 3.04.    Temporary Securities .........................................................  26
                 --------------------
SECTION 3.05.    Global Securities ............................................................  27
                 -----------------
SECTION 3.06.    Registration, Transfer and Exchange Generally:  Certain Transfers
                 and Exchanges:  Restricted Securities Legends ................................  28
                 ------------------
SECTION 3.07.    Mutilated, Destroyed, Lost and Stolen Securities .............................  31
                 ------------------------------------------------
SECTION 3.08.    Payment of Interest; Interest Rights Preserved ...............................  32
                 ----------------------------------------------
SECTION 3.09.    Persons Deemed Owners ........................................................  33
                 ---------------------
SECTION 3.10.    Cancellation .................................................................  34
                 ------------
SECTION 3.11.    Computation of Interest ......................................................  34
                 -----------------------
SECTION 3.12.    Deferrals of Interest Payment Dates ..........................................  34
                 -----------------------------------
SECTION 3.13.    CUSIP Numbers ................................................................  35
                 -------------

ARTICLE IV - Satisfaction and Discharge .......................................................  36

SECTION 4.01.    Satisfaction and Discharge of Indenture ......................................  36
                 ---------------------------------------
SECTION 4.02.    Application of Trust Money ...................................................  37
                 --------------------------

ARTICLE V - Remedies...........................................................................  37

SECTION 5.01.    Events of Default ............................................................  37
                 -----------------
SECTION 5.02.    Acceleration of Maturity; Rescission and Annulment ...........................  38
                 --------------------------------------------------
</TABLE>

                                       i
<PAGE>

<TABLE>
<CAPTION>
                                                                                                Page
                                                                                                ----
<S>                                                                                             <C>
SECTION 5.03.    Collection of Indebtedness and Suits for Enforcement by Trustee ..............  40
                 ---------------------------------------------------------------
SECTION 5.04.    Trustee May File Proofs of Claim .............................................  40
                 --------------------------------
SECTION 5.05.    Trustee May Enforce Claim Without Possession of Securities ...................  41
                 ----------------------------------------------------------
SECTION 5.06.    Application of Money Collected ...............................................  41
                 ------------------------------
SECTION 5.07.    Limitation on Suits ..........................................................  42
                 -------------------
SECTION 5.08.    Unconditional Right of Holders to Receive Principal and Interest .............  42
                 ----------------------------------------------------------------
SECTION 5.09.    Restoration-of-Rights and Remedies ...........................................  43
                 ----------------------------------
SECTION 5.10.    Rights and Remedies Cumulate .................................................  43
                 ----------------------------
SECTION 5.11.    Delay or Omission Not Waiver .................................................  43
                 ----------------------------
SECTION 5.12.    Control by Holders ...........................................................  44
                 ------------------
SECTION 5.13.    Waiver of Past Defaults ......................................................  44
                 -----------------------
SECTION 5.14.    Undertaking for Costs ........................................................  45
                 ---------------------
SECTION 5.15.    Waiver of Usury, Stay or Extension Laws ......................................  45
                 ---------------------------------------

ARTICLE VI - The Trustee ......................................................................  45

SECTION 6.01.    Certain Duties and Responsibilities ..........................................  45
                 -----------------------------------
SECTION 6.02.    Notice of Defaults ...........................................................  46
                 ------------------
SECTION 6.03.    Certain Rights of Trustee ....................................................  47
                 -------------------------
SECTION 6.04.    Not Responsible for Recitals or Issuance of Securities .......................  48
                 ------------------------------------------------------
SECTION 6.05.    May Hold Securities ..........................................................  48
                 -------------------
SECTION 6.06.    Money Held in Trust ..........................................................  48
                 -------------------
SECTION 6.07.    Compensation and Reimbursement ...............................................  48
                 ------------------------------
SECTION 6.08.    Disqualification; Conflicting Interests ......................................  49
                 ---------------------------------------
SECTION 6.09.    Corporate Trustee Required; Eligibility ......................................  49
                 ---------------------------------------
SECTION 6.10.    Resignation and Removal, Appointment of Successor ............................  50
                 -------------------------------------------------
SECTION 6.11.    Acceptance of Appointment Successor ..........................................  51
                 -----------------------------------
SECTION 6.12.    Merger, Conversion, Consolidation or Succession to Business ..................  52
                 -----------------------------------------------------------
SECTION 6.13.    Preferential Collection of Claims Against Company ............................  52
                 -------------------------------------------------
SECTION 6.14.    Appointment of Authenticating Agent ..........................................  53
                 -----------------------------------
SECTION 6.15.    Trustee's Rights and Obligations .............................................  54
                 --------------------------------

ARTICLE VII - Holder's Lists and Reports by Trustee and Company ...............................  54

SECTION 7.01.    Company to Furnish Trustee Names and Addresses of Holders ....................  54
                 ---------------------------------------------------------
SECTION 7.02.    Preservation of Information.  Communications to Holders ......................  54
                 -------------------------------------------------------
SECTION 7.03.    Reports by Trustee ...........................................................  55
                 ------------------
SECTION 7.04.    Reports by Company ...........................................................  55
                 ------------------

ARTICLE VIII - Consolidation, Merger, Conveyance, Transfer or Lease ...........................  56

SECTION 8.01.    Company May Consolidate Only on Certain Terms ................................  56
                 ---------------------------------------------
SECTION 8.02.    Successor Company Substituted ................................................  56
                 -----------------------------

ARTICLE IX - Supplemental Indentures...........................................................  57

SECTION 9.01.    Supplemental Indentures without Consent of Holders ...........................  57
                 --------------------------------------------------
SECTION 9.02.    Supplemental Indentures with Consent of Holders ..............................  58
                 -----------------------------------------------
SECTION 9.03.    Execution of Supplemental Indentures .........................................  60
                 ------------------------------------
SECTION 9.04.    Effect of Supplemental Indentures ............................................  60
                 ---------------------------------
</TABLE>

                                      ii
<PAGE>

<TABLE>
<CAPTION>
                                                                                           Page
                                                                                           ----
<S>                                                                                        <C>
SECTION 9.05.    Conformity with Trust Indenture Act .....................................  60
                 -----------------------------------
SECTION 9.06.    Reference in Securities to Supplemental Indentures ......................  60
                 --------------------------------------------------

ARTICLE X - Covenants.....................................................................  60

SECTION 10.01.   Payment of Principal and Interest .......................................  60
                 ---------------------------------
SECTION 10.02.   Maintenance of Office or Agency .........................................  60
                 -------------------------------
SECTION 10.03.   Money for Security Payments to be Held in Trust .........................  60
                 -----------------------------------------------
SECTION 10.04.   Statement as to Compliance ..............................................  61
                 --------------------------
SECTION 10.05.   Waiver of Certain Covenants .............................................  62
                 ---------------------------
SECTION 10.06.   Payment of the Trusts' Costs and Expenses ...............................  62
                 -----------------------------------------
SECTION 10.07.   Additional Covenants ....................................................  63
                 --------------------
SECTION 10.08.   Information Returns .....................................................  63
                 -------------------
SECTION 10.09.   Statement by Officers as to Default .....................................  64
                 -----------------------------------
SECTION 10.10    Delivery of Certain Information .........................................  64
                 -------------------------------

ARTICLE XI - Redemption or Prepayment of Securities ......................................  64

SECTION 11.01.   Applicability of This Article ...........................................  65
                 -----------------------------
SECTION 11.02.   Election To Redeem:  Notice to Trustee ..................................  65
                 --------------------------------------
SECTION 11.03.   Selection of Securities to be Redeemed ..................................  65
                 --------------------------------------
SECTION 11.04.   Notice of Redemption ....................................................  65
                 --------------------
SECTION 11.05.   Deposit of Redemption Price .............................................  66
                 ---------------------------
SECTION 11.06.   Payment of Securities Called for Redemption .............................  67
                 -------------------------------------------
SECTION 11.07.   Company's Right of Redemption ...........................................  67
                 -----------------------------

ARTICLE XII - Sinking Funds ..............................................................  67

SECTION 12.01.   Applicability of Article ................................................  68
                 ------------------------
SECTION 12.02.   Satisfaction of Sinking Fund Payments with Securities ...................  68
                 -----------------------------------------------------
SECTION 12.03.   Redemption of Securities Sinking Fund ...................................  68
                 -------------------------------------

ARTICLE XIII - Subordination of Securities ...............................................  70

SECTION 13.01.   Securities Subordinate to Senior Debt ...................................  70
                 -------------------------------------
SECTION 13.02.   Payment Over of Proceeds upon Dissolution ...............................  70
                 -----------------------------------------
SECTION 13.03.   Prior Payment to Senior Debt Upon Acceleration of Securities ............  71
                 ------------------------------------------------------------
SECTION 13.04.   No Payment When Senior Debt in Default ..................................  72
                 --------------------------------------
SECTION 13.05.   Payment Permitted If No Default .........................................  72
                 -------------------------------
SECTION 13.06.   Subrogation to Rights of Holders of Senior Debt .........................  72
                 -----------------------------------------------
SECTION 13.07.   Provisions Solely to Define Relative Rights .............................  73
                 -------------------------------------------
SECTION 13.08.   Trustee to Effectuate Subordination .....................................  73
                 -----------------------------------
SECTION 13.09.   No Waiver of Subordination Provisions ...................................  73
                 -------------------------------------
SECTION 13.10.   Notice to Trustee .......................................................  74
                 -----------------
SECTION 13.11.   Reliance on Judicial Order or Certificate of Liquidating Agent ..........  74
                 --------------------------------------------------------------
SECTION 13.12.   Trustee Not Fiduciary for Holders of Senior Debt ........................  74
                 ------------------------------------------------
SECTION 13.13.   Rights of Trustee as Holder of Senior Debt ..............................  74
                 ------------------------------------------
SECTION 13.14.   Article Applicable to Paying Agents .....................................  74
                 -----------------------------------
SECTION 13.15.   Certain Conversions or Exchanges Deemed Payment .........................  75
                 -----------------------------------------------

ARTICLE XIV - Conversion of Securities ...................................................  75

SECTION 14.01.   Conversion Rights .......................................................  75
                 -----------------
</TABLE>

                                      iii
<PAGE>

<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                          ----
<S>                                                                                                       <C>
SECTION 14.02.   Conversion Procedures ..................................................................  75
                 ---------------------
SECTION 14.03.   Conversion Price Adjustments ...........................................................  78
                 ----------------------------
SECTION 14.04.   Reclassification, Consolidation, Merger or Sale of Assets ..............................  81
                 ---------------------------------------------------------
SECTION 14.05.   Notice of Adjustments of Conversion Price ..............................................  82
                 -----------------------------------------
SECTION 14.06.   Prior Notice of Certain Events .........................................................  82
                 ------------------------------
SECTION 14.07.   Certain Defined Terms ..................................................................  83
                 ---------------------
SECTION 14.08.   Dividend or Interest Reinvestment Plans ................................................  84
                 ---------------------------------------
SECTION 14.09.   Certain Additional Rights ..............................................................  84
                 -------------------------
SECTION 14.10.   Trustee Not Responsible for Determining Conversion Price or Adjustments ................  84
                 -----------------------------------------------------------------------
SECTION 14.11.   Termination of Conversion Rights .......................................................  85
                 --------------------------------
</TABLE>

                                      iv
<PAGE>

                         COMMONWEALTH BANKSHARES, INC.

     Reconciliation and tie between the Trust Indenture Act of 1939 (including
 cross-references to provisions of Sections 310 and including 317 which,
 pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by
 the Trust Reform Act of 1990, are a part of and govern the Indenture whether or
 not physically contained therein) and the Junior Subordinated Indenture, dated
 as of _____________, 2000.

<TABLE>
<CAPTION>
                                                                                           Indenture
Trust Indenture Act Section                                                                Section
---------------------------                                                                -------
<S>                                                                                        <C>
(S)310     (a)(1), (2) and (5)....................................................             6.09
(S)310     (a)(3).................................................................             Not Applicable
(S)310     (a)(4).................................................................             Not Applicable
(S)310     (b)....................................................................             6.08, 6.10
(S)310     (c)....................................................................             Not Applicable
(S)311     (a)....................................................................             6.13
(S)311     (b)....................................................................             6.13
(S)311     (c)....................................................................             Not Applicable
(S)312     (a)....................................................................             7.01, 7.02(a)
(S)312     (b)....................................................................             7.02(b)
(S)312     (c)....................................................................             7.02(c)
(S)313     (a)....................................................................             7.03(a)
(S)313     (b)....................................................................             7.03(b)
(S)313     (c)....................................................................             7.03(a), 7.03 (b)
(S)313     (d)....................................................................             7.03(c)
(S)314     (a)(1), (2) and (3)....................................................             7.04
(S)314     (a)(4).................................................................            10.04
(S)314     (b)....................................................................             Not Applicable
(S)314     (c)(1).................................................................             1.02
(S)314     (c)(2).................................................................             1.02
(S)314     (c)(3).................................................................             Not Applicable
(S)314     (d)....................................................................             Not Applicable
(S)314     (e)....................................................................             1.02
314        (f)....................................................................             Not Applicable
(S)315     (a)....................................................................             6.01(a)
(S)315     (b)....................................................................             6.02, 7.03(a)
(S)315     (c)....................................................................             6.01(b)
(S)315     (d)....................................................................             6.01(c)
(S)315     (d)(1).................................................................             6.01(c)(1)
(S)315     (d)(2).................................................................             6.01(c)(2)
(S)315     (d)(3).................................................................             6.01(c)(3)
(S)315     (e)....................................................................             5.14
(S)316     (a)....................................................................             5.12
(S)316     (a)(1)(A)..............................................................             5.12
(S)316     (a)(1)(B)..............................................................             5.13
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                           <C>
(S)        (a)(2).................................................................            Not Applicable
(S)        (b)....................................................................            5.08
(S)        (c)....................................................................            1.04(f)
(S)317     (a)(1).................................................................            5.03
(S)317     (a)(2).................................................................            5.04
(S)317     (b)....................................................................           10.03
(S)318     (a)....................................................................            1.07
</TABLE>

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

Note:    This reconciliation and tie shall not, for any purpose, be deemed to be
         a part of the Junior Subordinated Indenture.

                                       2
<PAGE>

     JUNIOR SUBORDINATED INDENTURE, dated as of ____________, 2000, between
COMMONWEALTH BANKSHARES, INC., a bank holding company established under the laws
of the Commonwealth of Virginia (hereafter called the "Company") having its
principal office at 403 Boush Street, Norfolk, Virginia 23510, and WILMINGTON
TRUST COMPANY, a Delaware corporation, as Trustee (hereafter called the
"Trustee").

                            RECITALS OF THE COMPANY

     The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereafter called the "Securities") of
substantially the tenor hereafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "Commonwealth
Bankshares Capital Trust" and, collectively, the "Commonwealth Bankshares
Capital Trusts") of preferred trust interests in such Commonwealth Bankshares
Capital Trusts (the "Capital Securities") and common interests in such
Commonwealth Bankshares Capital Trusts (the "Common Securities" and,
collectively with the Capital Securities, the "Trust Securities"), and to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered.

     NOW THEREFORE, THIS INDENTURE WITNESSETH:  For and in consideration of the
premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:

                                   ARTICLE I

          Definitions and Other Provisions of General Application
          -------------------------------------------------------

     SECTION 1.01.  Definitions.  For all purposes of this Indenture, except as
                    -----------
otherwise expressly provided or unless the context otherwise requires:

     (1) The terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular.

     (2) All other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein.

     (3) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and the term "generally accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such accounting
principles that are generally accepted at the date or time of such computation;
provided, that when two or more principles are so generally accepted, it shall
--------
mean that set of principles consistent with those in use by the Company.

     (4) 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.
<PAGE>

     (5) Unless otherwise specified herein, any reference to an "Article" or
Section" refers to an Article or a Section, as the case may be, of this
Indenture.

     "Act," when used with respect to any Holder, has the meaning specified in
Section 1.04.

     "Additional Interest" means the interest, if any, that shall accrue on any
interest on the Securities of any series the payment of which has not been made
on the applicable Interest Payment Date and that shall accrue at the rate per
annum specified or determined as specified in any Officers' Certificate
delivered pursuant to Section 3.01.

     "Additional Sums" has the meaning specified in Section 10.06.

     "Administrative Action" has the meaning specified in the definition of "Tax
Event" in this Section 1.01.

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

     "Agent Member" means any member of, or participant in, the Depositary.

     "Amended and Restated Declaration of Trust" for each series of Securities
has the meaning specified in the Officers' Certificate for such series delivered
pursuant to Section 3.01.

     "Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.14 to act on behalf of the Trustee to authenticate Securities of
one or more series.

     "Board of Directors" means either the board of directors of the Company or
any committee of that board duly authorized to act hereunder.

     "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 Hoard
of Directors, or such committee of the Board of Directors or officers of the
Company to which authority to act on behalf of the Board of Directors has been
delegated, 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 (i) a Saturday or Sunday, (ii) a
day on which banking institutions in the City of Norfolk, Virginia are
authorized or required by law or executive order to remain closed, or (iii) a
day on which the Corporate Trust Office of the Trustee, or, with respect to the
Securities of a series issued to a Commonwealth Bankshares Capital Trust, the
Corporate Trust Office of the Property Trustee under the related Trust
Agreement, is closed for business.

                                       2
<PAGE>

     "Capital Securities" has the meaning specified in the first recital of this
Indenture.

     "Capital Securities Register" means the securities register or registers to
be kept or caused to be kept by the Property Trustee pursuant to the applicable
Trust Agreement.

     "Capital Treatment Event" means the Company shall have received an opinion
of independent bank regulatory counsel experienced in such matters to the effect
that, as a result of (a) any amendment to, or change (including any announced
prospective change) in, the laws (or any rules or regulations thereunder) of the
United States or any political subdivision thereof or therein or any rules,
guidelines or policies of the Federal Reserve or (b) any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement, action or decision is announced on or after the original
Issue Date of the Capital Securities, the Company will not be entitled to treat
the Capital Securities as "Tier I Capital" (or the equivalent thereof) (except
to the extent that the Capital Securities would otherwise constitute more than
25% of the Company's Tier I Capital (or the equivalent thereof)) for purposes of
the risk-based capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company; provided, however, that the distribution
                                      --------  -------
of the Securities in connection with the liquidation of a Commonwealth
Bankshares Capital Trust by the Company shall not in and of itself constitute a
Capital Treatment Event.

     "Closing" has the meaning specified in Section 14.07(a).

     "Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date.

     "Common Securities" has the meaning specified in the first recital of this
Indenture.

     "Common Stock" means the common stock, $2.50 par value, of the Company.

     "Commonwealth Bankshares Capital Trust" has the meaning specified in the
first recital of this Indenture.

     "Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.

     "Company Guarantee" means the guarantee by the Company of the distributions
on the Trust Securities of a Commonwealth Bankshares Capital Trust to the extent
of the Guarantee Agreement.

     "Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman, Chief
Executive Officer, President or

                                       3
<PAGE>

a Vice President, and by the Treasurer, an Assistant Treasurer, the Controller,
the Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.

     "Conversion Agent" means the Person appointed to act on behalf of the
holders of Trust Securities in effecting the conversion of Trust Securities to
Securities and of Securities to Common Stock as and in the manner set forth in
the related Trust Agreement and in this Indenture.

     "Conversion Date" has the meaning specified in Section 14.02(c).

     "Conversion Price" has the meaning specified in Section 14.01.

     "Conversion Request" means (a) the irrevocable request to be given by a
Holder of Securities to the Conversion Agent directing the Conversion Agent to
convert such Securities into Common Stock and (b) the irrevocable request to be
given by a holder of Trust Securities to the Conversion Agent directing the
Conversion Agent to exchange such Trust Security for Securities and to convert
such Securities into Common Stock on behalf of such holder.

     "Conversion Termination Date" has the meaning specified in Section
14.11(d).

     "Conversion Termination Date of the Securities" has the meaning specified
in Section 14.11(d).

     "Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office as of the date of this Indenture is located at 1100 N.  Market Street,
Attention: Corporate Trust Administration, Wilmington, Delaware 19890.

     "Corporation" includes a corporation, association, company, joint-stock
company or business trust.

     "Current Market Price" has the meaning specified in Section 14.03(f).

     "Declaration of Trust" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01.

     "Defaulted Interest" has the meaning specified in Section 3.08.

     "Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in the form of one or more Global Securities, the
Person designated as Depositary by the Company pursuant to Section 3.01 with
respect to such series (or any successor thereto (a "Successor Depositary")).

     "Determination Date" has the meaning specified in Section 2.02.

                                       4
<PAGE>

     "Dissolution Event" means the liquidation of a Commonwealth Bankshares
Capital Trust pursuant to the related Trust Agreement, and the distribution of
the Securities held by the Property Trustee to the holders of the Trust
Securities issued by such Commonwealth Bankshares Capital Trust pro rata in
accordance with such Trust Agreement.

     "Dissolution Event Distribution" has the meaning specified in Section
14.11(b).

     "Dollar" means the currency of the United States of America that, as at the
time of payment, is legal tender for the payment of public and private debts.

     "DTC" means The Depository Trust Company.

     "Event of Default," unless otherwise specified in the supplemental
indenture creating a series of Securities, has the meaning specified in Article
V.

     "Expiration Time" has the meaning specified in Section 14.03(e).

     "Extension Period" has the meaning specified in Section 3.12.

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

     "Foreign Currency" means any currency issued by the government of one or
more countries other than the United States of America or by any recognized
confederation or association of such governments.

     "Global Security" means a Security in the form prescribed in section 2.04
evidencing all or part of a series of Securities, issued to the Depositary or
its nominee for such series, and registered in the name of such Depositary or
its nominee.

     "Guarantee Agreement" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01.

     "Holder" means a Person in whose name a Security is registered in the
Securities Register.

     "Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of each particular series of Securities established as
contemplated by Section 3.01.

     "Institutional Accredited Investor" means an accredited investor within the
meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act.

     "Interest Payment Date" means as to each series of Securities the Stated
Maturity of an installment of interest on such Securities.

                                       5
<PAGE>

     "Interest Rate" means the rate of interest specified or determined as
specified in each Security as being the rate of interest payable on such
Security.

     "Investment Company Event" means the receipt by a Commonwealth Bankshares
Capital 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 a
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
such Commonwealth Bankshares Capital Trust is or will be considered an
"investment company" that is required to be registered under the 1940 Act, 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 Capital Securities of
such Commonwealth Bankshares Capital Trust.

     "Junior Subordinated Payment" has the meaning specified in Section 13.02.

     "Lien" means any mortgage, pledge, lien, security interest or other
encumbrance.

     "Liquidation Amount" has the meaning specified in Section 1.01 of the Trust
Agreement.

     "Maturity," when used with respect to any Security, means the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether as the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.

     "1940 Act" means the Investment Company Act of 1940.

     "Notice of Conversion" has the meaning specified in Section 14.02(a).

     "Notice of Conversion Request" has the meaning specified in Section
14.02(a).

     "Notice of Conversion Termination" has the meaning specified in Section
14.11(c).

     "Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President, or Vice President, and by the Treasurer, the
Controller, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and delivered to the Trustee.

     "Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company.

     "Original Issue Date" means the date of issuance specified as such in each
Security.

     "Other Debentures" means, with respect to any series of Securities, all
junior subordinated debt securities to be issued by the Company pursuant to this
Indenture, other than such series of Securities, with substantially similar
subordination terms, and that will be issued and sold (if at all) to any
Commonwealth Bankshares Capital Trust established by the Company (if any), and
will be unsecured and subordinate and junior in right of payment to the extent
and in the manner set forth in this Indenture to all Senior Debt of the Company.

                                       6
<PAGE>

     "Other Guarantees" means, with respect to any series of Securities, all
guarantees (if any) to be issued by the Company with respect to Capital
Securities (if any) to be issued by any Commonwealth Bankshares Capital Trust to
be established by the Company (if any), other than the guarantee related to such
series of Securities.

     "Outstanding" means, when used in reference to any Securities, as of the
date of determination, all Securities theretofore authenticated and delivered
under this indenture, except:

          (i)   Securities theretofore canceled by the Trustee, delivered to the
Trustee for cancellation, or exchanged by the Conversion Agent in accordance
with Article XIV;

          (ii)  Securities for whose payment money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust for the
Holders of such Securities; and

          (iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or that have been paid pursuant
to Section 3.07, unless proof satisfactory to the Trustee is presented that any
such Securities are held by Holders in whose hands such Securities are valid,
binding and legal obligations of the Company;

provided, however, that in determining whether the Holders of the requisite
--------  -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities that a Responsible Officer actually knows to
be so owned shall be so disregarded.  Securities so owned that have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.  Upon the
written request of the Trustee, the Company shall furnish the Trustee promptly
an Officers' Certificate listing and identifying all Securities, if any, known
by the Company to be owned or held by or for the account of the Company, or any
other obligor on the Securities or any Affiliate of the Company or such obligor,
and, subject to the provisions of Section 6.01, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts therein
set forth and of the fact that all Securities not listed therein are outstanding
for the purpose of any such determination.

     "Paying Agent" means the Trustee or any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.

     "Person" means any individual, Corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

                                       7
<PAGE>

     "Place of Payment" means, with respect to the Securities of any series, the
place or places where the principal of and interest on the Securities of such
series are payable pursuant to Sections 3.01 and 3.08.

     "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 3.07 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.

     "Proceeding" has the meaning specified in Section 13.02.

     "Property Trustee" means, in respect of any Commonwealth Bankshares Capital
Trust, the commercial bank or trust company identified as the "Property Trustee"
in the related Trust Agreement, solely in its capacity as Property Trustee of
such Commonwealth Bankshares Capital Trust under such Trust Agreement and not in
its individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as therein provided.

     "Purchased Shares" has the meaning specified in Section 14.03(e).

     "Redemption Price," when used with respect to any Security to be redeemed
or prepaid means an amount in cash equal to one hundred percent (100%) of the
principal amount to be redeemed or prepaid, plus any accrued and unpaid interest
thereon, including Additional Interest and Additional Sums, if any, to the date
of such redemption.

     "Reference Date" has the meaning specified in Section 14.03(c).

     "Regular Record Date" for the interest payable on any Interest Payment Date
with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.01 with respect to Securities of a series, the date that
is the Business Day next preceding such Interest Payment Date.

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

     "Restricted Security" means each Security required pursuant to Section
3.06(c) to bear a Restricted Securities Legend.

     "Restricted Securities Certificate" means a certificate substantially in
the form set forth in Exhibit A to this Indenture.

                                       8
<PAGE>

     "Restricted Securities Legend" means a legend substantially in the form of
the legend required in the form of Security set forth in Section 2.02 to be
placed on a Restricted Security.

     "Securities" has the meaning specified in the first recital of this
Indenture.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Securities Certificate" means a certificate evidencing ownership of
Securities.

     "Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.06.

     "Senior Debt" with respect to any series of Securities means (a) the
principal of, and premium, if any, and interest on all indebtedness of the
Company for money borrowed, whether outstanding on the date of execution of this
Indenture or thereafter created, assumed or incurred, (b) all obligations to
make payment pursuant to the terms of financial instruments, such as (i)
securities contracts and foreign currency exchange contracts, (ii) derivative
instruments, such as swap agreements (including interest rate and foreign
exchange note swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts and commodity options contracts, and (iii) similar
financial instruments; except, in the case of both (a) and (b) above, such
indebtedness and obligations that are expressly stated to rank junior in right
of payment to, or pari passu in right of payment with, the Securities, (c) any
                  ---- -----
indebtedness or obligations of others of the kind described in both (a) and (b)
above for the payment of which the Company is responsible or liable as guarantor
or otherwise, and (d) any deferrals, renewals or extensions of any such Senior
Debt; provided, however, that Senior Debt shall not be deemed to include (a) any
      --------  -------
debt of the Company that, when incurred and without respect to any election
under Section 1111(b) of the U.S.  Bankruptcy Code of 1978, as amended, was
without recourse to the Company; (b) any debt of the Company to any of its
Subsidiaries; (c) debt to any employee of the Company; (d) debt that by its
terms is subordinated to trade accounts payable or accrued liabilities arising
in the ordinary course of business to the extent that payments made to the
holders of such debt by the Holders as a result of the subordination provisions
of this Indenture would be greater than such payments otherwise would have been
as a result of any obligation of such holders of such debt to pay amounts over
to the obligees on such trade accounts payable or accrued liabilities arising in
the ordinary course of business as a result of the subordination provisions to
which such debt is subject; (e) trade accounts payable or accrued liabilities
arising in the ordinary course of business; and (f) any other debt securities
issued pursuant to this Indenture.

     "Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.08.

     "Stated Maturity" when used with respect to any Security or any installment
of principal thereof or interest thereon means the date specified pursuant to
the terms of such Security as the date on which the principal of such Security
or such installment of interest is due and payable, in

                                       9
<PAGE>

the case of such principal, as such date may be shortened or extended as
provided pursuant to the terms of such Security and this Indenture.

     "Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For purposes of this definition, "voting stock" means stock that ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.

     "Successor Security" of any particular Security means every Security issued
after, and evidencing all or a portion of the same debt as that evidenced by,
such particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

     "Successor Trustee" has the meaning specified in the definition of
"Trustee" in this Section 1.01.

     "Tax Event" means the receipt by the Trust or the Company of an opinion of
an independent tax counsel to the Company experienced in such matters to the
effect that, as a result of (a) any amendment to or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any judicial decision or official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action") or (c) any amendment to or change in the administrative
position or interpretation of any Administrative Action or judicial decision
that differs from the theretofore generally accepted position, in each case, by
any legislative body, court, governmental agency or regulatory body,
irrespective of the manner in which such amendment or change is made known,
which amendment or change is effective or such Administrative Action or decision
is announced, in each case, or after the Original Issue Date of the applicable
series of Securities or the issue date of the applicable Capital Securities
issued by the affected Commonwealth Bankshares Capital Trust, there is more than
an insubstantial risk that (x) if the Securities are held by or on behalf of the
affected Commonwealth Bankshares Capital Trust, (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 interest accrued or received on the Securities or
subject to more than a de minimis amount of other taxes, duties or other
                       ----------
governmental charges as determined by such counsel, or (ii) any portion of
interest payable by the Company to the affected Commonwealth Bankshares Capital
Trust on the 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 (y) with respect to Securities that are no longer
held by or on behalf of the affected Commonwealth Bankshares Capital Trust, any
portion of interest payable by the Company on the 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.

                                       10
<PAGE>

     "Trading Day" has the meaning specified in Section 14.07(b).

     "Trust Agreement" with respect to each series of Securities means the
Declaration of Trust with respect to such series, as amended and restated by the
Amended and Restated Declaration of Trust with respect to such series.

     "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-77bbbb), as in effect on the date of this Indenture, except as
provided in Sections 1.07 and 9.05.

     "Trust Securities" has the meaning specified in the first recital of this
Indenture.

     "Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee (a "Successor Trustee") shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a Trustee
hereunder and, if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any series shall mean the Trustee with
respect to Securities of that series.

     "Vice President," when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."

     SECTION 1.02.  Compliance Certificate and Opinions.  Upon any application
                    -----------------------------------
or request by the Company to the Trustee to take any action under any provision
of this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent (including covenants
compliance with which constitutes a condition 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 (including covenants compliance with which constitute a
condition precedent), if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.

     Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates provided
regarding conditions or covenants waived by the Holders pursuant to Section
10.05) shall include:

     (1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;

     (2) 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;

                                       11
<PAGE>

     (3) a statement that, in the opinion of each such individual, 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

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

     SECTION 1.03.  Forms of Documents Delivered to Trustee.  In any case where
                    ---------------------------------------
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one Person, or that they be so certified or
covered by only one document, but one such Person may certify or give an opinion
with respect to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.

     Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representation
with respect to matters upon which his certificate or opinion is based are
erroneous.  Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

     Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

     SECTION 1.04.  Acts of Holders.
                    ---------------

          (a)  Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.

          (b)  The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying

                                       12
<PAGE>

that the individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a Person acting in other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority.

          (c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.

          (d) The ownership of Securities shall be proved by Securities
Register.

          (e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.

          (f) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to take any action under
this Indenture by vote or consent.  Except as otherwise provided herein, such
record date shall be the later of 30 days prior to the first solicitation of
such consent or vote or the date of the most recent list of Security Holders
furnished to the Trustee pursuant to Section 7.01 prior to such solicitation.
If a record date is fixed, those persons who were Security Holders at such
record date (or their duly designated proxies), and only those persons, shall be
entitled to take such action by vote or consent or to revoke any vote or consent
previously given, whether or not such persons continue to be Holders after such
record date, provided, however, that unless such vote or consent is obtained
             --------  -------
from the Holders (or their duly designated proxies) of the requisite principal
amount of Outstanding Securities prior to the date that is the 120th day after
such record date, any such vote or consent previously given shall automatically
and without further action by any Holder be canceled and of no further effect.

     SECTION 1.05.  Notices to Trustee and Company.  Any request, demand,
                    ------------------------------
authorization, direction, notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with:

     (1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, or

     (2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose (except as otherwise provided in Section 5.01 hereof) hereunder if
in writing and mailed, first class, postage prepaid, to the Company addressed to
it at the address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing to the
Trustee by the Company.

                                       13
<PAGE>

     SECTION 1.06.  Notice to Holders:  Waiver.  Where this Indenture provides
                    --------------------------
for notice to Holders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed, first
class postace prepaid, to each Holder affected by such event, at the address of
such Holder as it appears in the Securities Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. In case, by reason of the suspension of or irregularities in
regular mail service or for any other reason, it shall be impossible or
impracticable to mail notice of any event to Holders when such notice is
required to be given pursuant to any provision of this Indenture or of the
relevant Securities, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

     SECTION 1.07.  Conflict with Trust Indenture Act.  If any provision of this
                    ---------------------------------
Indenture limits, qualifies or conflicts with the duties imposed by any of
Section 310 to 317, inclusive, of the Trust Indenture Act through operation of
Section 318(c) thereof, such imposed duties shall control.

     SECTION 1.08.  Effect of Headings and Table of Contents.  The Article and
                    ----------------------------------------
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.

     SECTION 1.09.  Successors and Assigns.  All covenants and agreements in
                    ----------------------
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.

     SECTION 1.10.  Separability Clause.  In case any provision in this
                    -------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

     SECTION 1.11.  Benefits of Indenture.  Nothing in this indenture or in the
                    ---------------------
Securities, express or implied, shall give to any Person, other than the parties
hereto, any Paying Agent and their successors and assigns, the holders of Senior
Debt and the Holders of the Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.

     SECTION 1.12.  Governing Law.  This Indenture and the Securities shall be
                    -------------
governed by and construed in accordance with the laws of the Commonwealth of
Virginia, without regard to principles of conflicts of laws.

     SECTION 1.13.  Non-Business Day.  In any case where any Interest Payment
                    ----------------
Date, Redemption Date or Stated Maturity of any Security shall not be a Business
Day, then (notwithstanding any other provision of this Indenture or the
Securities) payment of interest or

                                       14
<PAGE>

principal need not be made on such date, but may be made on the next succeeding
Business Day (and no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be,
until such next succeeding Business Day) 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 the Interest Payment Date or Redemption Date or at the Stated Maturity, as
the case may be.

                                  ARTICLE II

                                 Security Forms
                                 --------------

     SECTION 2.01.  Forms Generally.  The Securities of each series and the
                    ---------------
Trustee's certificate of authentication shall be in substantially the forms set
forth in this Article, or in such other form or forms as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with applicable tax
laws or the rules of any securities exchange or as may, consistently herewith,
be determined by the officers executing such securities, as evidenced by their
execution of the Securities.  If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 3.03 with respect to
the authentication and delivery of such Securities.

     The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.

     Securities distributed to holders of book-entry Capital Securities shall be
distributed in the form of one or more Global Securities registered in the name
of a Depositary or its nominee, and deposited with the Securities Registrar, as
custodian for such Depositary, or held by such Depositary for credit by the
Depositary to the respective accounts of the beneficial owners of the Securities
represented thereby (or such other accounts they may direct).  Securities
distributed to holders of Capital Securities other than book-entry Capital
Securities shall not be issued in the form of a Global Security or any other
form intended to facilitate book-entry trading in beneficial interests in such
Securities.

     SECTION 2.02.  Form of Face of Security.
                    ------------------------

                   COMMONWEALTH BANKSHARES, INC. CORPORATION
                              (Title of Security)

                                       15
<PAGE>

                                                                  CUSIP No.
                                                                  $

     COMMONWEALTH BANKSHARES, INC., a Virginia corporation (hereafter called the
"Company," which term includes any successor corporation under the Indenture
hereafter referred to); for value received, hereby promises to pay to
_______________________________, or its registered assigns, the principal sum of
________________________ Dollars on (the "Stated Maturity").  The Company
further promises to pay interest on such principal sum from ___________________,
or from the most recent interest payment date (each such date, an "Interest
Payment Date") on which interest has been paid or duly provided for, quarterly
(subject to deferral as set forth herein), in arrears on January 15, April 15,
July 15 and October 15 of each year, commencing January 15, 2001, at the annual
rate of ___%, until the principal hereof shall have become due and payable, plus
Additional Interest, if any, until the principal hereof is paid or duly provided
for or made available for payment 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 the annual rate of
___% compounded quarterly as Additional Interest.

     The amount of interest payable for any period shall be computed on the
basis of the actual number of days elapsed in a year of twelve 30-day months;
except that the amount of interest payable for any partial period shall be
computed on the basis of the actual number of days elapsed in a 360-day year.
In the event that any date on which interest is payable on this Security is not
a Business Day, then payment of the 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 the date on which the payment was originally payable.  A "Business
Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which
banking institutions in the City of Norfolk, Virginia are authorized or required
by law or executive order to remain closed or (iii) a day on which the Corporate
Trust Office of the Trustee or the Corporate Trust Office of the Property
Trustee under the Trust Agreement hereafter referred to for the related
Commonwealth Bankshares Capital Trust is closed for business.  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 Security (or one or more Predecessor Securities, as defined
in the Indenture) is registered at the close of business on the Regular Record
Date for such interest installment, which shall be the first day of the calendar
month in which the relevant Interest Payment Date occurs.  Any such interest
installment not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in such Indenture.

                                       16
<PAGE>

     So long as no Event of Default has occurred and is continuing, the Company
shall have the right at any time during the term of this Security, from time to
time, to defer payment of interest on such Security for up to twenty (20)
consecutive quarterly interest payment periods with respect to each deferral
period (each an "Extension Period"), during which Extension Periods the Company
                 ----------------
shall have the right to make partial payments of interest on any Interest
Payment Date, and at the end of which the Company shall pay all interest then
accrued and unpaid on the Securities (together with Additional Interest thereon
to the extent permitted by applicable law); provided, however, that no Extension
                                            --------  -------
Period may extend beyond the Stated Maturity of this Security.  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 (which includes common and
preferred stock) or (ii) make any payment of principal of, interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Company
(including any Other Debentures) that rank pari passu with or junior in interest
                                           ----------
to this Security or (iii) make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any Subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu with or junior
                                                     ----------
in interest to this Security (other than (a) dividends or distributions in
Common Stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the applicable Company Guarantee,
(d) purchases or acquisitions of shares of the Company's Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plan or other contractual obligation of the Company (other than
a contractual obligation ranking pari passu with or junior to this Security),
                                 ---- -----
(e) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock or (f) 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).  Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period, provided, however, that
                                                      --------  -------
such extension does not cause such Extension Period to exceed twenty (20)
consecutive quarterly interest payment periods or extend beyond the Stated
Maturity of this Security. Upon the termination of any such Extension Period and
the payment of all accrued and unpaid interest and any Additional Interest then
due, and, subject to the foregoing limitations, the Company may elect to begin a
new Extension Period. No interest shall be due and payable during an Extension
Period except at the end thereof. The Company shall give the Trustee notice of
its election to begin any Extension Period at least three Business Days prior to
the Interest Payment Date, or, with respect to the Securities issued to a
Commonwealth Bankshares Capital Trust, prior to the earlier of (i) the date on
which the Distributions on the Capital Securities would have been payable except
for the election to begin or extend such Extension Period or (ii) the date on
which the Administrative Trustees are required to give notice to any automated
quotation system or to holders of such Capital Securities of the record date or
the date on which such Distributions are payable, but in any event not less than
three Business Days prior to such record date. There is no limitation on the
number of times that the Company may elect to begin an Extension Period.

                                       17
<PAGE>

     Payment of the principal of and interest on this Security will be made at
the office or agency of the Trustee in the City of Wilmington, Delaware or at
the office of such Paying Agents in the United States as the Company may
designate from time to time, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that, at the option of the Company, payment of
any interest may be made (except in the case of Global Securities) (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Securities Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Securities Register.

     The indebtedness evidenced by this 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 Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such actions as may be
necessary or appropriate to effectuate such subordination and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof,
by his acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Debt, whether, now outstanding or hereafter incurred, and waives reliance
by each such holder upon such provisions.

     Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

     Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Date:                                COMMONWEALTH BANKSHARES, INC.

[Seal]

                                     By_________________________________________
                                         [Chairman and Chief Executive Officer,
                                         President or Vice President]

Attest:

___________________________________
[Secretary or Assistant Secretary]

                                       18
<PAGE>

     SECTION 2.03.  Form of Reverse of Security.  This Security is one of a duly
                    ---------------------------
authorized issue of securities of the Company (herein called the "Securities"),
                                                                  ----------
issued and to be issued in one or more series under a Junior Subordinated
Indenture, dated as of ________________, 2000, as supplemented by an Officers'
Certificate dated as of ________________ (herein called the "Indenture"),
between the Company and Wilmington Trust Company, as Trustee (herein called the
"Trustee," which term includes any Successor Trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof [, limited in aggregate principal amount to $______________].

     All terms used in this Security that are defined in the Indenture and in
the Amended and Restated Declaration of Trust of Commonwealth Bankshares Capital
Trust I, dated as of _______________, 2000, as amended (the "Amended and
Restated Declaration of Trust"), among Commonwealth Bankshares, Inc., as
Depositor, and the Trustees named therein, shall have the meanings assigned to
them in the Indenture or, to the extent not defined in the Indenture, the
Amended and Restated Declaration of Trust, as the case may be.

     The Company has the right to redeem this Security (i) on or after
_______________, 2006, in whole at any time or in part from time to time, or
(ii) in whole (but not in part), at any time within 90 days following the
occurrence and during the continuation of a Tax Event, an Investment Company
Event or a Capital Treatment Event, in each case at the Redemption Price, and
subject to possible regulatory approval.

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

     On the terms and subject to the conditions set forth in the Indenture, the
Holder of any Security has the right, exercisable at any time on or before 5:00
p.m. (Norfolk, Virginia time) on the earlier of (i) the Business Day immediately
preceding the date of redemption of such Security, whether at maturity or upon
prepayment, and (ii) the Conversion Termination Date of the Securities, if any,
to convert the principal amount thereof (or any portion thereof that is a
multiple of $25.00) into fully paid and nonassessable shares of Common Stock of
the Company at the Conversion Price described in the Indenture. The number of
shares issuable upon conversion of a Security is determined by dividing the
principal amount of the Security converted by the Conversion Price in effect on
the date of conversion. No fractional shares will be issued upon conversion, but
a cash adjustment will be made for any fractional interest. The outstanding
principal amount of any Security shall be reduced by the portion of the
principal amount thereof converted into shares of Common Stock. The conversion
right and the Conversion Price are subject to adjustment as provided in the
Indenture, to which reference is hereby made. Under certain circumstances
specified in the Indenture, Holders converting

                                       19
<PAGE>

Securities may be entitled to accrued and unpaid interest (including Additional
Interest and Additional Sums, if any, to the extent permitted by applicable law)
on such Securities.

     The conversion rights of the Holders of Securities are subject to
termination at the option of the Company on and after January 15, 2004, subject
to and upon the satisfaction of certain conditions set forth in the Indenture.

     If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of this Security may be declared due and
payable in the manner, with the effect and subject to the conditions provided in
the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

     As provided in and subject to the provisions of the Indenture, if an Event
of Default with respect to the Securities of this series at the time Outstanding
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 25% in aggregate principal amount of the Outstanding Securities
of this series may declare the principal amount of all of the Securities of this
series to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by Holders), provided, however, that, in the case
of the Securities of this series issued to a Commonwealth Bankshares Capital
Trust, if upon an Event of Default, the Trustee or the Holders of not less than
25% in aggregate principal amount of the Outstanding Securities of this series
fail to declare the principal of all of the Securities of this series to be
immediately due and payable, the holders of at least 25% in aggregate
Liquidation Amount of the corresponding series of Capital Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee with a copy to the Property Trustee. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of this series may
annul such declaration and waive the default by written notice to the Property
Trustee, the Company and the Trustee if the default (other than the nonpayment
of the principal of these Securities that has become due solely by such
acceleration) 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 Trustee. Should the Holders of the Securities of this
series fail to annul such declaration and waive such default, the holders of a
majority in aggregate Liquidation Amount of the Capital Securities shall have
such right. Upon any such declaration such principal amount and the accrued
interest (including any Additional Interest) on all of the Securities of this

                                       20
<PAGE>

series shall become immediately due and payable, provided that the payment of
principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture.

     No reference herein to the Indenture and no provision of this 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 interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Securities Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company maintained pursuant to Section 10.02 of the Indenture duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee shall treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

     The Securities of this series are issuable in registered form without
coupons.  As provided in the Indenture and subject to certain limitations
therein set forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of such series of a different
authorized denomination, as requested by the Holder surrendering the same.

     The Company and, by its acceptance of this Security or a beneficial
interest herein, the Holder of, and any Person that acquires a beneficial
interest in, this Security intend that such Security constitute indebtedness and
agree to treat such Security as indebtedness for all United States Federal,
state and local tax purposes.

     THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

     SECTION 2.04.  Additional Provisions Required in Global Security.  Any
                    -------------------------------------------------
Global Security issued hereunder shall, in addition to the provisions contained
in Sections 2.02 and 2.03, bear a legend in substantially the following form:

     "This Security is a Global Security within the meaning of the Indenture
     hereafter referred to and is registered in the name of The Depository Trust
     Company (the "Depositary") or a

                                       21
<PAGE>

     nominee of the Depositary. This Security is exchangeable for Securities
     registered in the name of a person other than the Depositary or its nominee
     only in the limited circumstances described in the Indenture and no
     transfer of this Security (other than a transfer of this Security as a
     whole by the Depositary to a nominee of the Depositary or by a nominee of
     the Depositary to the Depositary or another nominee of the Depositary) may
     be registered except in limited circumstances.

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

     SECTION 2.05.  Form of Trustee's Certificate of Authentication.  This is
                    -----------------------------------------------
one of the Securities referred to in the within mentioned Indenture:

                                        ________________________________________
                                        as Trustee

Dated:

                                        By:_____________________________________
                                                   Authorized Signatory

                                  ARTICLE III

                                The Securities
                                --------------

     SECTION 3.01.  Title and Terms.  The aggregate principal amount of
                    ---------------
Securities that may be authenticated and delivered under this Indenture is
unlimited.

     The Securities may be issued in one or more series.  There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of a series:

          (a)  the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;

          (b)  the limit, if any, upon the aggregate principal amount of the
Securities of such series that may be authenticated and made available for
delivery under this Indenture (except for Securities authenticated and made
available for delivery upon registration of, transfer of, or in exchange for, or
in lieu of, other Securities of the series pursuant to Section 3.04, 3.06,

                                       22
<PAGE>

3.07, 9.06 or 11.06); provided, however, that the authorized aggregate principal
amount of such series may be increased above such amount by a Board Resolution
to such effect;

          (c)  the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination thereof;

          (d)  the rate or rates, if any, at which the Securities of such series
shall bear interest, if any, the rate or rates and extent to which Additional
Interest, if any, shall be payable in respect of any Securities of such series,
the Interest Payment Dates on which such interest shall be payable, the right,
pursuant to Section 3.12 or as otherwise set forth therein, of the Company to
defer or extend an Interest Payment Date, and the Regular Record Date for the
interest payable on any Interest Payment Date or the method by which any of the
foregoing shall be determined;

          (e)  the place or places where the principal of and interest on the
Securities of such series shall be payable, the place or places where the
Securities of such series may be presented for registration of transfer or
exchange, and the place or places where notices and demands to or upon the
Company in respect of the Securities of such series may be made;

          (f)  the period or periods within or the date or dates on which, if
any, the price or prices at which and the terms and conditions upon which the
Securities of such series may be redeemed, in whole or in part, at the option of
the Company;

          (g)  the obligation or the right, if any, of the Company to redeem,
repay or purchase the Securities of such series pursuant to any sinking fund,
amortization or analogous provisions, or at the option of a Holder thereof, and
the period or periods within which, the prices or prices at which, the currency
or currencies (including currency unit or units) in which and the other terms
and conditions upon which Securities of the series shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligations;

          (h)  the denominations in which any Securities of such series shall be
issuable, if other than in blocks having aggregate principal amounts of not less
than $25.00 and multiples of $25.00 in excess thereof;

          (i)  if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of and interest, if any, on the
Securities of the series shall be payable, or in which the Securities of the
series shall be denominated and the manner of determining the equivalent thereof
in Dollars for purposes of the definition of the term "Outstanding";

          (j)  the additions, modifications or deletions, if any, in the Events
of Default or covenants of the Company set forth herein with respect to the
Securities of such series;

          (k)  if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;

                                       23
<PAGE>

          (1)  the additions or changes, if any, to this Indenture with respect
to the Securities of such series as shall be necessary to permit or facilitate
the issuance of the Securities of such series in bearer form, registrable or not
registrable as to principal, and with or without interest coupons;

          (m)  any index or indices used to determine the amount of payments of
principal on the Securities of such series or the manner in which such amounts
will be determined;

          (n)  the issuance of a temporary Global Security representing all of
the Securities of such series and exchange of such temporary Global Security for
definitive Securities of such series;

          (o)  whether the Securities of the series shall be issued in whole or
in part in the form of one or more Global Securities and, in such case, the
Depositary for such Global Securities, which Depositary shall be a clearing
agency registered under the Securities Exchange Act of 1934;

          (p)  the appointment of any Paying Agent or Agents for the Securities
of such series;

          (q)  the terms of any right to convert or exchange Securities of such
series into any other securities or property of the Company, and the additions
or changes, if any, to this Indenture with respect to the Securities of such
series to permit or facilitate such conversion or exchange;

          (r)  the transfer restrictions and legends required to be on the
Securities;

          (s)  the definitions of Amended and Restated Declaration of Trust,
Declaration of Trust and Guarantee Agreement for each series;

          (t)  the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to ether series of Securities in
right of payment, whether such other series of Securities are Outstanding or
not; and

          (u)  any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).

     All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided herein or in or pursuant
to such Board Resolution and set forth in such Officers' Certificate or in any
such indenture supplemental hereto.

     Unless otherwise provided with respect to the Securities of any series, at
the option of the Company, interest on the Securities of any series that bears
interest may be paid (except in the case of Securities in Global form) (i) by
check mailed to the address of the Person entitled

                                       24
<PAGE>

thereto as such address shall appear in the Securities Register or (ii) by wire
transfer in immediately available funds at such place and to such account as may
be designated by the Person entitled thereto as specified in the Securities
Register.

     SECTION 3.02.  Denominations.  The Securities of each series shall be in
                    -------------
registered form without coupons and shall be issuable initially in blocks having
aggregate principal amounts of not less than $25.00 and multiples of $25.00 in
excess thereof, unless otherwise specified as contemplated by Section 3.01.

     SECTION 3.03.  Execution, Authentication, Delivery and Dating.  The
                    ----------------------------------------------
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents under its corporate seal
reproduced or impressed thereon and attested by its Secretary or one of its
Assistant Secretaries.  The signature of any of these officers on the Securities
may be manual or facsimile.

     Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities executed by the Company to the Trustee for authentication. Securities
may be authenticated on original issuance from time to time and delivered
pursuant to such procedures acceptable to the Trustee ("Procedures") as may be
specified from time to time by Company Order. Procedures may authorize
authentication and delivery pursuant to oral instructions of the Company or a
duly authorized agent, which instructions shall be promptly confirmed in
writing. The Trustee shall authenticate and deliver such Securities in
accordance with such instructions and as provided in this Indenture.

     Prior to the delivery of a Security in any such form to the Trustee for
authentication, the Company shall deliver to the Trustee the following:

          (a)  a Company Order requesting the Trustee's authentication and
delivery of all or a portion of the Securities of such series, and if less than
all, setting forth procedures for such authentication;

          (b)  the Board Resolution by or pursuant to which such form of
Security has been approved, and the Board Resolution, if any, by or pursuant to
which the terms of the Securities of such series have been approved, and, if
pursuant to a Board Resolution, an Officers' Certificate describing the action
taken;

          (c)  an Officers' Certificate dated the date such certificate is
delivered to the Trustee, stating that all conditions precedent provided for in
this Indenture relating to the authentication and delivery of Securities in such
form and with such terms have been complied with; and

                                       25
<PAGE>

          (d)  an Opinion of Counsel or Opinions of Counsel substantially to the
effect that (i) the form of such Securities has been duly authorized and
approved in conformity with the provisions of this Indenture; (ii) the terms of
such Securities have been duly authorized and determined in conformity with the
provisions of this Indenture, or, if such terms are to be determined pursuant to
Procedures, when so determined such terms shall have been duly authorized and
determined in conformity with the provisions of this Indenture; and (iii)
Securities in such form when completed by appropriate insertions and executed
and delivered by the Company to the Trustee for authentication in accordance
with this Indenture, authenticated and made available for delivery by the
Trustee in accordance with this Indenture within the authorization as to
aggregate principal amount established from time to time by the Board of
Directors and sold in the manner specified in such Opinion of Counsel, will
constitute valid and legally binding obligations of the Company entitled to the
benefits of this Indenture, subject to bankruptcy, reorganization, insolvency,
fraudulent transfer, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles, and
except as enforcement thereof may be limited by (A) requirements that a claim
with respect to any Securities denominated other than in Dollars (or a Foreign
Currency or currency unit judgment in respect of such claim) be converted into
Dollars at a rate of exchange prevailing on a date determined pursuant to
applicable law or (B) governmental authority to limit, delay or prohibit the
making of payments in Foreign Currencies or currency units or payments outside
the United States, and subject to such other qualifications as such counsel
shall conclude do not materially affect the rights of Holders of such
Securities.

     The Trustee shall be entitled to receive the documents referred to in
clauses (b) and (d) above only at or prior to the first request of the Company
to the Trustee to authenticate Securities of such series.

     Each Security shall be dated the date of its authentication.

     No Security shall be entitled to any benefit under this Indenture, or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and made
available for delivery hereunder.

     SECTION 3.04.  Temporary Securities.  Pending the preparation of definitive
                    --------------------
Securities of any series, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities that are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any
denomination, substantially of the tenor of the definitive Securities of such
series in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities.

     If temporary Securities of any series are issued, the Company will cause
definitive Securities of such series to be prepared without unreasonable delay.
After the preparation of definitive Securities, the temporary Securities shall
be exchangeable for definitive Securities

                                       26
<PAGE>

upon surrender of the temporary Securities at the office or agency of the
Company designated for that purpose without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities, the Company shall
execute and the Trustee shall authenticate and make available for delivery in
exchange therefor a like principal amount of definitive Securities of the same
series of authorized denominations having the same original Issue Date and
Stated Maturity and having the same terms as such temporary Securities. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.

     SECTION 3.05.  Global Securities.
                    -----------------

          (a)  Each Global Security issued under this Indenture shall be
registered in the name of the Depositary designated by the Company for such
Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.

          (b)  Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee in writing that such
Depositary is no longer willing or able to continue as a Depositary with respect
to such Global Security, and no successor depositary shall have been appointed,
or if at any time the Depositary ceases to be a "clearing agency" registered
under the Securities Exchange Act of 1934, as amended, at a time when the
Depositary is required to be so registered to act as such depositary, (ii) the
Company in its sole discretion determines that such Global Security shall be so
exchangeable, (iii) there shall have occurred and be continuing an Event of
Default or (iv) pursuant to the following sentence. All or any portion of a
Global Security may be exchanged for a Security that has a like aggregate
principal amount and is not a Global Security upon 20 days' prior request made
by the Depositary or is Agent Member to the Securities Registrar.

          (c)  If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Securities Registrar for exchange or cancellation as provided
in this Article III. If any Global Security is to be exchanged for other
Securities or canceled in part, or if another Security is to be exchanged in
whole or in part for a beneficial interest in any Global Security, then either
(i) such Global Security shall be so surrendered for exchange or cancellation as
provided in this Article III or (ii) the principal amount thereof shall be
reduced, subject to Section 3.06(b)(iv), or increased by an amount equal to the
portion thereof to be so exchanged or canceled, or equal to the principal amount
of such other Security to be so exchanged for a beneficial interest therein, as
the case may be, by means of an appropriate adjustment made on the records of
the Securities Registrar, whereupon the Trustee shall instruct the Depositary or
its authorized representative to make a corresponding adjustment to its records.
Upon any such surrender or adjustment of a Global Security by the Depositary,
accompanied by registration instructions and, to the extent required by section
3.06, a Restricted Securities Certificate, the Trustee shall, subject to Section
3.05 (b) and as otherwise provided in this Article III, authenticate and make
available for

                                       27
<PAGE>

delivery any Securities issuable in exchange for such Global Security (or any
portion thereof) in accordance with the instructions of the Depositary. The
Trustee shall not be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be fully protected in relying on, such
instructions.

          (d)  The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interest pursuant to the rules and procedures of
the Depositary.  Accordingly, any such owners of beneficial interests in a
Global Security shall be shown only on, and the transfer of such interest shall
be effected only through, records maintained by the Depositary or its nominee or
its Agent Members.  Neither the Trustee nor the Securities Registrar shall have
any liability in respect of any transfers effected by the Depositary.

          (e)  The rights of the owners of beneficial interests in a Global
Security shall be exercised only through the Depositary and shall be limited to
those established by law and agreements between such owners and the Depositary
and/or its Agent Members.

     SECTION 3.06.  Registration, Transfer and Exchange Generally: Certain
                    ------------------------------------------------------
Transfers and Exchanges: Restricted Securities Legends.
------------------------------------------------------

          (a)  The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of the Securities
and of transfers of Securities. Such register is herein sometimes referred to as
the "Securities Register". The Trustee is hereby appointed "Securities
Registrar" for the purpose of registering the Securities and transfers of
Securities as herein provided.

     Upon surrender for registration of transfer of any Security at the office
of the agent of the Company designated for that purpose, the Company shall
execute, and the Trustee shall authenticate and make available for delivery, in
the name of the designated transferee or transferees, one or more new Securities
of the same series of any authorized denominations, of a like aggregate
principal amount, of the same Original Issue Date and Stated Maturity and having
the same terms and bearing such restrictive legends as may be required by this
Indenture.

     At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms and bearing such restrictive legends as may be
required by this Indenture, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and make available
for delivery, the Securities that the Holder making the exchange is entitled to
receive.

     All Securities issued upon any transfer or exchange of Securities shall be
the valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.

                                       28
<PAGE>

     Every Security presented or surrendered for transfer or exchange shall (if
so required by the Company or the Securities Registrar) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.

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

     Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (i) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of Securities pursuant to Article
XI and ending at the close of business on the day of mailing of notice of
redemption or (ii) to transfer or exchange any Security so selected for
redemption in whole or in part, except, in the case of any Security to be
redeemed in part, any portion thereof not to be redeemed.

          (b)  Certain Transfers and Exchanges.  Notwithstanding any other
               -------------------------------
provision of this Indenture, transfers and exchanges of Securities and
beneficial interests in a Global Capital Security of the kinds specified in this
Section 3.06(b) shall be made only in accordance with this Section 3.06(b).

               (i)   Non-Global Security to Global Security.  If the Holder of a
                     --------------------------------------
Security (other than a Global Security) wishes at any time to transfer all or
any portion of such Security to a Person who wishes to take delivery thereof in
the form of a beneficial interest in a Global Security, such transfer may be
effected only in accordance with the provisions of this clause (b)(i) and
subject to the rules and procedures of the Depositary. Upon receipt by the
Securities Registrar of (A) such Security as provided in Section 3.06 (a) and
instructions satisfactory to the Securities Registrar directing that a
beneficial interest in the Global Security in a specified principal amount not
greater than the principal amount of such Security be credited to a specified
Agent Member's account and (B) a Securities Certificate duly executed by such
Holder or such Holder's attorney duly authorized in writing, then the Securities
Registrar shall cancel such Security (and issue a new Security in respect of the
untransferred portion thereof) as provided in Section 3.06 (a) and increase the
aggregate principal amount of the Global Security by the specified principal
amount as provided in Section 3.05(c).

               (ii)  Non-Global Security to Non-Global Security. A Security that
                     ------------------------------------------
is not a Global Security may be transferred, in whole or in part, to a Person
who takes delivery in the form of another Security that is not a Global Security
as provided in Section 3.06(a); provided, that if such Security to be
transferred in whole or in part is a Restricted Security, the Securities
Registrar shall have received a Restricted Securities Certificate duly executed
by the transferor Holder or such Holder's attorney duly authorized in writing.

                                       29
<PAGE>

               (iii)  Exchanges between Global Security and Non-Global Security.
                      ---------------------------------------------------------
A beneficial interest in a Global Security may be exchanged for a Security that
is not a Global Security as provided in Section 3.05.

          (c)  Restricted Securities Legend.  (i) Except as set forth below, all
Securities shall bear a Restricted Securities Legend, substantially in the
following form:

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (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 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 PRIOR TO THE DATE THAT IS ONE YEAR AFTER THE LATER
     OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH COMMONWEALTH
     BANKSHARES, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE
     OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE
     RESTRICTIONS TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN
     EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG
     AS THIS SECURITY IS ELIGIBLE FOR RESALE 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, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
     SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
     ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
     INSTITUTIONAL "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 (E) PURSUANT TO ANOTHER AVAILABLE
     EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
     TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
     TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN
     OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
     EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF
     TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE.
     THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
     RESTRICTIONS TERMINATION DATE.

                                       30
<PAGE>

               (ii)  Subject to the following clauses of this Section 3.06(c), a
Security (other than a Global Security) that does not bear a Restricted
Securities Legend may be issued in exchange for or in lieu of a Restricted
Security or any portion thereof that bears such legend if, in the Company's
judgment, placing such a legend upon such new Security is not necessary to
ensure compliance with the registration requirements of the Securities Act, and
the Trustee, at the written direction of the Company in the form of an Officers'
Certificate, shall countersign and deliver such a new Security as provided in
this Article III.

               (iii) Notwithstanding the foregoing provisions of this Section
3.06(c), a successor Security of a Security that does not bear a Restricted
Securities Legend shall not bear such form of legend unless the Company has
reasonable cause to believe that such successor Security is a "restricted
security" within the meaning of Rule 144 under the Securities Act, in which case
the Trustee, at the written direction of the Company in the form of an Officers
Certificate, shall countersign and deliver a new Security bearing a Restricted
Securities Legend in exchange for successor Security as provided in this Article
III.

               (iv) Upon any sale or transfer of a Restricted Security
(including any Restricted Security represented by a Global Security) pursuant to
an effective registration statement under the Securities Act or pursuant to Rule
144 under the Securities Act after such registration ceases to be effective: (A)
in the case of any Restricted Security that is a definitive Security, the
Securities Registrar shall permit the Holder thereof to exchange such Restricted
Security for a definitive Security that does not bear the Restricted Securities
Legend and rescind any restriction on the transfer of such Restricted Security;
and (B) in the case of any Restricted Security that is represented by a Global
Security, the Securities Registrar shall permit the Holder of such Global
Security to exchange such Global Security for another Global Security that does
not bear the Restricted Securities Legend.

               (v)  If Restricted Securities are being presented or
surrendered for transfer or exchange then there shall be (if so required by the
Trustee), (A) if such Restricted Securities are being delivered to the
Securities Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect; or (B) if
such Restricted Securities are being transferred, (i) a certification from the
transferor in a form substantially similar to that attached as Exhibit A, and
(ii) if the Company or Securities Registrar so requests, evidence reasonably
satisfactory to them as to the compliance with the restrictions set forth in the
Restricted Securities Legend.

               (vi) If the Securities are issued pursuant to an effective
registration statement, no Restricted Securities Legend shall be required.

     SECTION 3.07.  Mutilated, Destroyed, Lost and Stolen Securities.  If any
                    ------------------------------------------------
mutilated Security is surrendered to the Trustee together with such security or
indemnity as may be required by the Company or the Trustee to hold each of them
harmless, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same issue and series of like
tenor and principal amount, having the same Original Issue Date and Stated
Maturity and bearing the same Interest Rate as such mutilated Security, and
bearing a number not contemporaneously outstanding.

                                       31
<PAGE>

     If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security, and
(ii) such security or indemnity as may be required by them to hold each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute,
and, upon its request, the Trustee shall authenticate and deliver, in lieu of
any such destroyed, lost or stolen Security, a new Security of the same issue
and series of like tenor and principal amount, having the same original Issue
Date and Stated Maturity and bearing the same Interest Rate as such destroyed,
lost or stolen Security, and bearing a number not contemporaneously outstanding.

     In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.

     Upon the issuance of any new Security under this Section, 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 (including
the fees and expenses of the Trustee) connected therewith.

     Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.

     The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.

     SECTION 3.08.  Payment of Interest; Interest Rights Preserved.  Interest on
                    ----------------------------------------------
any Security of any series that is payable, and is punctually paid or duly
provided for, on any Interest Payment Date, shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest in respect of
Securities of such series, except that, unless otherwise provided in the
Securities of such series, interest payable on the Stated Maturity of a Security
shall be paid to the Person to whom principal is paid. The initial payment of
interest on any Security of any series that is issued between a Regular Record
Date and the related Interest Payment Date shall be payable as provided in such
Security or in the Board Resolution pursuant to Section 3.01 with respect to the
related series of Securities.

     Any interest on any Security that is payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities of such series
(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 may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:

                                       32
<PAGE>

     (1)  The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series in respect of which
interest is in default (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 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 15 days
and not less than 10 days prior to the date of the proposed payment and not less
than 10 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 Holder of a
Security of such series at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record Date. The
Trustee may, in its discretion, in the name and at the expense of the Company,
cause a similar notice to be published at least once in a newspaper, customarily
published in the English language on each Business Day and of general
circulation in the Borough of Manhattan, the City of New York, but such
publication shall not be a condition precedent to the establishment of 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 the Securities of
such series (or their respective Predecessor Securities) are registered on such
Special Record Date and shall no longer be payable pursuant to the following
Clause (2).

     (2)  The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of the series in respect of which interest is in default
may be listed and, upon such notice as may be required by such exchange (or by
the Trustee if the Securities are not listed), if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause, such
payment shall be deemed practicable by the Trustee.

     Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, that were carried by such other Security.  Any interest on any Security
that is deferred or extended pursuant to Section 3.12 shall not constitute
Defaulted Interest for purposes of this Section 3.08.

     SECTION 3.09.  Persons Deemed Owners.  The Company, the Trustee and any
                    ---------------------
agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.08) interest on such
Security and for all other purposes whatsoever, whether

                                       33
<PAGE>

or not such Security is overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its behalf
by a Depositary shall have any rights under this Indenture with respect to such
Global Security, and such Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the owner of such Global Security
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company or the Trustee from giving effect to any written
certification, proxy, or other authorization furnished by a Depositary or
impair, as between the Depositary and such holders of beneficial interests, the
operation of customary practices governing the exercise of the rights of the
Depositary (or its nominee) as Holder of any Security.

     SECTION 3.10.  Cancellation.  All Securities surrendered for payment,
                    ------------
redemption, conversion, transfer or exchange shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee, and any such Securities and
Securities surrendered directly to the Trustee for any such purpose shall be
promptly canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and made available for
delivery hereunder that the Company may have acquired in any manner whatsoever,
and all Securities so delivered shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Securities shall be delivered to the Company.

     SECTION 3.11.  Computation of Interest.  Except as otherwise specified as
                    -----------------------
contemplated by Section 3.01 for Securities of any series, interest on the
Securities of each series for any period shall be computed on the basis of a
360-day year of twelve 30-day months, and interest on the Securities of each
series for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months.

     SECTION 3.12.  Deferrals of Interest Payment Dates.  If specified as
                    -----------------------------------
contemplated by Section 3.01 with respect to the Securities of a particular
series, provided that no Event of Default has occurred and is continuing with
respect to such Securities, the Company shall have the right, at any time or
from time to time during the term of such series, to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.01 (each, an "Extension Period") during which
Extension Periods the Company shall have the right to make partial payments of
interest on any Interest Payment Date. No Extension Period shall end on a date
other than an Interest Payment Date. At the end of any such Extension Period the
Company shall pay all interest then accrued and unpaid on the Securities
(together with Additional Interest thereon, if any, at the rate specified for
the Securities of such series to the extent permitted by applicable law),
provided, however, that no Extension Period may extend beyond the Stated
Maturity of these Securities. During any such Extension Period, the Company
shall not (i) declare or pay dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock (which includes common and preferred stock), or (ii) make any
payment of principal, interest, or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company (including Other Debentures) that rank
pari passu with or junior in interest to the Securities of such series or (iii)
---- -----
make any guarantee payments with respect to any guarantee by the Company of the
debt

                                       34
<PAGE>

securities of any Subsidiary of the Company (including Other Guarantees) if such
guarantee ranks pari passu with or junior in interest to the Securities of such
                ---- -----
series (other than (a) dividends or distributions in common stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholders' rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the applicable Company Guarantee, (d) purchases or
acquisitions of shares of the Company's Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plan
or other contractual obligation of the Company (other than a contractual
obligation ranking pari passu with or junior to these Securities, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, or (f) 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). Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period; provided, however, that no
                                                      --------  -------
Extension Period shall exceed the period or periods specified in such Securities
or extend beyond the Stated Maturity of such Securities.  Upon termination of
any Extension Period and upon the payment of all accrued and unpaid interest and
any Additional Interest then due on any Interest Payment Date, and subject to
the foregoing limitations, the Company may elect to begin a new Extension
Period. No interest shall be due and payable during an Extension Period, except
at the end thereof. The Company shall give the Trustee and the Property Trustee
notice of its election to begin any such Extension Period (or an extension
thereof) at least three Business Days prior to the Interest Payment Date or,
with respect to the Securities of a series issued to a Commonwealth Bankshares
Capital Trust, prior to the earlier of (i) the date the Distributions on the
Trust Securities of such Commonwealth Bankshares Capital Trust would have been
payable except for the election to begin or extend such Extension Period or (ii)
the date the Administrative Trustees or such Commonwealth Bankshares Capital
Trust are required to give notice to any automated quotation system or to
holders of Trust Securities of the record date or the date such Distributions
are payable, but in any event not less than three Business Days prior to such
record date. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.

     SECTION 3.13.  CUSIP Numbers.  The Company in issuing the Securities may
                    -------------
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption or other related material as a
convenience to Holders; provided, however, that any such notice or other related
material may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption or other related material and that reliance may be placed only on the
other identification numbers printed on the Securities, and any such redemption
shall not be affected by any defect in or omission of such numbers.

     So long as the Securities are held by or on behalf of a Commonwealth
Bankshares Capital Trust, notwithstanding anything to the contrary herein, the
Company shall have the right to set off any payment it is otherwise required to
make hereunder in respect of any Security with and to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, any
payment under a Company Guarantee used to satisfy the related payment of
indebtedness hereunder.

                                       35
<PAGE>

                                  ARTICLE IV

                          Satisfaction and Discharge
                          --------------------------

     SECTION 4.01.  Satisfaction and Discharge of Indenture.  This Indenture,
                    ---------------------------------------
upon Company Request, shall cease to be of further effect (except as to (i) any
surviving rights of transfer, substitution and exchange of Securities, (ii)
rights hereunder of Holders to receive payments of principal of and interest on
the Securities; and other rights, duties and obligations of the Holders as
beneficiaries hereof with respect to the amounts, if any, deposited with the
Trustee pursuant to this Article IV and (iii) the rights and obligations of the
Trustee hereunder), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when

     (1)  either

          (A)  all Securities theretofore authenticated and delivered (other
than (i) Securities that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 3.07 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.03) have been delivered to the Trustee for
cancellation; or

          (B)  all such Securities not theretofore delivered to the Trustee for
cancellation

               (i)    have become due and payable, or

               (ii)   will become due and payable at their Stated Maturity
within one year of the date of deposit, or

               (iii)  are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company,

and the Company, in the case of Clause (B)(i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust for
such purpose an amount in the currency or currencies in which the Securities of
such series are payable sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for cancellation,
for principal and interest (including any Additional Interest) to the date of
such deposit (in the case of Securities that have become due and payable) or to
the Stated Maturity or the date for redemption, as the case may be;

     (2)  the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and

                                       36
<PAGE>

     (3)  the Company has delivered to the Trustee 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.

     Notwithstanding the satisfaction and discharge of this Indenture on the
earlier resignation or removal of the Trustee, the obligations of the Company to
the Trustee under Section 6.07 and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations
of the Trustee under Section 4.02 and the last paragraph of Section 10.03 shall
survive.

     SECTION 4.02.  Application of Trust Money.  Subject to the provisions of
                    --------------------------
the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 4.01, shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest for the payment of which such
money or obligations have been deposited with or received by the Trustee;
provided, however, that such moneys need not be segregated from other funds
except to the extent required by law.

                                   ARTICLE V

                                   Remedies
                                   --------

     SECTION 5.01.  Events of Default.  "Event of Default," wherever used herein
                    -----------------
with respect to the Securities of any Series, means any one of the following
events (whatever the reason for such Event of Default 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):

     (1)  default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension Period); or

     (2)  default in the payment of the principal of any Security of that series
when due, whether at its maturity, upon redemption, by declaration of
acceleration or otherwise; or

     (3)  default in the observance or performance in any material respect, of
any covenant of the Company in this Indenture (other than a covenant a default
in the performance of which or the breach of which is elsewhere in this Section
specifically dealt with), and continuance of such default 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 outstanding principal amount of the Securities of that series a
written notice specifying such default and requiring it to be remedied; or

                                       37
<PAGE>

     (4)  the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or

     (5)  the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by
it in writing of its inability to pay its debts generally as they become due and
its willingness to be adjudicated a bankrupt, or the taking of corporate action
by the Company in furtherance of any such action; or

     (6)  in respect of a series issued to a Commonwealth Bankshares Capital
Trust, the voluntary or involuntary dissolution, winding-up or termination of a
Commonwealth Bankshares Capital Trust, except in connection with the
distribution of the Securities of such series to the holders of Trust Securities
in liquidation of such Commonwealth Bankshares Capital Trust, the redemption of
all the Trust Securities of a Commonwealth Bankshares Capital Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the applicable
Trust Agreement; or

     (7)  any other Event of Default with respect to Securities of that series
as set forth in the Board Resolution and the Officers' Certificate, or
established in a supplemental indenture hereto, prior to the issuance of the
series of such Securities as contemplated by Section 3.01.

     SECTION 5.02.  Acceleration of Maturity; Rescission and Annulment.  If an
                    --------------------------------------------------
Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
the Securities of that series are Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided,
however, that, in the case of the Securities of a series issued to a
Commonwealth Bankshares Capital Trust, if, upon an Event of Default, the Trustee
or the Holders of not less than 25% in aggregate principal amount of the
outstanding Securities of that series fail to declare the principal of all the
Securities of that series to be immediately due and payable, the holders of at
least 25% in aggregate Liquidation Amount of the corresponding series of Capital
Securities then outstanding shall have such right by a notice in writing to the
Company and the Trustee with a copy to the Property Trustee. The Holders of a
majority in aggregate

                                       38
<PAGE>

principal amount of the Outstanding Securities of a series may annul such
declaration and waive the default by written notice to the Property Trustee, the
Company and the Trustee if the default (other than the nonpayment of the
principal of these Securities that has become due solely by such acceleration)
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
Trustee. Should the Holders of the Securities of such a series fail to annul
such declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Capital Securities shall have such right. Upon any
such declaration such principal amount (or specified amount) of and the accrued
interest (including any Additional Interest) on all the Securities of such
series shall become immediately due and payable, provided, however, that the
payment of principal and interest (including any Additional Interest) on such
Securities shall remain subordinated to the extent provided in Article XIV.

     At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:

     (1)  the Company has paid or deposited with the Trustee a sum sufficient to
pay:

          (A)  all overdue installments of interest (including any Additional
Interest) on all Securities of that series,

          (B)  the principal of any Securities of that series that has become
due otherwise than by such declaration of acceleration and interest thereon at
the rate borne by the Securities, and

          (C)  all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and

     (2)  all Events of Default with respect to Securities of that series, other
than the nonpayment of the principal of Securities of that series that has
become due solely by such acceleration, have been cured or waived as provided in
Section 5.13.

     The Company is required to file annually with the Trustee a certificate as
to whether or not the Company is in compliance with all the conditions and
covenants applicable to it under this Indenture.

     No such rescission shall affect any subsequent default or impair any right
consequent thereon.

     Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities of
a series all or part of which is represented by a Global Security, a record date
shall be established for determining Holders of Outstanding Securities of such
series entitled to join in such notice, which record date shall be at the close
of

                                       39
<PAGE>

business on the day the 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, however, 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 5.02.

     SECTION 5.03.  Collection of Indebtedness and Suits for Enforcement by
                    -------------------------------------------------------
Trustee.  The Company covenants that if:
-------

     (1)  default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest becomes
due and payable, and such default continues for a period of 30 days, or

     (2)  default is made in the payment of the principal of any Security at the
maturity thereof,

the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations and interest (including any Additional Interest); and, in
addition thereto, all amounts owing to the Trustee under Section 6.07 and
Section 10.06.

     If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.

     If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.

     SECTION 5.04.  Trustee May File Proofs of Claim. In case of the pendency of
                    --------------------------------
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment,

                                       40
<PAGE>

composition or other judicial proceeding relative to the Company or any other
obligor upon the Securities or the property of the Company or of such other
obligor or their creditors,

          (a)  the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal or interest
(including any Additional Interest)) shall be entitled and empowered, by
intervention in such proceeding or otherwise,

               (i)  to file and prove a claim for the whole amount of principal
and interest (including any Additional Interest) owing and unpaid in respect to
the Securities and to file such other papers or documents as may be necessary or
advisable and to take any and all actions as are authorized under the Trust
Indenture Act in order to have the claims of the Holders and any predecessor to
the Trustee under Section 6.07 and of the Holders allowed in any such judicial
proceedings; and

               (ii) in particular, the Trustee shall be authorized to collect
and receive any moneys or other property payable or deliverable on any such
claims and to distribute the same in accordance with Section 5.06; and

          (b)  any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.06, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it and any predecessor Trustee under Section 6.07.

     Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any proceeding; provided, however, that
                                                      -----------------
the Trustee may, on behalf of the Holders, vote for the election of a trustee in
bankruptcy or similar official and be a member of a creditors' or other similar
committee.

     SECTION 5.05.  Trustee May Enforce Claim Without Possession of Securities.
                    ----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of all the amounts owing to the Trustee and any predecessor
Trustee under Section 6.07, its agents and counsel, be for the ratable benefit
of the Holders of the Securities in respect of which such judgment has been
recovered.

     SECTION 5.06.  Application of Money Collected. Any money or property
                    ------------------------------
collected or to be applied by the Trustee with respect to a series of Securities
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money or
property on account of principal or interest (including any

                                       41
<PAGE>

Additional Interest), upon presentation of the Securities and the notation
thereon of the payment, if only partially paid, and upon surrender thereof, if
fully paid:

     First: to the payment of all amounts due the Trustee and any predecessor
     -----
Trustee under Section 6.07;

     Second: to the payment of the amounts then due and unpaid upon such series
     ------
of Securities for principal and interest (including any Additional Interest), in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such series of Securities for principal and interest
(including any Additional Interest), respectively; and

     Third: the balance, if any, to the Person or Persons entitled thereto.
     -----

     SECTION 5.07.  Limitation on Suits. No Holder of any Securities of any
                    -------------------
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture or for the appointment of a receiver, assignee,
trustee, liquidator, sequestrator (or other similar official) or for any other
remedy hereunder, unless:

     (1)  such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;

     (2)  the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;

     (3)  such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;

     (4)  the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and

     (5)  no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;

     it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing itself of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.

     SECTION 5.08.  Unconditional Right of Holders to Receive Principal and
                    -------------------------------------------------------
Interest. Notwithstanding any other provision in this Indenture, the Holder of
--------
any Security shall have the right that is absolute and unconditional to receive
payment of the principal of and (subject to

                                       42
<PAGE>

Section 3.08) interest (including any Additional Interest) on such Security on
the respective Stated Maturities expressed in such Security and to institute
suit for the enforcement of any such payment, and such right shall not be
impaired without the consent of such Holder. In the case of Securities of a
series issued to a Commonwealth Bankshares Capital Trust, any holder of the
corresponding series of Capital Securities shall have the right, upon the
occurrence of an Event of Default described in Section 5.01(1) or 5.01(2)
hereof, to institute a suit directly against the Company for enforcement of
payment to such Holder of principal of and (subject to Section 3.08) interest
(including any Additional Interest) on the Securities having a principal amount
equal to the aggregate Liquidation Amount of the Capital Securities of the
corresponding series held by such Holder. Notwithstanding any payments made to a
holder of Capital Securities by the Company in connection with a suit directly
against the Company, the Company shall remain obligated to pay the principal of
or interest on the Securities, and the Company shall be subrogated to the rights
of the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any suit directly against the Company.

     The holders of the Capital Securities will riot be able to exercise
directly any remedies, other than those set forth in this Section 5.08,
available to the holders of the Securities unless there shall have been an Event
of Default under the related Trust Agreement.

     SECTION 5.09.  Restoration of Rights and Remedies. If the Trustee or any
                    ----------------------------------
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every case the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.

     SECTION 5.10.  Rights and Remedies Cumulate.  Except as otherwise provided
                    ----------------------------
in the last paragraph of Section 3.07, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every right and remedy given hereunder
or now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

     SECTION 5.11.  Delay or Omission Not Waiver. Except as otherwise provided
                    ----------------------------
in the last paragraph of Section 3.07, no delay or omission of the Trustee or of
any Holder of any Security to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein.

     Every right and remedy given by this Article or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.

                                       43
<PAGE>

     SECTION 5.12.  Control by Holders. The Holders of a majority in principal
                    ------------------
amount of the Outstanding Securities of any series 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 the Securities of such series, provided that:

     (1)  such direction shall not be in conflict with any rule of law or with
this Indenture;

     (2)  the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction; and

     (3)  subject to the provisions of Section 6.01, the Trustee shall have the
right to decline to follow such direction if the Trustee in good faith shall, by
a Responsible Officer or Officers of the Trustee, determine that the proceeding
so directed would be unjustly prejudicial to the Holders not joining in any such
direction or would involve the Trustee in personal liability.

     Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, with respect to Securities of a series all or part of which is
represented by a Global Security, a record date shall be established for
determining Holders of outstanding Securities of such series entitled to join in
such notice, which record date shall be at the close of business on the day the
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, however, that, unless the Holders of a majority in principal amount of
the Outstanding Securities of such series shall have joined in such notice prior
to the day that is 90 days after such record date, such notice 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 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 5.12.

     SECTION 5.13.  Waiver of Past Defaults. The Holders of a majority in
                    -----------------------
aggregate principal amount of the Outstanding Securities of a series affected
thereby may, on behalf of the Holders of all the Securities of such series,
waive any past default, except a default in the payment of principal of or
interest (including any Additional Interest) (unless such default has been cured
and a sum sufficient to pay all overdue installments of interest and principal
due otherwise than by acceleration has been deposited with the Trustee) on any
Security of such series or a default in respect of a covenant or provision that,
under Article IX, cannot be modified or amended without the consent of the
Holder of each outstanding Security of such series and, in the case of
Securities of a series issued to a Commonwealth Bankshares Capital Trust, should
the Holders of such Securities fail to annul such declaration and waive such
default, the holders of a majority in aggregate Liquidation Amount of the
related series of Capital Securities shall have such right.

                                       44
<PAGE>

     Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

     SECTION 5.14.  Undertaking for Costs. All parties to this Indenture agree,
                    ---------------------
and each Holder of any 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, 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 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than l0% in principal amount of the
outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of or interest (including
any Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.

     SECTION 5.15.  Waiver of Usury, Stay or Extension Laws. The Company
                    ---------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                  ARTICLE VI

                                  The Trustee
                                  -----------

     SECTION 6.01.  Certain Duties and Responsibilities. (a) Except during the
                    -----------------------------------
continuance of an Event of Default:

     (1)  the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and

     (2)  in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon 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 that by any provisions 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 (but need not confine or investigate the accuracy of mathematical
calculations or other facts stated therein).

                                       45
<PAGE>

          (b)  In case an Event of Default has occurred and is continuing, 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 person would exercise or use under the circumstances in the conduct of
his own affairs.

          (c)  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:

               (i)    this Subsection shall not be construed to limit the effect
of Subsection (a) of this Section;

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

               (iii)  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 Holders pursuant to Section 5.12 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
with respect to the Securities of such series.

     (d)  No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or indemnity satisfactory to it against such risk or liability is not
assured to it.

     (e)  Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.

     SECTION 6.02.  Notice of Defaults. Within 90 days after actual knowledge by
                    ------------------
a Responsible Officer of the Trustee of the occurrence of any default hereunder
with respect to the Securities of any series, the Trustee shall transmit by mail
to all Holders of Securities of such series, as their names and addresses appear
in the Securities Register, notice of such default hereunder known to a
Responsible Officer of the Trustee, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of or interest (including any Additional Interest) on any
Security of such series, the Trustee shall be fully protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders of Securities of such series; and provided, further, however, that,
in the case of any default of the character specified in Section 5.01(3), no
such notice to Holders of Securities of such series shall be given until at
least 30 days after the occurrence thereof.  For the purpose of

                                       46
<PAGE>

this Section, the term "default" means any event that is, or after notice or
lapse of time or both would become, an Event of Default with respect to
Securities of such series.

     SECTION 6.03.  Certain Rights of Trustee. Subject to the provisions of
                    -------------------------
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, direction, consent, order, bond,
debenture, Security 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 or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;

     (c)  whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
is herein specifically prescribed) shall be entitled to receive and may, in the
absence of bad faith on its part, conclusively rely upon an Officers'
Certificate;

     (d)  the Trustee may consult with counsel of its selection and the advice
of such counsel or any 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 reliance thereon;

     (e)  the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction;

     (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, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney at the reasonable cost of the Company upon
giving reasonable notice to the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or investigation;

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

                                       47
<PAGE>

     (h)  the Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Indenture;

     (i)  the Trustee shall not be charged with knowledge of any Event of
Default unless either (1) a Responsible Officer of the Trustee shall have actual
knowledge or (2) the Trustee shall have received notice thereof in accordance
with Section 1.05(1) hereof from the Company or a Holder;

     (j)  no permissive power or authority available to the Trustee shall be
construed as a duty; and

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

     SECTION 6.04.  Not Responsible for Recitals or Issuance of Securities. The
                    ------------------------------------------------------
recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness.  The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities or any offering or disclosure materials prepared in connection
therewith.  The Trustee shall not be accountable for the use or application by
the Company of the Securities or the proceeds thereof.

     SECTION 6.05.  May Hold Securities. The Trustee, any Paying Agent,
                    -------------------
Securities Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Paying Agent, Securities Registrar or such
other agent.

     SECTION 6.06.  Money Held in Trust. Money held by the Trustee in trust
                    -------------------
hereunder need not be segregated from other funds except to the extent required
by law.  The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.

     SECTION 6.07.  Compensation and Reimbursement. The Company, as borrower on
                    ------------------------------
the Securities, agrees:

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

     (2)  to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its

                                       48
<PAGE>

agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and

     (3)  to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense (other than taxes based upon, measured by or
determined by the income of the Trustee) (including the reasonable compensation
and the expenses and disbursements of its agents and counsel) incurred without
negligence or bad faith, arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder.

     The obligations of the Company under this Section 6.07 shall survive the
termination of this Indenture or the earlier resignation or removal of the
Trustee.

     To secure the Company's payment obligations in this Section, the Company
and the Holders agree that the Trustee shall have a lien prior to the Securities
on all money or property held or collected by the Trustee.  Such lien shall
survive the satisfaction and discharge of this Indenture.

     When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.01(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code of 1978, as amended, or any successor
statute.

     The provisions of this Section 6.07 shall survive the termination of this
Indenture.

     SECTION 6.08.  Disqualification; Conflicting Interests. The Trustee for the
                    ---------------------------------------
Securities of any series issued hereunder shall be subject to the provisions of
Section 310 (b) of the Trust Indenture Act.  Nothing herein shall prevent the
Trustee from filing with the Commission the application referred to in the
second-to-last paragraph of Section 310 (b) of the Trust Indenture Act.

     SECTION 6.09.  Corporate Trustee Required; Eligibility. There shall at all
                    ---------------------------------------
times be a Trustee hereunder that shall be:

     (a)  a corporation organized and doing business under the laws of the
United States of America or of any state, territory or the District of Columbia,
authorized under such laws to exercise corporate trust powers and subject to
supervision or examination by Federal, state, territorial or District of
Columbia authority, or

     (b)  a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to a
rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to the supervision or examination applicable to United
States institutional trustees, in either case having a combined capital and
surplus of at least

                                       49
<PAGE>

$50,000,000, subject to supervision of examination by Federal or state
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, 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 the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereafter specified in this Article. Neither the Company nor any
Person directly or indirectly controlling, controlled by or under common control
with the Company shall serve as Trustee for the Securities of any series issued
hereunder.

     SECTION 6.10.  Resignation and Removal, Appointment of Successor. (a) No
                    -------------------------------------------------
resignation or removal of the Trustee and no appointment of a Successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the Successor Trustee under Section 6.11.

          (b)  The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company.  If an
instrument of acceptance by a Successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a Successor Trustee with respect to the Securities of such
series.

          (c)  The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the outstanding Securities of such series, delivered to the Trustee and to
the Company.

          (d)  If at any time:

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

               (ii)   the Trustee shall cease to be eligible under Section 6.09
and shall fail to resign after written request therefor by the Company or by any
such Holder, or

               (iii)  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, (x) the Company, acting
pursuant to the authority of a Board Resolution, may remove the Trustee, or (y)
subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security 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.

          (e)  If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a Successor Trustee

                                       50
<PAGE>

with respect to the Securities of that or those series. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a Successor Trustee with respect to the Securities of any series shall
be appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the Successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the Successor Trustee with respect to the Securities
of such series and supersede the Successor Trustee appointed by the Company. If
no Successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner hereafter provided, within 30 days of such resignation or removal the
Trustee or any Holder who has been a bona fide Holder of a Security for at least
six months, subject to Section 5.14, on behalf of himself and all others
similarly situated, may petition any court of competent jurisdiction for the
appointment of a Successor Trustee with respect to the Securities of such
series.

          (f)  The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a Successor Trustee with respect to the Securities of any series
by mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of Securities of such series as their names and addresses appear in
the Securities Register. Each notice shall include the name of the Successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.

     SECTION 6.11.  Acceptance of Appointment Successor. (a) In case of the
                    -----------------------------------
appointment hereunder of a Successor Trustee with respect to all Securities,
every such Successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, 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, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
Successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such Successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such Successor Trustee all property and money held by
such retiring Trustee hereunder.

          (b)  In case of the appointment hereunder of the Successor Trustee
with respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each Successor Trustee with respect to the Securities
of one or more series shall execute and deliver a written instrument or an
indenture supplemental hereto wherein each Successor Trustee small accept such
appointment and which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each Successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
Successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confine that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the

                                       51
<PAGE>

administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such written instrument or supplemental
indenture shall constitute such Trustees as 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, and upon the execution and delivery of such written instrument or
supplemental indenture, the resignation or removal of the retiring Trustee shall
become effective to the extent provided therein, and each such Successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts, and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
Successor Trustee relates; but, on request of the Company or any Successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such
Successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or those series to which the appointment
of such Successor Trustee relates.

          (c)  Upon request of any such Successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such Successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section, as the case may be.

          (d)  No Successor Trustee shall accept its appointment unless at the
time of such acceptance such Successor Trustee shall be qualified and eligible
under this Article.  In the event that the Trust Indenture Act applies to this
Indenture at the time that any Successor Trustee is appointed, such Successor
Trustee shall qualify under such Act.

     SECTION 6.12.  Merger, Conversion, Consolidation or Succession to Business.
                    -----------------------------------------------------------
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, provided such
corporation shall be otherwise qualified and eligible under this Article
(including qualification under the Trust Indenture Act, if applicable), without
the execution or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such Successor Trustee, and in all cases the certificate of
authentication shall have the full force that it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.

     SECTION 6.13.  Preferential Collection of Claims Against Company.  If and
                    -------------------------------------------------
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor).

                                       52
<PAGE>

     SECTION 6.14.  Appointment of Authenticating Agent. The Trustee may appoint
                    -----------------------------------
an authenticating agent or agents (each, an "Authenticating Agent") with respect
to one or more series of Securities that shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder.  Where reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, or of any state, Territory or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $50,000,000 and subject to supervision or
examination by Federal or State authority.  If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of such supervising or examining authority, then for the purposes
of this Section the combined capital and surplus of such Authenticating Agent
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,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.

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

     An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company.  The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
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 such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent that shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.06 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve.  Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.

     The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.

                                       53
<PAGE>

     If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of each series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:

     This is one of the Securities referred to in the within mentioned
Indenture.

     Dated:                             _______________________________
                                        Agent Trustee

                                        by ____________________________
                                             As Authenticating Agent

                                        by ____________________________
                                             As Authenticating Agent

     SECTION 6.15.  Trustee's Rights and Obligations. The Trustee shall have and
                    --------------------------------
be subject to all the duties and responsibilities specified with respect to an
indenture trustee under the Trust Indenture Act.  Subject to such provisions,
the Trustee is under no obligation to exercise any of the powers vested in it by
this Indenture at the request of any holder of the Securities, unless offered
indemnity to its satisfaction by such holder against the costs, expenses and
liabilities that might be incurred thereby.  The Trustee will not be required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.  Notwithstanding the
foregoing, nothing in this Section 6.15 shall be deemed to abrogate any of the
rights, indemnities or protections otherwise provided to the Trustee under this
Indenture.

                                  ARTICLE VII

               Holder's Lists and Reports by Trustee and Company
               -------------------------------------------------

     SECTION 7.01.  Company to Furnish Trustee Names and Addresses of Holders.
                    ---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee:

     (a)  quarterly, not more than 15 days after each Regular Record Date in
each year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular 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, excluding from any such list names and addresses received by the
Trustee in its capacity as Securities Registrar.

     SECTION 7.02.  Preservation of Information.  Communications to Holders. (a)
                    -------------------------------------------------------
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses

                                       54
<PAGE>

of Holders contained in the most recent list furnished to the Trustee as
provided in Section 7.01 and the names and addresses of Holders received by the
Trustee in its capacity as Securities Registrar. The Trustee may destroy any
list furnished to it as provided in Section 7.01 upon receipt of a new list so
furnished.

     (b)  The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.

     (c)  Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.

     SECTION 7.03.  Reports by Trustee. (a) The Trustee shall transmit to
                    ------------------
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act, at the times and in the
manner provided pursuant thereto.

          (b)  Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than the last calendar day in
February of each calendar year, commencing with the last calendar day in
February of the year following the Original Issue Date.

          (c)  A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each securities exchange
upon which the Securities are listed and also with the Commission. The Company
will notify the Trustee whenever the Securities are listed on any securities
exchange.

     SECTION 7.04.  Reports by Company. The Company shall file with the Trustee
                    ------------------
and with the Commission, and transmit to Holders, such information, documents
and other reports, and such summaries thereof, as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided in the Trust
Indenture Act; provided that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or Section 15 (d) of the
Securities Exchange Act of 1934, as amended, shall be filed with the Trustee
within 15 days after the same is required to be filed with the Commission.
Notwithstanding that the Company may not be required to remain subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Company shall continue to file with the Commission and
provide the Trustee with the annual reports and the information, documents and
other reports that are specified in Sections 13 and 15 (d) of the Securities
Exchange Act of 1934, as amended.  The Company also shall comply with the other
provisions of Trust Indenture Act Section 314(a).  Delivery of such reports,
information and documents to the Trustee is for informational purposes only, and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).

                                       55
<PAGE>

                                 ARTICLE VIII

             Consolidation, Merger, Conveyance, Transfer or Lease
             ----------------------------------------------------

     SECTION 8.01.  Company May Consolidate Only on Certain Terms. The Company
                    ---------------------------------------------
shall not consolidate with or merge with or into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, and no Person shall consolidate with or merge with or into the Company
or convey, transfer or lease its properties and assets substantially as an
entirety to the Company, unless:

     (1)  in case the Company shall consolidate with or merge with or into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or into which the Company is merged or the Person that acquires by
conveyance or transfer, or that leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the principal of and interest
(including any Additional Interest) on all the Securities and the performance of
every covenant and every obligation of this Indenture on the part of the Company
to be performed or observed;

     (2)  immediately after giving effect to such transaction, no Event of
Default, and no event that, after notice or lapse of time, or both, would become
an Event of Default, shall have occurred and be continuing;

     (3)  if at such time Securities of a series issued to a Commonwealth
Bankshares Capital Trust are Outstanding, such consolidation, merger,
conveyance, transfer or lease is permitted under the related Trust Agreement and
Company Guarantee and does not give rise to any breach or violation of the
related Trust Agreement or Company Guarantee; and

     (4)  the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger, conveyance,
transfer or lease and any such supplemental indenture complies with this Article
and that all conditions precedent herein provided for relating to such
transaction have been complied with; and the Trustee, subject to Section 6.01,
may rely upon such Officers' Certificate and Opinion of Counsel as conclusive
evidence that such transaction complies with this Section 8.01.

     SECTION 8.02.  Successor Company Substituted. Upon any consolidation or
                    -----------------------------
merger by the Company with or into any other Person, or any conveyance, transfer
or lease by the Company of its properties and assets substantially as an
entirety to any Person in accordance with Section 8.01, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; and in the event of any such conveyance, transfer or
lease the Company shall be discharged from all

                                       56
<PAGE>

obligations and covenants under the Indenture and the Securities and may be
dissolved and liquidated.

     Such successor Person 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 Securities issuable
hereunder that theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor Person instead
of the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall make available
for delivery any Securities that previously shall have been signed and delivered
by the officers of the Company to the Trustee for authentication pursuant to
such provisions and any Securities that such successor Person thereafter shall
cause to be signed and delivered to the Trustee on its behalf for the purpose
pursuant to such provisions.  All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.

     In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form may be made in the Securities thereafter to be
issued as may be appropriate.

                                  ARTICLE IX

                            Supplemental Indentures
                            -----------------------

     SECTION 9.01.  Supplemental Indentures without Consent of Holders. Without
                    --------------------------------------------------
the consent of any Holders, the Company, when authorized by a Board Resolution,
and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following:

     (1)  to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company herein and in
the Securities contained;

     (2)  to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon the
Company;

     (3)  to establish the form or terms of Securities of any series as
permitted by Sections 2.01 or 3.01;

     (4)  to add to the covenants of the Company for the benefit of the Holders
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company;

     (5)  to add any additional Events of Default;

                                       57
<PAGE>

     (6)  to change or eliminate any of the provisions of this Indenture;
provided that any such change or elimination (a) shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture that is entitled to the benefit of such
provision or (b) shall not apply to any Outstanding Securities;

     (7)  to cure any ambiguity, to correct or supplement any provision herein
that may be inconsistent with any other provision herein, or to make any other
provisions with respect to matters or questions arising under this Indenture;
provided that such action pursuant to this clause (7) shall not materially
adversely affect the interest of (a) the Holders of Securities of any series or,
(b) in the case of the Securities of a series issued to a Commonwealth
Bankshares Capital Trust and for so long as any of the corresponding series of
Capital Securities shall remain outstanding, the holders of such Capital
Securities;

     (8)  to evidence and provide for the acceptance of appointment hereunder by
a Successor Trustee with respect to the Securities of one or more series 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 6.11(b); or

     (9)  to comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act.

     SECTION 9.02.  Supplemental Indentures with Consent of Holders. With the
                    -----------------------------------------------
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series affected by such supplemental indenture,
by Act of such Holders delivered to the Company and the Trustee, the Company,
when authorized by a Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,

     (1)  except to the extent permitted by Section 3.12 or as otherwise
specified as contemplated by Section 3.01 with respect to the extension of the
interest payment period of the Securities of any series, change the Stated
Maturity of the principal of, or any installment of interest (including any
Additional Interest) on, any Security, or reduce the principal amount thereof or
the rate of interest thereon, or reduce the amount of principal of a Discount
Security that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 5.02, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on or after
the date fixed for redemption thereof);

     (2)  reduce the percentage in principal amount of the outstanding
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of

                                       58
<PAGE>

this Indenture or certain defaults hereunder and their consequences) provided
for in this Indenture;

     (3)  modify any of the provisions of this Section, Section 5.13 or Section
10.05, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Security affected thereby; or

     (4)  modify the provisions in Article XIII of this Indenture with respect
to the subordination of outstanding Securities of any series in a manner adverse
to the Holders thereof;

provided that, in the case of the Securities of a series issued to a
--------
Commonwealth Bankshares Capital Trust, so long as any of the corresponding
series of Capital Securities remain outstanding, no such amendment shall be made
that adversely affects the holders of such Capital Securities in any material
respect, and no termination of this Indenture shall occur, and no waiver of any
Event of Default or compliance with any covenant under this indenture shall be
effective, without the prior consent of the holders of at least a majority of
the aggregate Liquidation Amount of such Capital Securities then outstanding
unless and until the principal of the Securities of such series and all accrued
and, subject to Section 3.08, unpaid interest (including any Additional
Interest) thereon have been paid in full; and provided further, however, that in
                                              ----------------  -------
the case of the securities of a series issued to a Commonwealth Bankshares
Capital Trust, so long as any of the corresponding series of Capital Securities
remain outstanding, no amendment shall be made to Section 5.08 of this Indenture
that would impair the rights of the holders of such Capital Securities provided
herein without the prior consent of the holders of each Capital Security then
outstanding unless and until the principal of the Securities of such series and
all accrued and (subject to Section 3.08) unpaid interest (including any
Additional Interest) thereon have been paid in full.

     The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Persons entitled to consent to any indenture
supplemental hereto.  If a record date is fixed, the Holders on such record
date, or their duly designated Proxies, and only such Persons, shall be entitled
to consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date that is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.

     A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Securities, or that modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

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

                                       59
<PAGE>

     SECTION 9.03.  Execution of Supplemental Indentures. In executing or
                    ------------------------------------
accepting the additional trusts created by any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in conclusively relying upon, an Officer's
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent have been complied with.  The Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this indenture or otherwise, or
that may subject it to liability or be contrary to applicable law.

     SECTION 9.04.  Effect of Supplemental Indentures. Upon the execution of any
                    ---------------------------------
supplemental indenture under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.

     SECTION 9.05.  Conformity with Trust Indenture Act. No supplemental
                    -----------------------------------
indenture will be qualified or executed pursuant to the Trust Indenture Act
unless this Indenture is so qualified, or in connection with Capital Securities
that are registered under the Securities Exchange Act of 1934, as amended, upon
the effectiveness of a registration statement.  Every supplemental indenture so
qualified or executed shall conform to the requirements of the Trust Indenture
Act as then in effect.

     SECTION 9.06.  Reference in Securities to Supplemental Indentures.
                    --------------------------------------------------
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Articles may, and shall if required by the Company,
bear a notation in form approved by the Company as to any matter provided for in
such supplemental indenture.  If the Company shall so determine, new Securities
of any series so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such Series.

                                   ARTICLE X

                                   Covenants
                                   ---------

     SECTION 10.01. Payment of Principal and Interest. The Company covenants and
                    ---------------------------------
agrees for the benefit of each series of Securities that it will duly and
punctually pay the principal of and interest on the Securities of that series in
accordance with the terms of such Securities and this Indenture.

     SECTION 10.02. Maintenance of Office or Agency. The Company will maintain
                    -------------------------------
in each Place of Payment for any series, an office or agency where Securities of
that series may be presented or surrendered for payment and an office or agency
where Securities may be surrendered for transfer or exchange and where notices
and demand to or upon the Company in

                                       60
<PAGE>

respect of the Securities and this Indenture may be served. The Company
initially appoints the Trustee, acting through its Corporate Trust Office, as
its agent for such purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or agency. If at any
time the Company shall fail to maintain such office or agency or shall fall to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.

     The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
of such purposes, and may from time to time rescind such designations; provided,
                                                                       --------
however, that no such designation or rescission shall in any manner relieve the
-------
Company of its obligation to maintain an office or agency in each Place of
Payment for Securities of any series for such purposes.  The Company will give
prompt written notice to the Trustee of any such designation and any change in
the location of any such office or agency.

     SECTION 10.03. Money for Security Payments to be Held in Trust. If the
                    -----------------------------------------------
Company shall at any time act as its own Paying Agent with respect to any series
of Securities, it will, on or before each due date of the principal of or
interest on any of the Securities of such series, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient to pay the
principal or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and will promptly notify
the Trustee of its failure so to act.

     Whenever the Company shall have one or more Paying Agents, it will, prior
to 10:00 a.m. Norfolk, Virginia time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
failure so to act.

     The Company will cause each Paying Agent other than the Trustee to execute
and make available for delivery to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:

     (1)  hold all sums held by it for the payment of the principal of or
interest on Securities in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided;

     (2)  give the Trustee written notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal or
interest;

     (3)  at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and

                                       61
<PAGE>

     (4)  comply with the provisions of the Trust Indenture Act applicable to it
as a Paying Agent.

     The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by the Company or any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.

     Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be paid
on Company Request to the Company, or (if then held by the Company) shall
(unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in the Borough of Manhattan, the City of New York,
notice that such money remains unclaimed and that, after a date specified
therein, that shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.

     SECTION 10.04. Statement as to Compliance. The Company shall deliver to the
                    --------------------------
Trustee, within 120 days after the end of each calendar year of the Company
commencing after the date hereof, an Officers' Certificate executed by
authorized officers at least one of whom shall be the principal executive,
financial or accounting officer of the Company covering the preceding calendar
year, stating whether or not to the best knowledge of the signers thereof the
Company is in default in the performance, observance or fulfillment of or
compliance with any of the material terms, provisions covenants and conditions
of this Indenture, and if the Company shall be in such default, specifying all
such defaults and the nature and status thereof of which they may have
knowledge.  For the purpose of this Section 10.04, compliance shall be
determined without regard to any grace period (other than an Extension Period)
or requirement of notice provided pursuant to the terms of this Indenture.

     SECTION 10.05. Waiver of Certain Covenants. The Company may omit in any
                    ---------------------------
particular instance to comply with any covenant or condition as specified as
contemplated by Section 3.01 with respect to the Securities of any series, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the outstanding Securities of such series shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to

                                       62
<PAGE>

or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company in
respect of any such covenant or condition shall remain in full force and effect.

     SECTION 10.06. Payment of the Trusts' Costs and Expenses. Since the
                    -----------------------------------------
Commonwealth Bankshares Capital Trusts are being formed solely to facilitate the
investment in the Securities, the Company, as borrower on the Securities, hereby
covenants to pay all debts and obligations (other than with respect to the
payment of principal and interest on the Trust Securities) and all costs and
expenses of such Trusts (including, but not limited to, all costs and expenses
relating to the organization of such Trusts, the fees and expenses of the
Trustees and all costs and expenses relating to the operation of such Trusts)
and to pay any and all taxes, duties, assessments or other governmental charges
of whatever nature (other than United States withholding taxes) imposed on such
Trusts by the United States, or any other taxing authority (such payments of
amounts in connection with taxes being herein referred to as "Additional Sums"),
so that the net amounts received and retained by such Trusts and their
respective Property Trustees after paying such expenses or Additional Sums will
be equal to the amounts such Trusts and Property Trustees would have received
had no such costs, expenses or taxes, duties, assessments or other governmental
charges been incurred by or imposed on such Trusts.  The foregoing obligations
of the Company are for the benefit of, and shall be enforceable by, any person
to whom such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice thereof.  Any such
Creditor may enforce such obligations of the Company hereunder directly against
the Company, and the Company hereby irrevocably waives any right or remedy to
require that any such Creditor take any action against any Trust or any other
person before proceeding against the Company.  The Company also agrees hereby to
execute such additional agreements as may be necessary or desirable to give full
effect to the foregoing.

     SECTION 10.07. Additional Covenants. The Company covenants and agrees with
                    --------------------
each Holder of Securities of a series issued to a Commonwealth Bankshares
Capital Trust that it will not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any shares of the Company's capital stock (which includes common and preferred
stock), or (ii) make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company (including
Other Debentures) that rank pari passu with or junior in interest to the
                            ---- -----
Securities of such series or (iii) make any guarantee payments with respect to
any guarantee by the Company of debt securities of any subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu with or junior
                                                     ---- -----
in interest to the Securities (other than (a) dividends or distributions in
Common Stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Company Guarantee, (d) purchases
or acquisitions of shares of the Company's Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plan
or other contractual obligation of the Company (other than a contractual
obligation ranking pari passu with or junior in interest to these Securities),
                   ---- -----
(e) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital

                                       63
<PAGE>

stock or (f) 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), if at such time (i) there
shall have occurred an Event of Default, (ii) the Company shall be in default
with respect to its payment of any obligations under the related Company
Guarantee or (iii) the Company shall have given notice of its election to begin
an Extension Period as provided herein and shall not have rescinded such notice,
or such Extension Period, or any extension thereof, shall be continuing.

     The Company also covenants with each Holder of Securities of a series
issued to a Commonwealth Bankshares Capital Trust (i) to maintain directly, or
indirectly through a wholly owned Subsidiary, 100% ownership of the Common
Securities of such Commonwealth Bankshares Capital Trust; provided, however,
                                                          --------  -------
that any permitted successor of the Company hereunder may succeed to the
Company's ownership of such Common Securities, (ii) not to voluntarily
terminate, wind-up or liquidate such Commonwealth Bankshares Capital Trust,
except (a) in connection with a distribution of the Securities of such series to
the holders of Capital Securities in liquidation of such Commonwealth Bankshares
Capital Trust or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the related Trust Agreement and (iii) to use its
reasonable best efforts, consistent with the terms and provisions of such Trust
Agreement, (x) not to adversely affect such Commonwealth Bankshares Capital
Trust's status as a grantor trust and (y) not to cause such Commonwealth
Bankshares Capital Trust to be classified as an association taxable as a
corporation for United States Federal income tax purposes.

     SECTION 10.08. Information Returns. For each year during which any
                    -------------------
Securities are outstanding, the Company shall furnish to each Paying Agent on a
timely basis such information as may be reasonably requested by each Paying
Agent in order that such Paying Agent may prepare the information that it is
required to report for such year on Internal Revenue Service Forms 1096 and
1099.  Such information shall include the amount of original issue discount, if
any, includable in income for each $1,000 of principal amount at Stated Maturity
of outstanding Securities during such year.

     SECTION 10.09. Statement by Officers as to Default. The Company shall
                    -----------------------------------
deliver to the Trustee, within five days after the Company becomes aware of the
occurrence of any Event of Default, an Officers' Certificate setting forth the
details of such Event of Default and the action that the Company proposes to
take with respect thereto, if known at such time.

     SECTION 10.10  Delivery of Certain Information. If specified as
                    -------------------------------
contemplated by Section 3.01 with respect to a series of Securities, at any time
when the Company is not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Security,
the Company will promptly furnish or cause to be furnished Rule 144A Information
(as defined below) to such Holder, to a prospective purchaser who is a
"qualified institutional buyer", within the meaning of Rule 144A under the
Securities Act, of such Security designated by such Holder in order to permit
compliance by such Holder with Rule 144A in connection with the resale of such
Security by such Holder; provided, however, that unless otherwise specified as
contemplated by Section 3.01, the Company shall not be required to furnish such
information in connection with any request made on or after the date that is two

                                       64
<PAGE>

years from the later of (i) the date such Security (or any predecessor Security)
was acquired from the Company or (ii) the date such Security (or any predecessor
Security) was last acquired from an "affiliate" of the Company within the
meaning of Rule 144 under the Securities Act.  "Rule 144A Information" shall be
such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act as in effect on the date hereof.

                                  ARTICLE XI

                    Redemption or Prepayment of Securities
                    --------------------------------------

     SECTION 11.01. Applicability of This Article. Redemption of Securities
                    -----------------------------
(whether by operation of a sinking fund or otherwise) as permitted or required
by any form of Security issued pursuant to this Indenture shall be made in
accordance with such form of Security and this Article; provided, however, that
if any provision of any such form of security shall conflict with any provision
of this Article, the provision of such form of Security shall govern.

     SECTION 11.02. Election To Redeem:  Notice to Trustee. The election of the
                    --------------------------------------
Company to redeem any Securities shall be evidenced by or pursuant to a Board
Resolution.  In case of any redemption at the election of the Company of any
Securities of any particular series and having the same terms, the Company
shall, not less than 30 nor more than 60 days prior to the date fixed for
redemption (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee and, in the case of Securities held by or on behalf of a
Commonwealth Bankshares Capital Trust, the Property Trustee of such date and of
the principal amount of Securities of that series to be redeemed.  In the case
of any redemption of Securities prior to the expiration of any restriction on
such redemption provided in the terms of such Securities, the Company shall
furnish the Trustee with an Officers' Certificate and an Opinion of Counsel
evidencing compliance with such restriction.  Any such notice given to the
Trustee hereunder shall include the information required by Section 11.04
hereof.

     SECTION 11.03. Selection of Securities to be Redeemed. If less than all the
                    --------------------------------------
Securities of any series are to be redeemed (unless all the Securities of such
series and of a specified tenor are to be redeemed or unless such redemption
affects only a single Security all as designated to the Trustee by the Company),
the particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and that may provide for the selection for
redemption of a portion of the principal amount of any Security of such series;
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security.  If less than all the Securities of
such series and of a specified tenor are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.

                                       65
<PAGE>

     The Trustee shall promptly notify the Company in writing of the Securities
selected for partial redemption and the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security that has been or is to be redeemed.  If the
Company shall so direct, Securities registered in the name of the Company, any
Affiliate or any Subsidiary thereof shall not be included in the Securities
selected for redemption.

     SECTION 11.04. Notice of Redemption. Notice of redemption (other than at
                    --------------------
the Stated Maturity) shall be given by first-class mail, postage prepaid, mailed
not later than the thirtieth day, and not earlier than the sixtieth day, prior
to the date fixed for redemption, to each Holder of Securities to be redeemed,
at the address of such Holder as it appears in the Securities Register.

     With respect to Securities of each series to be redeemed, each notice of
redemption shall state:

          (a)  the Redemption Date for Securities of such series;

          (b)  the Redemption Price or, if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, the estimate of
the Redemption Price provided pursuant to this Indenture together with a
statement that it is an estimate and that the actual Redemption Price will be
calculated on the third Business Day prior to the Redemption Date (if such an
estimate of the Redemption Price is given, a subsequent notice shall be given as
set forth above setting forth the Redemption Price promptly following the
calculation thereof);

          (c)  if less than all Outstanding Securities of such particular series
and having the same terms are to be redeemed, the identification (and, in the
case of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;

          (d)  that on the date fixed for redemption, the redemption price at
which such Securities are to be redeemed will become due and payable upon each
such Security or portion thereof, and that interest thereon, if any, shall cease
to accrue on and after such date;

          (e)  the place or places where such Securities are to be surrendered
for payment of the Redemption Price;

          (f)  that the redemption is for a sinking fund, if such is the case;

          (g)  such other provisions as may be required in respect of the terms
of a particular series of Securities; and

          (h)  the CUSIP number if any.

     Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the

                                       66
<PAGE>

expense of the Company and shall not be irrevocable. 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, a failure to give
such notice by mail or any defect in the notice to the Holder of any Security
designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Security.

     SECTION 11.05. Deposit of Redemption Price. Prior to 10:00 a.m. Norfolk,
                    ---------------------------
Virginia time on the Redemption Date specified in the notice of redemption given
as provided in Section 11.04, 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 Securities so called for redemption at the applicable
Redemption Price.

     SECTION 11.06. Payment of Securities Called for Redemption. If any notice
                    -------------------------------------------
of redemption has been given as provided in Section 11.04, the Securities or
portion of Securities with respect to which such notice has been given shall
become due and payable on the date and at the place or places stated in such
notice at the applicable Redemption Price.   On presentation and surrender of
such Securities at a place of payment in such notice specified, such Securities
or the specified portions thereof shall be paid and redeemed by the Company at
the applicable Redemption Price.

     Upon presentation of any Security redeemed in part only, the company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Company, a new Security or Securities of that same series, of
authorized denominations, in aggregate principal amount equal to the unredeemed
portion of the Security so presented and having the same original Issue Date,
Stated Maturity and terms.  If the Global Security is so surrendered, such new
Security will (subject to Section 3.06) also be a new Global Security.

     If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of such Security shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.

     SECTION 11.07. Company's Right of Redemption. Unless otherwise specified as
                    -----------------------------
contemplated by Section 3.01 with respect to the Securities of a particular
series and notwithstanding any additional redemption rights that may be so
specified, the Company, at its option, may redeem the Securities, subject to the
Company having received prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve, (i) on
or after the date specified in such Securities, in whole at any time or in part
from time to time, or ii) upon the occurrence and during the continuation of a
Tax Event, an Investment Company Event or a Capital Treatment Event, at any time
within 90 days following the occurrence and during the continuation of such Tax
Event, Investment Company Event or Capital Treatment Event, in whole (but not in
part), in each case at a Redemption Price specified in such Securities, together
with accrued interest (including Additional Interest) to the Redemption Date.

     If less than all the Securities of any such series are to be redeemed, the
aggregate principal amount of such Securities remaining Outstanding after giving
effect to such redemption

                                       67
<PAGE>

shall be sufficient to satisfy any provisions of the Trust Agreement related to
the Commonwealth Bankshares Capital Trust to which such Securities were issued.

                                  ARTICLE XII

                                 Sinking Funds
                                 -------------

     SECTION 12.01. Applicability of Article. The provisions of this Article
                    ------------------------
shall be applicable to any sinking fund for the retirement of Securities of any
series except as otherwise specified as contemplated by Section 3.01 for such
Securities.

     The minimum amount of any sinking fund payment provided for by the terms of
any Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any sinking fund payment in excess of such minimum amount that is
permitted to be made by the terms of such Securities of any series is herein
referred to as an "optional sinking fund payment".  If provided for by the terms
of any Securities of any series, the case amount of any sinking fund payment may
be subject to reduction as provided in Section 13.02.  Each sinking fund payment
shall be applied to the redemption (or purchase by tender or otherwise) of
Securities of any series as provided for by the terms of such Securities.

     SECTION 12.02. Satisfaction of Sinking Fund Payments with Securities. In
                    -----------------------------------------------------
lieu of making all or any part of a mandatory sinking fund payment with respect
to any Securities of a series in cash, the Company may at its option, at any
time no more than 16 months and no less than 45 days prior to the date on which
such sinking fund payment is due, deliver to the Trustee Securities of such
series (together with the unmatured Coupons, if any, appertaining thereto)
theretofore purchased or otherwise acquired by the Company, except Securities of
such series that have been redeemed through the application of mandatory or
optional sinking fund payments pursuant to the terms of the Securities of such
series, accompanied by a Company Order instructing the Trustee to credit such
obligations and stating that the Securities of such series, were originally
issued by the Company by way of bona fide sale or other negotiation for value;
provided that the Securities to be so credited have not been previously so
credited.  The Securities to be so credited shall be received and credited for
such purpose by the Trustee at the redemption price for such Securities, as
specified in the Securities so to be redeemed, for redemption through operation
of the sinking fund, and the amount of such sinking fund payment shall be
reduced accordingly.

     SECTION 12.03. Redemption of Securities Sinking Fund.  Not less than 45
                    -------------------------------------
days prior to each sinking fund payment date for any series of securities, the
Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for such Securities pursuant to
the terms of such Securities, the portion thereof, if any, that is to be
satisfied by payment of cash in the currency in which the Securities of such
series are payable (except as provided pursuant to Section 3.01) and the portion
thereof, if any, that is to be satisfied by delivering and crediting Securities
pursuant to Section 13.02 and will also deliver to the Trustee any Securities to
be so delivered.  Such Certificate shall be irrevocable and upon its delivery
the Company shall be obligated to make the cash payment or payments therein
referred to, if any, on or before the succeeding sinking fund payment date.  In
the case of the

                                       68
<PAGE>

failure of the Company to deliver such Certificate (or, as required by this
Indenture, the Securities and coupons, if any, specified in such Certificate) by
the due date therefor, the sinking fund payment due on the succeeding sinking
fund payment date for such series shall be paid entirely in cash and shall be
sufficient to redeem the principal amount of the Securities of such series
subject to a mandatory sinking fund payment without the right to deliver or
credit securities as provided in Section 13.02 and without the right to make the
optional sinking fund payment with respect to such series at such time.

     Any sinking fund payment or payments (mandatory or optional) made in cash
plus any unused balance of any preceding sinking fund payments made with respect
to the Securities of any particular series shall be applied by the Trustee (or
by the Company if the Company is acting as its own Paying Agent) on the sinking
fund payment date on which such payment is made (or, if such payment is made
before a sinking fund payment date, on the sinking fund payment date immediately
following the date of such payment) to the redemption of Securities of such
series at the redemption price specified in such Securities with respect to the
sinking fund.  Any sinking fund moneys not so applied or allocated by the
Trustee (or by the Company if the Company is acting as its own Paying Agent), in
which case such moneys shall be segregated and held in trust as provided in
Section 10.03) for such series and together with such payment (or such amount so
segregated) shall be applied in accordance with the provisions of this Section
12.03.  Any and all sinking fund moneys with respect to the Securities of any
particular series held by the Trustee (or if the Company is acting as its own
Paying Agent, segregated and held in trust as provided in Section 10.03) on the
last sinking fund payment date with respect to Securities of such series and not
held for the payment or redemption of particular Securities of such series shall
be applied by the Trustee (or by the Company if the Company is acting as its own
Paying Agent), together with other moneys, if necessary, to be deposited (or
segregated) sufficient for the purpose, to the payment of the principal of the
Securities of such series at Maturity.  The Trustee shall select the Securities
to be redeemed upon such sinking fund payment date in the manner specified in
Section 11.03 and cause notice of the redemption thereof to be given in the name
of and at the expense of the Company in the manner provided in Section 11.04.
Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Section 11.06.  On or before
each sinking fund payment date, the Company shall pay to the Trustee (or, if the
Company is acting as its own Paying Agent, the company shall segregate and hold
in trust as provided in Section 10.03) in cash a sum in the currency in which
Securities of such series are payable (except as provided pursuant to Section
3.01) equal to the principal and any interest accrued to the redemption date for
Securities or portions thereof to be redeemed on such sinking fund payment date
pursuant to this Section 12.03.

     Neither the Trustee nor the Company shall redeem any Securities of a series
with sinking fund moneys or mail any notice of redemption of Securities of such
series by operation of the sinking fund for such series during the continuance
of a default in payment of interest, if any, on any Securities of such series or
of any Event of Default (other than an Event of Default occurring as a
consequence of this paragraph) with respect to the Securities of such series,
except that if the notice of redemption shall have been provided in accordance
with the provisions hereof, the Trustee (or the Company if the Company is then
acting as its own Paying Agent) shall redeem such Securities if cash sufficient
for that purpose shall be deposited with the Trustee (or segregated by the
Company) for that purpose in accordance with the terms of this Article XII.

                                       69
<PAGE>

Except as aforesaid, any moneys in the sinking fund for such series at the time
when any such default or Event of Default shall occur and any moneys thereafter
paid into such sinking fund shall, during the continuance of such default or
Event of Default, be held as security for the payment of the Securities and
coupons, if any, of such series; provided, however, that in case such default or
                                 --------  -------
Event of Default shall have been cured or waived herein, such moneys shall
thereafter be applied on the next sinking fund payment date for the Securities
of such series on which such moneys may be applied pursuant to the provisions of
this Section 12.03.

                                 ARTICLE XIII

                          Subordination of Securities
                          ---------------------------

     SECTION 13.01. Securities Subordinate to Senior Debt. The Company covenants
                    -------------------------------------
and agrees, and each Holder of a Security, by its acceptance thereof, likewise
covenants and agrees, that, to the extent and in the manner hereafter set forth
in this Article, the payment of the principal of and interest (including any
Additional Interest) on each and all of the Securities are hereby expressly made
subordinate and junior in right of payment to the prior payment in full of all
amounts then due and payable in respect of all Senior Debt.

     SECTION 13.02. Payment Over of Proceeds upon Dissolution. In the event of
                    -----------------------------------------
(a) any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company, its creditors or its property, (b) any proceeding for the
liquidation, dissolution, or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings, (c)
any assignment by the Company for the benefit of creditors or (d) any other
marshaling of the assets of the company (each such event, if any, herein
sometimes referred to as a "Proceeding"), then the holders of Senior Debt shall
be entitled to receive payment in full of principal of and interest, if any, on
such Senior Debt, or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior Debt,
before the Holders of the Securities are entitled to receive or retain any
payment or distribution of any kind or character, whether in cash, property or
securities (including any payment by distribution that may be payable or
deliverable by reason of the payment of any other debt of the Company (including
any series of the Securities) subordinated to the payment of the Securities,
such payment or distribution being hereafter referred to as a "Junior
Subordinated Payment"), on account of principal of or interest (including any
Additional Interest) on the Securities or on account of the purchase or other
acquisition of Securities by the Company or any Subsidiary and to that end the
holders of Senior Debt shall be entitled to receive, for application to the
payment thereof, any payment or distribution of any kind or character, whether
in cash, property or securities, including any Junior Subordinated Payment, that
may be payable or deliverable in respect of the Securities in any such
Proceeding.

     In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Senior Debt is paid in full or payment thereof is provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt,

                                       70
<PAGE>

and if such fact shall, at or prior to the time of such payment or distribution,
have been made known to a Responsible Officer of the Trustee or, as the case may
be, such Holder, then and in such event such payment or distribution shall be
paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making payment
or distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.

     For purposes of this Article only, the words "any payment or distribution
of any kind or character, whether in 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 or
reorganization or readjustment, in each case, which securities are subordinated
in right of payment to all then outstanding Senior Debt to substantially the
same extent as, or to a greater extent than, the Securities are so subordinated
as provided in this Article.  The consolidation of the Company with, or the
merger of the Company into, another Person or the liquidation or dissolution of
the Company following the sale of all or substantially all of its properties and
assets as an entirety to another Person or the liquidation or dissolution of the
Company following the sale of all or substantially all of its properties and
assets as an entirety to another Person upon the terms and conditions set forth
in Article VIII shall not be deemed a Proceeding for the purposes of this
Section if the Person formed by such consolidation or into which the Company is
merged or the Person that acquires by sale such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, or sale comply with the conditions set forth in Article
VIII.

     SECTION 13.03. Prior Payment to Senior Debt Upon Acceleration of
                    -------------------------------------------------
Securities. In the event that any securities are declared due and payable before
----------
their Stated Maturity, then and in such event the holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall first be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Debt (including any amounts due upon acceleration), or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, before the Holders of the Securities
will be entitled to receive or retain any payment or distribution of any kind or
character, whether in cash, property or securities (including any Junior
Subordinated Payment) by the Company on account of the principal of or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary;
provided, however, that nothing in this Section shall prevent the satisfaction
of any sinking fund payment in accordance with this Indenture or as otherwise
specified as contemplated by Section 3.01 for the Securities of any series by
delivering and crediting pursuant to Section 12.02 or as otherwise specified as
contemplated by Section 3.01 for the Securities of any series of Securities that
have been acquired (upon redemption or otherwise) prior to such declaration of
acceleration.

     In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.

                                       71
<PAGE>

     The provisions of this Section shall not apply to any payment with respect
to which Section 13.02 would be applicable.

     SECTION 13.04. No Payment When Senior Debt in Default. (a) In the event and
                    --------------------------------------
during the continuation of any default by the Company in the payment of
principal of or interest, if any, on any Senior Debt, or in the event that any
event of default with respect to any Senior Debt shall have occurred and be
continuing and shall have resulted in such Senior Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, unless and until such event of default shall have been
cured or waived or shall have ceased to exist and such acceleration shall have
been rescinded or annulled, or (b) in the event any judicial proceeding shall be
pending with respect to any such default in payment or event of default, then no
direct or indirect payment or distribution of any kind or character, whether in
cash, property or securities (including any Junior Subordinated Payment), by
set-off or otherwise, shall be made or agreed to be made by the Company on
account of principal or interest (including any Additional Interest) on the
Securities or on account of any redemption, repayment, retirement, purchase or
other acquisition of any Securities by the Company or any Subsidiary; provided,
however, that nothing in this Section shall prevent the satisfaction of any
sinking fund payment in accordance with this Indenture or as otherwise specified
as contemplated by Section 3.01 for the Securities of any series by delivering
and crediting pursuant to Section 12.02 or as otherwise specified as
contemplated by Section 3.01 for the Securities of any series of Securities that
have been acquired (upon redemption or otherwise) prior to such default in
payment or event of default.

     In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.

     The provisions of this Section shall not apply to any payment with respect
to which Section 13.02 would be applicable.

     SECTION 13.05. Payment Permitted If No Default. Nothing contained in this
                    -------------------------------
Article or elsewhere in this Indenture or in any of the Securities shall prevent
(a) the Company, at any time except during the pendency of any Proceeding
referred to in Section 13.02 or under the conditions described in Sections 13.03
and 13.04, from making payments at any time of principal of or interest
(including any Additional Interest) on the Securities, or (b) the application by
the Trustee of any money deposited with it hereunder to the payment of or on
account of the principal of or interest (including any Additional Interest) on
the Securities or the retention of such payment by the Holders, if, at the time
of such payment by the Company or application by the Trustee, as the case may
be, it did not have knowledge that such payment or application, as the case may
be, would have been prohibited by the provisions of this Article.

     SECTION 13.06. Subrogation to Rights of Holders of Senior Debt. Subject to
                    -----------------------------------------------
the payment in full of all amounts due on all Senior Debt to the extent required
under Sections 13.02

                                       72
<PAGE>

and 13.03 of this Indenture, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior Debt,
the Holders of the Securities shall be subrogated to the extent of the payments
or distributions made to the holders of such Senior Debt pursuant to the
provisions of this Article (equally and ratably with the holders of all
indebtedness of the Company that by its express terms is subordinated to Senior
Debt of the Company to substantially the same extent as the Securities are
subordinated to the Senior Debt and is entitled to like rights of subrogation by
reason of any payments or distributions made to holders of such Senior Debt) to
the rights of the holders of such Senior Debt to receive payments and
distributions of cash, property and securities applicable to the Senior Debt
until the principal of and interest on the Securities shall be paid in full. For
purposes of such subrogation or assignment, no payments or distributions to the
holders of the Senior Debt of any cash, property or securities to which the
Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Senior Debt by Holders of the Securities or the
Trustee, shall, as among the Company, its creditors other than holders of Senior
Debt, and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Debt.

     SECTION 13.07. Provisions Solely to Define Relative Rights. The provisions
                    -------------------------------------------
of this Article are and are intended solely for the purpose of defining the
relative rights of the Holders of the Securities on the one hand and the holders
of Senior Debt on the other hand.  Nothing contained in this Article or
elsewhere in this Indenture or in the Securities is intended to or shall (a)
impair, as between the Company and the Holders of the securities, the
obligations of the Company, which are absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest (including any
Additional Interest) on the Securities as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than their rights in relation to the holders of Senior Debt; or
(c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this Indenture
including, without limitation, filing and voting claims in any Proceeding,
subject to the rights, if any, under this Article of the holders of Senior Debt
to receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.

     SECTION 13.08. Trustee to Effectuate Subordination. Each Holder of a
                    -----------------------------------
Security by his or her acceptance thereof 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 provided in this Article and
appoints the Trustee his or her attorney-in-fact for any and all such purposes.

     SECTION 13.09. No Waiver of Subordination Provisions. No right of any
                    -------------------------------------
present or future holder of any Senior Debt 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 be otherwise charged with.

                                       73
<PAGE>

     SECTION 13.10. Notice to Trustee. The Company shall give prompt written
                    -----------------
notice to the Trustee of any fact known to the Company that would prohibit the
making of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Debt or from any
trustee, agent or representative therefor (whether or not the facts contained in
such notice are true); provided, however, that if the Trustee shall not have
                       --------  -------
received the notice provided for in this Section at least two Business Days
prior to the date upon which by the terms hereof any monies may become payable
for any purpose (including, without limitation, the payment of the principal of
or interest (including any Additional Interest) on any Security), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such monies and to apply the same to the purpose
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.

     SECTION 13.11. Reliance on Judicial Order or Certificate of Liquidating
                    --------------------------------------------------------
Agent. Upon any payment or distribution of assets of the Company referred to in
-----
this Article, the Trustee, subject to the provisions of Article VI, and the
Holders of the Securities shall be entitled to conclusively rely upon any order
or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders of Securities, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior Debt
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.

     SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt. The
                    ------------------------------------------------
Trustee, in its capacity as trustee under this Indenture, shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt and shall not be liable to
any such holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash, property or
securities to which any holders of Senior Debt shall be entitled by virtue of
this Article or otherwise.

     SECTION 13.13. Rights of Trustee as Holder of Senior Debt; Preservation of
                    -----------------------------------------------------------
Trustee's Rights.  The Trustee in its individual capacity shall be entitled to
----------------
all the rights set forth in this Article with respect to any Senior Debt that
may at any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.

     SECTION 13.14. Article Applicable to Paying Agents. In case at any time any
                    -----------------------------------
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article shall in
such case (unless the context otherwise requires) be construed as extending to
and including such Paying Agent within its

                                       74
<PAGE>

meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article in addition to or in place of the Trustee.

     SECTION 13.15. Certain Conversions or Exchanges Deemed Payment. For
                    -----------------------------------------------
purposes of this Article XIII only, (a) the issuance and delivery of junior
securities (as defined below) upon conversion or exchange of Securities shall
not be deemed to constitute a payment or distribution on account of the
principal of or interest (including any Additional Interest) on the Securities
or on account of the purchase or other acquisition of Securities, and (b) the
payment, issuance or delivery of cash, property or securities (other than junior
securities) upon conversion or exchange of a Security shall be deemed to
constitute payment on account of the principal of such Security.  For the
purposes of this Section, the term "junior securities" means (i) shares of any
stock of any class of the Company and (ii) securities of the Company that are
subordinated in right of payment to all Senior Debt that may be outstanding at
the time of issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Securities are so subordinated as
provided in this Article.

                                  ARTICLE XIV

                           Conversion of Securities
                           ------------------------

     SECTION 14.01. Conversion Rights. Subject to and upon compliance with the
                    -----------------
provisions of this Article XIV, the Securities are convertible, at the option of
the Holder, at any time on or before 5:00 p.m.  (Norfolk, Virginia time) on the
earlier of (i) the Business Day immediately preceding the date of repayment of
such Securities, whether at maturity or upon prepayment, and (ii) the Conversion
Termination Date of the Securities, into fully paid and nonassessable shares of
Common Stock at a per share conversion price equal to $8.00, subject to
adjustment as described in this Article XIV (as so adjusted, the "Conversion
Price").  A Holder of Securities may convert any portion of the principal amount
of such Securities into that number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing the principal amount of the Securities to be
converted by the Conversion Price.  In case a Security or portion thereof is
called for redemption or prepayment, such conversion right in respect of the
Security or portion so called shall expire at 5:00 p.m.  (Norfolk, Virginia
time) on the Business Day immediately preceding the corresponding Redemption
Date, unless the Company defaults in making the payment due upon redemption or
prepayment.

     SECTION 14.02. Conversion Procedures. (a) To convert all or a portion of
                    ---------------------
the Securities, the Holder thereof shall deliver to the Conversion Agent an
irrevocable notice in the form of Exhibit B attached to this Indenture (each, a
"Notice of Conversion Request") setting forth the principal amount of Securities
to be converted, together with the name or names, if other than the Holder, in
which the shares of Common Stock should be issued upon conversion and, if such
Securities are definitive Securities, surrender to the Conversion Agent the
Securities to be converted, duly endorsed or assigned to the Company or in
blank.  In addition, a holder of Trust Securities may exercise its right under
the related Trust Agreement to exchange such Trust Securities for Securities
which will be converted into Common Stock by delivering to the Conversion Agent
an irrevocable request (each, a "Conversion Request") setting forth the

                                       75
<PAGE>

information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Trust Securities for a portion of the Securities held
by the related Commonwealth Bankshares Capital Trust (at an exchange rate of
$25.00 principal amount of Securities for each Trust Security) and (ii)
immediately to convert such Securities, on behalf of such holder, into Common
Stock pursuant to this Article XIV and, if such Trust Securities are in
definitive form, surrendering such Trust Securities, duly endorsed or assigned
to the Company or in blank.  So long as any Trust Securities are outstanding, no
Commonwealth Bankshares Capital Trust shall convert any Securities except
pursuant to a Conversion Request delivered to the Conversion Agent by a holder
of Trust Securities.

     Holders of Securities at 5:00 p.m. (Norfolk, Virginia time; on a record
date for an Interest Payment Date will be entitled to receive the interest
payable on such Securities on the corresponding Interest Payment Date
notwithstanding the conversion of such Securities following such record date but
on or prior to such Interest Payment Date.  Except as provided in the
immediately preceding sentence, the Company will not make, or be required to
make, any payment, allowance or adjustment for accumulated and unpaid interest,
whether or not in arrears, on converted Securities; provided, however, that if
notice of prepayment of Securities is mailed or otherwise given to Holders of
Securities or the related Commonwealth Bankshares Capital Trust issues a press
release announcing a Conversion Termination Date, then, if any Holder of
Securities converts any Securities into Common Stock on any date on or after the
date on which such notice of prepayment is mailed or otherwise given or the date
of such press release, as the case may be, and if such date of conversion falls
on any day from and including the first day of an Extension Period and on or
prior to the Interest Payment Date upon which such Extension Period ends, such
converting Holder shall be entitled to receive either (i) if the date of such
conversion falls after a record date and on or prior to the next succeeding
Interest Payment Date, all accrued and unpaid interest on such Securities
(including interest thereon, if any, to the extent permitted by applicable law)
to such Interest Payment Date or (ii) if the date of such conversion does not
fall on a date described in clause (i) above, all accrued and unpaid interest on
such Securities (including interest thereon, if any, to the extent permitted by
applicable law) to the most recent Interest Payment Date prior to the date of
such conversion, which interest shall, in either such case, be paid to such
converting Holder unless the date of conversion of such Securities is on or
prior to the Interest Payment Date upon which such Extension Period ends and
after the record date for such Interest Payment Date, in which case such
interest shall be paid to the person who was the Holder of such Securities (or
one or more predecessor Securities) at 5:00 p.m.  (Richmond, Virginia time) on
such record date.  Except as otherwise set forth above in this paragraph, in the
case of any Security that is converted, interest whose Stated Maturity is after
the date of conversion of such Security shall not be payable, and the Company
shall not make or be required to make any other payment, adjustment or allowance
with respect to accrued but unpaid interest (including Additional Interest and
Additional Sums, if any) on the Securities being converted, which shall be
deemed to be paid in full.  If any Security called for prepayment is converted,
any money deposited with the Trustee or with any Paying Agent or so segregated
and held in trust for the prepayment of such Security shall (subject to any
right of the Holder of such Security or any Predecessor Security to receive
interest as provided in this Indenture) be paid to the Company upon a Company
Request or, if then held by the Company, shall, be discharged from such trust.

                                       76
<PAGE>

     Each conversion shall be deemed to have been effected immediately prior to
5:00 p.m.  (Norfolk, Virginia time) on the day (the "Conversion Date") on which
the Notice of Conversion Request or the Notice of Conversion, as the case may
be, was received by the Conversion Agent from the Holder or from a holder of the
Trust Securities, as the case may be, effecting a conversion thereof pursuant to
its conversion rights under the related Trust Agreement.  The Person or Persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as a record holder or holders of such Common Stock as
of the Conversion Date.  As promptly as practicable on or after the Conversion
Date, the Company shall issue and deliver at the office of the Conversion Agent,
unless otherwise directed by the Holder in the Notice of Conversion Request, a
certificate or certificates for the number of full shares of Common Stock
issuable upon such conversion, together with the cash payment, if any, in lieu
of any fraction of any share, to the Person or Persons entitled to receive the
same.  The Conversion Agent shall deliver such certificate or certificates to
each such Person or Persons.

          (b) Subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in Section 14.02(a), the
Company's delivery upon conversion of the fixed number of shares of Common Stock
into which the Securities are convertible (together with the cash payment, if
any, in lieu of fractional shares) shall be deemed to satisfy the Company's
obligation to pay the principal amount at maturity of the portion of Securities
so converted and any unpaid interest (including Additional Interest and
Additional Sums, if any) accrued on such Securities at the time of such
conversion.

          (c) No fractional shares of Common Stock will be issued as a result of
conversion, but, in lieu thereof, the Company shall pay to the Conversion Agent
a cash adjustment in an amount equal to the same fraction of the Closing Price
as such fractional interest on the date on which the Securities or Trust
Securities, as the case may be, were duly surrendered to the Conversion Agent
for conversion, or, if such day is not a Trading Day, on the next Trading Day,
and the Conversion Agent in turn will make such payment, if any, to the Holder
of the Securities or the holder of the Trust Securities so converted.

          (d) In the event of the conversion of any Security in part only, a new
Security or Securities for the unconverted portion thereof will be issued in the
name of the Holder thereof upon the cancellation thereof.

          (e) In effecting the conversion transactions described in this
Section, the Conversion Agent is acting as agent of the holders of Trust
Securities (in the exchange of Trust Securities for Securities) and as agent of
the Holders of Securities (In the conversion of Securities into Common Stock),
as the case may be, directing it to effect such conversion transactions.  The
Conversion Agent is hereby authorized (i) to exchange Trust Securities for
Securities held by the related Commonwealth Bankshares Capital Trust from time
to time in connection with the conversion of such Trust securities in accordance
with this Article XIV and (ii) to convert all or a portion of such Securities
into Common Stock and thereupon to deliver such shares of Common Stock in
accordance with the provisions of this Article XIV and to deliver to such
Commonwealth Bankshares Capital Trust a new Security or Securities for any
resulting unconverted principal amount.

                                       77
<PAGE>

     SECTION 14.03. Conversion Price Adjustments. The Conversion Price shall be
                    ----------------------------
subject to adjustment (without duplication) from time to time as follows:

          (a) In case the Company shall, while any of the Securities are
outstanding, (i) pay a dividend or make a distribution with respect to its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the Conversion Price in
effect immediately prior to such action shall be adjusted so that the Holder of
any Securities thereafter surrendered for conversion shall be entitled to
receive the number of shares of capital stock of the Company that he would have
owned immediately following such action had such Securities been converted
immediately prior thereto.  An adjustment made pursuant to this Section 14.03(a)
shall become effective immediately after the record date in the case of a
dividend or other distribution and shall become effective immediately after the
effective date in case of a subdivision, combination or reclassification (or
immediately after the record date if a record date shall have been established
for such event).  If, as a result of an adjustment made pursuant to this Section
14.03(a), the Holder of any Security thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes or series of capital
stock of the Company, the Board of Directors (whose determination shall be
conclusive and shall be described in a resolution of the Board of Directors
filed with the Trustee) shall determine the allocation of the adjusted
Conversion Price between or among shares of such classes or series of capital
stock.

          (b) In case the Company shall, while any of the Securities are
outstanding, issue rights or warrants to all holders of its Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned in this Section 14.03(b)) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market Price per share
of Common Stock on such record date, the Conversion Price for the Securities
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date of
issuance of such rights or warrants by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares that the aggregate offering
price of the total number of shares so offered for subscription or purchase
would purchase at such Current Market Price, and of which the denominator shall
be the number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase.  Such adjustment shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights or warrants.  For the purposes of this subsection, the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company.  The Company shall not issue any
rights or warrants in respect of the shares of Common Stock held in the treasury
of the Company.  In case any rights or warrants referred to in this subsection
in respect of which an adjustment shall have been made shall expire unexercised
within 45 days after the same shall have been distributed or issued by the
Company, the Conversion Price shall be readjusted at the time of such expiration
to the Conversion Price that would have been in effect if no adjustment had been
made on account of the distribution or issuance of such expired rights or
warrants.

                                       78
<PAGE>

          (c) Subject to the last sentence of this Section 14.03(c) and to
Section 14.03(d), in case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness,
shares of any class or series of capital stock, cash or assets (including
securities, but excluding any rights or warrants referred to in Section
14.03(b), any dividend or distribution paid exclusively in cash and any dividend
or distribution referred to in Section 14.03(a)), the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this Section 14.03 (c) by a fraction
of which the numerator shall be the Current Market Price per share of the Common
Stock on the date fixed for the payment of such distribution (the "Reference
Date") less the fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors), on the Reference Date, of the portion of the
evidences of indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock, and the denominator shall
be such Current Market Price per share of the Common Stock, such reduction to
become effective immediately prior to the opening of business on the day
following the Reference Date.  In the event that such dividend or distribution
is not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price that would then be in effect if such dividend or distribution
had not occurred.  If the Board of Directors determines the fair market value of
any distribution for purposes of this Section 14.03(c) by reference to the
actual or when issued trading market for any securities comprising such
distribution, it must, in doing so, consider the prices in such market over the
same period used in computing the Current Market Price per share of Common
Stock.  For purposes of this Section 14.03(c), any dividend or distribution that
includes shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, shares of capital stock, cash or
assets other than such shares of Common Stock or such rights or warrants (making
any Conversion Price reduction required by this Section 14.03(c)) immediately
followed by (2) a dividend or distribution of such shares of common Stock or
such rights or warrants (making any further Conversion Price reduction required
by Section 14.03 (a) or 14.03(b)), except (A) the Reference Date of such
dividend or distribution as defined in this Section 14.03 (c) shall be
substituted as (a) "the record date in the case of a dividend or other
distribution," and (b) "the record date for the determination of stockholders
entitled to receive such rights or warrants" within the meaning of Sections
14.03 (a) and 14.03(b), respectively, and (B) any shares of Common Stock
included in such dividend or distribution shall not be deemed outstanding for
purposes of computing any adjustment of the Conversion Price in Section
14.03(a).

          (d) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding all regular cash
dividends, if the annualized amount thereof per share of Common Stock does not
exceed 15% of the Current Market Price per share of the Common Stock on the
Trading Day immediately preceding the date of declaration of such dividend), the
Conversion Price shall be reduced to equal the price determined by multiplying
the Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this Section 14.03(d) by a fraction
of which the numerator shall be the Current Market Price per share of the Common
Stock on the date

                                       79
<PAGE>

fixed for the payment of such dividend or distribution less the amount of cash
so distributed (and not excluded as herein provided) that is allocable to one
share of Common Stock, and the denominator shall be such Current Market Price
per share of the Common Stock, such reduction to become effective immediately
prior to the opening of business on the day following the date fixed for the
payment of such dividend or distribution; provided, however, that in the event
the portion of the cash so distributed applicable to one share of Common Stock
is equal to or greater than the Current Market Price per share of the Common
Stock on the record date mentioned above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder of Securities shall have
the right to receive upon conversion the amount of cash that such Holder would
have received had such Holder converted each Security immediately prior to the
record date for the distribution of the cash. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price that would then be in effect if such
dividend or distribution had not occurred.

          (e) In case a tender or exchange offer (other than an odd-lot offer)
made by the Company or any subsidiary of the Company for all or any portion of
the Common Stock shall expire and such tender or exchange offer shall involve
the payment by the Company or such subsidiary of consideration per share of
Common Stock having a fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at the last time (the "Expiration Time")
that tenders or exchanges may be made pursuant to such tender or exchange offer
(as it shall have been amended) that exceeds 110% of the Current Market Price
per share of Common Stock on the Trading Day next succeeding the Expiration
Time, the Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
Section 14.03 (e) by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged shares)
at the Expiration Time multiplied by the Current Market Price per share of the
Common Stock on the Trading Day next succeeding the Expiration Time, and the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price per share of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the Expiration
Time.

          (f) For the purpose of any computation under Sections 14.03(b), (c),
(d) or (e), the "Current Market Price" per share of Common Stock on any date in
question shall be deemed to be the average of the daily Closing Prices for the
five consecutive Trading Days selected by the Company commencing not more than
20 Trading Days before, and ending not later than, the earlier of the day in
question or, if applicable, the day before the "ex" date with respect to the
issuance or distribution requiring such computation; provided, however, that if
another event occurs that would require an adjustment pursuant to any of
Sections 14.03(a) through (e), inclusive, the Board of Directors may make such
adjustments to the Closing Prices

                                       80
<PAGE>

during such five Trading Day period as it determines to be appropriate to
effectuate the intent of the provisions of this Section 14.03, in which case any
such determination by the Board of Directors shall be set forth in a resolution
of the Board of Directors and shall be conclusive. For purposes of this
paragraph, the term "ex" date, (i) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the NYSE or on such successor securities exchange on which the Common Stock
may be listed or in the relevant market from which the Closing Prices were
obtained without the right to receive such issuance or distribution, and (ii)
when used with respect to any tender or exchange offer, means the first date on
which the Common Stock trades regular way on such securities exchange or in such
market after the Expiration Time of such offer.

          (g) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 14.03(a) through (e), as it considers to
be advisable to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes.  The Company from time to time may reduce the Conversion Price by
any amount for any period of time if the period is at least 20 days, the
reduction is irrevocable during the period, and the Board of Directors of the
Company shall have made a determination that such reduction would be in the best
interest of the Company, which determination shall be conclusive.  Whenever the
Conversion Price is reduced pursuant to the preceding sentence, the Company
shall mail to Holders of record of the Securities a notice of the reduction at
least 15 days prior to the date that the reduced Conversion Price takes effect,
and such notice shall state the reduced Conversion Price and the period that it
will be in effect.

          (h) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustment that, by reason of this
Section 14.03(h), is not required to be made shall be carried forward and taken
into account in determining whether any subsequent adjustment shall be required.

          (i) If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described above, only one adjustment
shall be made, and such adjustment shall be the amount of adjustment that has
the highest absolute value to the Holder of the Securities.

     SECTION 14.04. Reclassification, Consolidation, Merger or Sale of Assets.
                    ---------------------------------------------------------
In the event that the Company shall be a party to any transaction, including
without limitation (a) any recapitalization or reclassification of the Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination
of the Common Stock), (b) any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company (other than a merger that does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (c) any sale, transfer or lease of all or substantially all of the
assets of the Company or (d) any compulsory share exchange, in each case
pursuant to which the Common Stock is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made as part
of the terms of such

                                       81
<PAGE>

transaction whereby the Holder of each Security then outstanding shall have the
right thereafter to convert each Security only into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock of the Company
into which such Security could have been converted immediately prior to such
transaction.

     The Company or the Person that is formed by such consolidation or that
results from such merger or that acquires such assets or the Company's shares,
as the case may be, shall make provision in its certificate or articles of
incorporation or other constituent document to establish such right.  Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments that, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article XIV.  The above provisions shall similarly apply to
successive transactions of the foregoing type.

     SECTION 14.05. Notice of Adjustments of Conversion Price. Whenever the
                    -----------------------------------------
Conversion Price is adjusted as herein provided:

          (a) The Company shall compute the adjusted Conversion Price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted Conversion Price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Trustee, the Conversion Agent and
the transfer agent for the Capital Securities and the Securities; and

          (b) Notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall, as soon as practicable, be
mailed by the Company to all record holders of Capital Securities and all
Holders of the Securities at their last addresses as they appear upon the
Capital Securities Register or the Securities Register, as the case may be.

     SECTION 14.06. Prior Notice of Certain Events. In case:
                    ------------------------------

          (a) the Company shall (i) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) a dividend payable in cash that would not require an
adjustment pursuant to Section 14.03(c) or (d), or (ii) authorize a tender or
exchange offer that would require an adjustment pursuant to section 14.03(e);

          (b) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of stock of
any class or series or of any other rights or warrants;

          (c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value, or
from par value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of

                                       82
<PAGE>

any compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or

          (d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;

          then the Company shall (1) if any Capital Securities are outstanding,
cause to be filed with the transfer agent for the Capital Securities, and cause
to be mailed to the holders of record of the Capital Securities, at their last
addresses as they shall appear in the Capital Securities Register or (2) cause
to be mailed to all Holders at their last addresses as they shall appear in the
Securities Register, at least 15 days prior to the applicable record or
effective date hereafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).

     SECTION 14.07. Certain Defined Terms. The following definitions shall apply
                    ---------------------
to terms used in this Article XIV:

          (a) "Closing Price" of any security on any day shall mean the last
reported sale price of such security, regular way, on such day or, if no sale
takes place on such day, the average of the reported closing bid and asked
prices of such security or such day, regular way, in either case as reported on
the NYSE Composite Tape or, if the security is not listed or admitted to trading
on the NYSE, on the principal national securities exchange on which such
security is listed or admitted to trading, or, if not listed or admitted to
trading on a national securities exchange, on the National Market System of the
National Association of Securities Dealers, Inc.  or, if such security is not
quoted or admitted to trading on such quotation system, on the principal
quotation system on which such security is listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted on any national
securities exchange or quotation system, the average of the closing bid and
asked prices of such security in the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if not so available in such manner, as
furnished by any NYSE member firm selected from time to time by the Board of
Directors for that purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors.

          (b) "Trading Day" shall mean a day on which securities are traded on
the national securities exchange or quotation system used to determine the
Closing Price.

                                       83
<PAGE>

     SECTION 14.08. Dividend or Interest Reinvestment Plans. Notwithstanding the
                    ---------------------------------------
foregoing provisions, the issuance of any shares of Common Stock pursuant to any
plan providing for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional optional amounts in
shares of Common Stock under any such plan, and the issuance of any shares of
Common Stock or options or rights to purchase such shares pursuant to any
employee benefit plan or program of the Company pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as of the
date that the Securities were first issued, shall not be deemed to constitute an
issuance of Common Stock or exercisable, exchangeable or convertible securities
by the Company to which any of the adjustment provisions described above
applies.   There shall also be no adjustment of the Conversion Price in case of
the issuance of any stock (car securities convertible into or exchangeable for
stock) of the Company except as specifically described in this Article XIV.

     SECTION 14.09. Certain Additional Rights. In case the Company shall, by
                    -------------------------
dividend or otherwise, declare or make a distribution on its Common Stock
referred to in Section 14.03(c) or (d) (including, without limitation, dividends
or distributions referred to in the last sentence of Section 14.03(c)), the
Holder of the Securities, upon the conversion thereof subsequent to 5:00 p.m.
(Norfolk, Virginia time) on the date fixed for the determination of stockholders
entitled to receive such distribution and prior to the effectiveness of the
Conversion Price adjustment in respect of such distribution, shall also be
entitled to receive, for each share of Common Stock into which the securities
are converted, the portion of the shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash and assets so
distributed applicable to one share of Common Stock; provided, however, that, at
the election of the Company (whose election shall be evidenced by a resolution
of the Board of Directors) with respect to all Holders so converting, the
Company may, in lieu of distributing to such Holder any portion of such
distribution not consisting of cash or securities of the Company, pay such
Holder an amount in cash equal to the fair market value thereof (as determined
in good faith by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors).  If any conversion of
Securities described in the immediately preceding sentence occurs prior to the
payment date for a distribution to holders of Common Stock that the Holder of
Securities so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets to which such Holder is so
entitled, provided, that such due bill (i) meets any applicable requirements of
the principal national securities exchange or other market on which the Common
Stock is then traded and (ii) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof to
holders of shares of Common Stock receiving such distribution.

     SECTION 14.10. Trustee Not Responsible for Determining Conversion Price or
                    -----------------------------------------------------------
Adjustments. Neither the Trustee nor any Conversion Agent shall at any time be
-----------
under any duty or responsibility to any Holder of any Security to determine
whether any facts exist that may require any adjustment of the Conversion Price,
or with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making any such adjustment.  Neither the

                                       84
<PAGE>

Trustee nor any Conversion Agent shall be accountable with respect to the
validity or value (or the kind of account) of any shares of Common Stock or of
any securities or property that may at any time be issued or delivered upon the
conversion of any Security; and neither the Trustee nor any Conversion Agent
makes any representation with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property upon the surrender of any
Security for the purpose of conversion, or, except as expressly herein provided,
to comply with any of the covenants of the Company contained in this Article
XIV.

     SECTION 14.11. Termination of Conversion Rights. (a) Right of Company to
                    --------------------------------
Terminate Conversion Rights.  On and after January 15, 2004, the Company may, at
its option, cause the conversion rights of holders of Securities to terminate if
(i) the Company is then current in the payment of interest on the Securities
(including Additional Interest and Additional Sums, if any) (except to the
extent that the payment of interest may have been deferred as a result of any
Extension Period) and (ii) for at least 20 Trading Days within any period of 30
consecutive Trading Days, including the last Trading Day of such period, the
Closing Price of the Common Stock shall have exceeded 115% of the Conversion
Price of the Securities then in effect.

          (b) Exercise of Option Prior to a Dissolution Event Distribution.  To
exercise its conversion expiration option prior to the distribution of
Securities from the related Commonwealth Bankshares Capital Trust to the holders
of the corresponding Trust Securities upon the occurrence of a Dissolution Event
(a "Dissolution Event Distribution"), the Company shall give written notice to
such Commonwealth Bankshares Capital Trust directing such Commonwealth
Bankshares Capital Trust to issue the "Press Release" (as defined in Section
4.08(h)(ii) of the related Trust Agreement), to cause the conversion rights of
the holders of Trust Securities to terminate.  The Company shall also furnish a
copy of such notice to the Trustee (and the Conversion Agent if the Trustee is
not then serving as the Conversion Agent).  If such Commonwealth Bankshares
Capital Trust fails to issue the Press Release within two (2) Business Days
after its receipt of such notice, the Company may, on behalf of such
Commonwealth Bankshares Capital Trust, issue the Press Release in accordance
with the provisions of Section 4.08(h) of the related Trust Agreement.  The
conversion rights of the Holders of the Securities shall terminate
simultaneously with the termination of the conversion rights of the holders of
the Trust Securities.

          (c) Exercise of Option After a Dissolution Event Distribution.  To
exercise its conversion termination option after a Dissolution Event
Distribution, the Company shall issue a press release for publication on the Dow
Jones News Service or on a comparable news service announcing the Conversion
Termination Date of the Securities.  Such press release must be issued prior to
the opening of business on the second Trading Day after a period in which the
conditions of Section 14.11(a) have been satisfied, but in no event prior to
January 15, 2004.  Such press release shall state that the Company has elected
to exercise its right to terminate the conversion privilege, specify the
Conversion Termination Date of the Securities (as determined in the manner set
forth below) and provide the Conversion Price and the Closing Price of the
Common Stock, in each case as of the close of business on the Trading Day next
preceding the

                                       85
<PAGE>

date of the press release. Additionally, the Company shall cause a notice of the
termination of conversion rights (a "Notice of Conversion Termination") to be
given by first-class mail to each Holder of Securities, the Trustee (and the
Conversion Agent if the Trustee is not then serving as the Conversion Agent) not
more than four Business Days after the Company issues such press release. The
Notice of Conversion Termination shall state, as appropriate: (i) the Conversion
Termination Date of the Securities; (ii) the Conversion Price of the Securities
and the Closing Price of the Common Stock, in each case as of the close of
business on the Trading Day next preceding the date of the Notice of Conversion
Termination; (iii) the place or places at which a Notice of Conversion Request
with respect to Securities may be given to the Conversion Agent in accordance
with Section 14.02 prior to the Conversion Termination Date of the Securities;
and (iv) such other information or instructions as the Company deems necessary
or advisable to enable each Holder to exercise its conversion right hereunder.
Notice of Conversion Termination shall be deemed to have been given on the day
that such notice is first mailed by first-class mail, postage prepaid, to each
Holder of Securities at the address of such Holder appearing in the Securities
Register (whether or not such Holder receives the Notice of Conversion
Termination). No defect in the Notice of Conversion Termination or in the
mailing thereof with respect to any Securities shall affect the validity of the
Company's exercise of its conversion termination option if the press release
referred to above shall have been issued.

          (d) Certain Definitions.  The term "Conversion Termination Date" has
the meaning assigned to such term in Section 4.08(h)(ii) of the related Trust
Agreement.  The "Conversion Termination Date of the Securities" shall be the
close of business on the Business Day selected by the Company that is not less
than 30 nor more than 60 calendar days after (1) the date on which the related
Commonwealth Bankshares Capital Trust (or the Company, as the case may be)
issues the Press Release as provided in Section 14.11 (b) announcing the
Company's intention to terminate the conversion rights of the holders of the
Trust Securities or (2) the date on which the Company issues the press release
required by Section 14.11(c) announcing its intention to terminate the
conversion rights of the Holders of the Securities, as the case may be.  If the
Company does not exercise its conversion termination option, the Conversion
Termination Date of the Securities (i) with respect to any principal amount of
Securities that is called for repayment shall be the close of business on the
Business Day prior to the scheduled date for such repayment and (ii) in any
other case shall be the close of business on the Business Day prior to the
Maturity Date of the Securities.  As of the close of business on the earlier of
the Conversion Termination Date or the Conversion Termination Date of the
Securities, the Securities shall be deemed to be nonconvertible securities.

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

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first written above.

                                       86
<PAGE>

                         COMMONWEALTH BANKSHARES, INC.

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

[Seal]

                         WILMINGTON TRUST COMPANY,
                         As Trustee

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

[Seal]

                                       87
<PAGE>

                                                                       EXHIBIT A

                  [Form of Restricted Securities Certificate]

                       RESTRICTED SECURITIES CERTIFICATE

           (For transfers pursuant to Section 3.05 and Section 3.06
                     of the Junior Subordinated Indenture)

[_____________________________],
as Security Registrar
[address]

Re:  Junior Convertible Subordinated Debt Securities of Commonwealth Bankshares,
     Inc. (the "Company") (the "Securities")

     Reference is made to the Junior Subordinated Indenture, dated as of
_________________, 2000 (the "Indenture"), between Commonwealth Bankshares, Inc.
and Wilmington Trust Company, as trustee (the "Trustee"). Terms used herein and
defined in the Indenture or in Regulation D, Rule 144A or Rule 144 under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), are used herein
as so defined.

     This certificate relates to $___________ aggregate principal amount of
Securities, that are evidenced by the following certificates) (the "Specified
Securities"):

     CUSIP No(s) -______________________________________________________________

     CERTIFICATE No(s) -________________________________________________________

     CURRENTLY IN BOOK-ENTRY FORM: ___________ Yes ________ No (check one)

The person in whose name this certificate is executed below (the "undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so.  Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary in the name of the Undersigned, as or on behalf of the
Owner.  If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.

The Owner has requested that the Specified Securities be transferred to a person
(the "Transferee") who will take delivery in the form of a Restricted Security.
In connection with such transfer, the Owner hereby certifies that, unless such
transfer is being effected pursuant to an effective registration statement under
the Securities Act, it is being effected in accordance with one of the following
as indicated (check one):

                                       88
<PAGE>

________  (1)  transferred to the Company; or

________  (2)  exchanged for the undersigned's own account without transfer; or

________  (3)  transferred pursuant to and in compliance with Rule 144A under
               the Securities Act; or

________  (4)  to an institutional "accredited investor" within the meaning of
               subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
               Securities Act that is acquiring the Securities for its own
               account, or for the account of such an institutional "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

________  (5)  transferred pursuant to another available exemption from the
               registration requirements of the Securities Act.

Unless such transfer is being effected in accordance with one of the above, the
Securities Registrar will refuse to register any of the Securities evidenced by
this certificate in the name of any person other than the Holder thereof;
provided, however, that if (4) or (5) is applicable, the Securities Registrar
may require, prior to registering any such transfer of the Securities such legal
opinions, certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, such as the exemption provided by Rule 144 under such Act;
provided, further, that if box (3) is checked, the transferee must also certify
that it is a qualified institutional buyer as defined in Rule 144A.

     This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.

Dated:                   _______________________________________________________
                         (Print the name of the Undersigned, as such term is
                         defined in the second paragraph of this certificate.)

                         By:____________________________________________________
                         Name:
                         Title:
                         (If the Undersigned is a corporation, partnership or
                         fiduciary, the title of the person signing on behalf of
                         the Undersigned must be stated.)

                                       89
<PAGE>

                                                                       EXHIBIT B

                         NOTICE OF CONVERSION REQUEST

To:  Commonwealth Bankshares, Inc.

     The undersigned owner of these Securities hereby irrevocably exercises the
option to convert these Securities, or the portion below designated, into Common
Stock of Commonwealth Bankshares, Inc. (the "Common Stock") in accordance with
the terms of the Indenture (the "Indenture"), dated as of ____________, 2000,
between the Company and Wilmington Trust Company, as Trustee.   Pursuant to the
aforementioned exercise of the options to convert these Capital Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined in the
Indenture) to convert such Securities on behalf of the undersigned, into Common
Stock (at the conversion price specified in the Indenture).

     The undersigned also hereby directs the Conversion Agent that the shares
issuable and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below.  If shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.

Date: _____________________________

Principal Amount of Securities to be converted ($25 or integral multiples
thereof):

If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.

-    ___________________________________________

-    ___________________________________________

-    ___________________________________________

-    ___________________________________________

(Sign exactly as your name appears on the other side of this Security) (for
conversion only)

Please Print or Type Name and Address, Including Zip Code, and Social Security
or Other Identifying Number

-    ___________________________________________
-    ___________________________________________
-    ___________________________________________
-    ___________________________________________

                                       90
<PAGE>

Signature Guarantee:*

                    ____________________________________________________________

_______________________________
     *    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 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
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

647671

                                       91

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