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  EXHIBIT 10.4    
  

 
 

SECURITY AGREEMENT    
  

    THIS SECURITY AGREEMENT ("Agreement") is made and entered into as of the 8th day of June, 2001 by LTC
Healthcare, Inc., a Nevada corporation (formerly known as LTC Equity Holding Company, Inc.) ("Debtor"), in favor of LTC Properties, Inc., a Maryland corporation
("Secured Party"), with reference to the following facts and circumstances. 

    A.  Secured
Party has agreed to extend a Loan (the "Loan") to Debtor, which Loan is evidenced by that certain Second
Amended and Restated Promissory Note of even date herewith executed by Debtor in favor of Secured Party (the "Note"). 

    B.  To
secure its obligations under the Loan, Debtor has agreed, among other things, to grant Secured Party a security interest in certain collateral, as described
herein. 

    NOW,
THEREFORE, IN CONSIDERATION of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor and Secured Party
hereby agree as follows: 

    1.  Grant of Security Interest.  As security for Debtor's due and punctual performance of the Obligations
(as hereinafter defined), Debtor hereby pledges with and delivers to Secured Party the Collateral (as hereinafter defined), and grants, assigns, transfers and conveys to Secured Party a continuing
security interest in all of Debtor's right, title and interest in and to the Collateral. 

    2.  Obligations.  This Agreement, and Debtor's pledge of and grant to Secured Party of a security
interest in and to the Collateral, is made to secure: (i) due and punctual performance of Debtor's obligation to make any and all payments when and as due under the Loan, the Note, and any
other note or instrument executed by Debtor and payable to Secured Party which recites that it is secured hereby, including any and all amendments, modifications, renewals, extensions, substitutions
or replacements
hereof or thereof, including the future advances which are made pursuant to the terms of the Loan, the Note or any such note or instrument and the performance and discharge of each and every
obligation of Debtor set forth in the Loan, the Note or any such note or notes; (ii) payment of all other sums, with interest thereon, herein or in the Loan, the Note, or any such note or
notes, or any part thereof; (iii) due, prompt and complete observance and performance of each and every obligation, covenant and agreement of Debtor contained herein, in the Note, or in any
other instrument executed by Debtor for the purpose of further securing the indebtedness evidenced by the Note, or such note or notes, or any part thereof (collectively, the
"Obligations"). 

    3.  Collateral.  As used herein, the term "Collateral"
shall collectively and severally mean the following: 

    (a)  Equipment.  All equipment (as defined in the California Uniform Commercial Code (the "Code")),
machinery tools furniture, furnishings, plant fixtures, business fixtures and other storage and office equipment, now owned or held, or hereafter acquired by the Debtor, wherever located, and all
parts thereof and all additions and accessions thereto and replacements thereof and documents therefor, including any documents of title representing any of the above (any and all of the foregoing
being the "Equipment"); 

    (b)  Accounts.  All accounts, general intangibles, chattel paper, instruments (each as defined in the
Code), and other obligations of any kind, now owned or held or hereafter acquired by the Debtor, including, without limitation, insurance claims insurance settlement proceeds, tax refund claims and
tax refunds arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights in and to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, general intangibles, chattel paper, instruments or obligations, and all books and records relating to any of the foregoing (any and all of the foregoing being
the "Accounts"); 

 

    (c)  Instruments.  All notes and other instruments and any instrument which constitutes a part of chattel
paper, and other evidences of indebtedness in which the Debtor now or hereafter has any interest, to the extent of that interest; 

    (d)  Documents.  All documents (as defined in the Code) in which the Debtor now or hereafter has any
interest, to the extent of that interest; 

    (e)  Chattel Paper.  All chattel paper in which the Debtor now or hereafter has any interest; 

    (f)  General Intangibles.  All General Intangibles (as hereinafter defined) in which the Debtor now or
hereafter has any interest, to the extent of that interest. "General Intangibles" means any "general intangibles," as such term is defined in the Code,
and shall include, without limitation, (i) all patents, patent applications, trademarks, trademark registrations, trade names and trademark applications; (ii) license agreements with any
other party, whether the Debtor is a licensor or licenses under any such license agreement, and the right to prepare for sale, sell and advertise for sale all inventory now or hereafter covered by
such licenses; (iii) all of the Debtor's books, records and files, including computer software and tapes and all other forms of electronic information storage; (iv) copyrights and other
rights in intellectual property; (v) interests in partnerships, joints ventures and other business associations; (vi) licenses and permits; (vii) trade secrets, propriety or
confidential information, customer lists, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data,
skill, expertise, experience, processes, models, drawings, materials and records, and goodwill; (viii) claims in or under insurance policies, including unearned premiums;
(ix) uncertificated securities; (x) deposit accounts; (xi) rights to receive tax refunds and other payments; (xii) rights of indemnification; and (xiii) all of the
Debtor's rights under any warranties or guaranties of any kind, including equipment, machinery or services; 

    (g)  Contracts.  All of the Debtor's rights under all contracts undertakings or agreements (other than
rights evidenced by chattel paper, documents or instruments) in or under which the Debtor may now or hereafter have any right, title or interest, including, without litigation, with respect to an
Account, any agreement relating to the terms of payment or the terms of performance thereof; 

    (h)  Money and Other Personal Property.  All money (as defined in the Code) and all other goods and
personal property in which the Debtor has any interest, to the extent of that interest, whether now or hereafter owned or existing, leased, consigned by or to or acquired by the Debtor and wherever
located; and 

    (i)  Stock.  All of the outstanding capital stock of Debtor and its subsidiaries now formed or to be
formed, and more specifically described as of June 8, 2001 on Exhibit A, attached hereto. 

    (j)  Proceeds and Products.  All proceeds and products of the foregoing (including, without limitation,
cash proceeds and noncash proceeds resulting from the sale or other voluntary or involuntary disposition thereof or any other realization in respect thereof) and including, but not limited to, all
property of any type that is acquired with any cash proceeds, and all guarantees, insurance and rights against sureties the Debtor may have in connection therewith and all proceeds and products
relating thereto or therefrom, and all the Debtor's right, title and interest in and to additions, accessions, replacements and substitutions to and for the foregoing, and all documents, ledger sheets
and files of the Debtor relating thereto. The term "proceeds" as used herein shall include, without limitation, all accounts, chattel paper, deposit
accounts, instruments, equipment, inventory, documents, general intangibles and other proceeds that arise from the sale, lease, transfer or other use or disposition of any kind of any of the
Collateral described in the foregoing paragraphs (a) through (j), inclusive, or proceeds, and all proceeds of any type described above acquired with cash proceeds. 

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    4.  Delivery of Collateral.  Concurrently with the execution and delivery of this Agreement, Debtor shall
deliver to Secured Party stock certificates representing all the outstanding shares of Debtor and the subsidiaries described on Exhibit A. Debtor agrees to deliver to Secured Party stock
certificates representing all the outstanding shares of any subsidiaries owned by Debtor and formed hereafter. 

    5.  Declaration of Trust.  If Debtor shall become entitled to receive or shall receive any goods,
instruments, documents, accounts, general intangibles or other property of any kind or nature delivered to Debtor on account of or in connection with Debtor's ownership of the Collateral, Debtor shall
accept and hold the same as Secured Party's agent, in trust for Secured Party, and shall forthwith, without notice or demand, endorse, transfer and deliver the same to Secured Party, accompanied,
where necessary or appropriate, by assignments duly executed in blank, to be held by Secured Party as part of the Collateral. 

    6.  Powers of Secured Party.  Debtor appoints Secured Party its true
attorney-in-fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time
to time by Secured Party's officers, employees or agents, or any of them, whether or not an Event of Default has occurred: (i) to liquidate any certificate of deposit pledged to Secured Party
hereunder prior to its maturity date and to apply the proceeds thereof to payment of the Obligations or hold such proceeds as part of the Collateral, notwithstanding the fact that such liquidation may
give rise to penalties for early withdrawals of funds; (ii) to sell, exchange or otherwise dispose of any portion of the Collateral if Secured Party deems such transaction reasonably necessary
to preserve the value of its security interest, and to apply the proceeds thereof to payment of the Obligations, to hold such proceeds as part of the Collateral or to use such proceeds to purchase
similar items of Collateral that Secured Party, in its sole discretion, deems necessary or advisable to preserve the value of its security interest; (iii) to notify any person obligated on any
security, instrument or other document subject to this Agreement of Secured Party's rights hereunder; (iv) to collect by legal proceedings or otherwise all dividends, interest, principal or
other sums now or hereafter payable upon or on account of the Collateral; (v) to enter into any extension, reorganization, deposit, merger or consolidation agreement, or any other agreement
relating to or affecting the Collateral or proceeds, and in connection therewith to deposit or surrender control of the Collateral, accept other property in exchange for the Collateral, and do and
perform such acts and things as Secured Party may deem proper, and any money or property received in exchange for the Collateral may be applied to the Obligations or held by Secured Party under this
Agreement; (vi) to make any compromise or settlement Secured Party deems necessary, desirable or proper in respect of the Collateral; (vii) to insure, process and preserve the
Collateral; and (viii) to perform any obligation of Debtor under this Agreement, in Debtor's name or otherwise. To effect the purposes of this Agreement, or otherwise upon instructions of
Debtor, Secured Party may cause the Collateral to be transferred to Secured Party's name or the name of Secured Party's nominee. 

    7.  Secured Party's Care and Delivery of Collateral.  Secured Party's obligation with respect to
Collateral in its possession shall be strictly limited to the duty to exercise reasonable care in the custody and preservation of such Collateral, and such duty shall not include any obligation to
ascertain or to initiate any action with respect to or to inform Debtor of maturity dates, conversion, call, or exchange rights,
or offers to purchase the Collateral, or any similar matters, notwithstanding the Secured Party's knowledge of the same. Secured Party shall have no duty to take any steps necessary to preserve the
rights of Debtor against prior parties, or to initiate any action to protect against the possibility of a decline in the market value of the Collateral. Secured Party shall not be obligated to take
any action with respect to the Collateral requested by Debtor unless such request is made in writing, and Secured Party determines, in its sole discretion, that the requested actions would not
unreasonably jeopardize the value of the Collateral as security for the Obligations. Secured Party may at any time deliver the Collateral, or any part thereof, to Debtor, and the receipt thereof by
Debtor shall be a complete and 

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full acquittance for the Collateral and proceeds so delivered, and Secured Party shall thereafter be discharged from any liability or responsibility therefor. 

    8.  Representations and Warranties.  Debtor represents and warrants to Secured Party as follows: 

    (a) Debtor
is a Nevada corporation, duly incorporated, validly existing and in good standing under the laws of the State of the State of Nevada. Debtor is qualified to
do business as a foreign corporation in every state in which Debtor is required to be so qualified. 

    (b) Debtor
has all requisite capacity and power to execute, deliver and perform its obligations under this Agreement. This Agreement has been duly and validly executed
and delivered by Debtor, and constitutes a valid and binding obligation of Debtor, enforceable in accordance with its terms. 

    (c) Debtor
owns the Collateral free and clear of all liens, claims, encumbrances, security interests or equities, other than the security interest created hereby. 

    (d) Debtor
has not sold, transferred, assigned or conveyed the Collateral, or any portion thereof, to any person other than Secured Party. 

    9.  Covenants and Agreements of Debtor.  Debtor covenants and agrees with Secured Party that from the
date hereof and until payment and satisfaction in full of each and all of the Obligations, unless Secured Party shall otherwise consent in writing, Debtor will: 

    (a) Duly
observe and perform each and every term and condition of any and all agreements, instruments and documents relating to the Collateral, and diligently protect
and enforce its rights under all such agreements. 

    (b) Give
Secured Party ten (10) days prior written notice before changing its principal residence or place of business or moving its books and records to a
location other than that set forth in Section 17 hereof. 

    (c) Not
sell, lease, assign, transfer, convey, pledge, hypothecate, mortgage or further encumber any of the Collateral, provided that Debtor may sell Inventory in the
ordinary course of business. 

    (d) Promptly
pay or otherwise cause to be discharged any lien, charge, security interest or other encumbrance that may attach to the Collateral, or any portion thereof,
other than pursuant to this Agreement. 

    (e) Promptly
notify Secured Party of any attachment or other legal process levied against any of the Collateral and any information received by Debtor relating to the
Collateral, or to other persons obligated in connection therewith, and of any threatened or filed claims or proceedings, that might in any way affect or impair Secured Party's security interest in the
Collateral or the rights and remedies of Secured Party with respect thereto. 

    (f)  Defend
the Collateral against all claims, liens, security interests, demands and other encumbrances of third parties at any time claiming an interest in the
Collateral that is adverse to Secured Party's interest in the Collateral hereunder. 

    (g) Notify
Secured Party in the event of any occurrence that may materially or adversely affect the security interest of Secured Party in the Collateral. 

    (h) At
the request of Secured Party, execute and permit to be filed one or more financing statements, and amendments thereto, under the California Uniform Commercial
Code and any other applicable state's Uniform Commercial Code naming Debtor as debtor and Secured Party as secured party and indicating therein the types or describing the Collateral. 

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    (i)  Not, without the prior written consent of Secured Party, execute, file or authorize or permit to be filed in any jurisdiction or with any governmental authority
any financing or similar statement relating to the Collateral, or any portion thereof, in which any person other than Secured Party is named as a secured party thereunder. 

    (j)  Reimburse
Secured Party upon demand for any costs and fees, including reasonable attorneys' fees and accountants' fees and other expenses, incurred in collecting
any sums payable by Debtor under any of the Obligations secured hereby, enforcing any term or provision of this Agreement or otherwise in the collection of the Collateral and the preparation and
enforcement of any agreement relating thereto. 

    (k) Upon
request of Secured Party, furnish within ten (10) days thereafter to Secured Party or to any proposed assignee of Secured Party, a written statement in
form satisfactory to Secured Party, duly acknowledged, certifying the amount of the principal and interest then owing under the obligations and liabilities set forth in the Note, and stating that no
claims, offsets or defenses exist with respect to the Note, this Agreement or any of the Loan Documents of any nature whatsoever. 

    (l)  Execute
and deliver to Secured Party any and all further agreements, instruments, or documents and take any and all such further action as Secured Party, in its
sole discretion, may deem necessary or advisable in order to evidence, effectuate, perfect, protect, maintain, or realize upon Secured Party's security interest in the Collateral or the priority
thereof. 

    10.  Events of Default.  The occurrence of any of the following shall constitute an "Event of Default"
hereunder: 

    (a) Failure
to make prompt and punctual payment or performance when due of any of the Obligations, including without limitation, any Event of Default under the Note. 

    (b) Any
representation or warranty herein, in the Note, or in any other instrument executed by Debtor in connection with its obligations hereunder, proves materially
false or misleading in any way. 

    (c) Breach
of any covenant or promise contained herein or in any other instrument executed by Debtor in connection with its obligations hereunder. 

    (d) Debtor
becomes insolvent, generally is not paying its debts as such debts become due, or makes an assignment for the benefit of creditors. 

    (e) Any
case is commenced by or against Debtor, under any bankruptcy, reorganization, arrangement, readjustment of debt or moratorium law or similar statute if, with
respect to a case commenced against Debtor, such case is not dismissed within sixty (60) days. 

    (f)  Any
writ of attachment, garnishment, execution or other legal process is issued against any property of Debtor, if such writ, garnishment, execution or other
process is not fully vacated within sixty (60) days. 

    (g) Debtor
seeks, consents to, acquiesces in or fails to cause to be vacated or stayed within sixty (60) days (or vacated within sixty (60) days of any
such stay) the appointment of a receiver, trustee or conservator of all or any substantial portion of Debtor's property. 

    11.  Secured Party's Remedies.  If an Event of Default occurs hereunder, then, Secured Party may, at its
option, but is not required to, do any one or more of the following without demand or notice to Debtor: 

    (a) Declare
all of the Obligations immediately due and payable in full, notwithstanding the terms of any other writing or evidence of debt; 

    (b) Transfer
the Collateral into Secured Party's name or that of its nominee; 

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    (c) From time to time, proceed with the foreclosure of Secured Party's security interest and sale of the Collateral, or any portion of it, in any manner permitted by
law or provided for herein; 

    (d) Take
possession of and retain the Collateral in satisfaction of the Obligations; or 

    (e) Exercise
any and all remedies of a secured party under the California Uniform Commercial Code or as otherwise provided by law. 

    12.  Application of Proceeds.  After the occurrence of an Event of Default, all income and distributions
with respect to the Collateral and all proceeds from any sale of the Collateral pursuant hereto shall be applied as follows: 

    (a) First,
in such order as Secured Party shall in its sole discretion determine, (i) to the payment of all costs and expenses incurred by Secured Party in
connection with any sale of the Collateral, including, without limitation, all court costs and the reasonable fees and expenses of counsel for Secured Party in connection therewith; (ii) to the
repayment of all advances made by Secured Party hereunder for the account of Debtor; and (iii) the payment of any and all other costs and expenses paid or incurred by Secured Party in
connection with this Agreement or otherwise in connection with the Obligations or the exercise of any right or remedy hereunder; 

    (b) Second,
to the payment of interest on the Obligations; 

    (c) Third,
to the payment or satisfaction of the Obligations; and 

    (d) Fourth,
any amounts remaining after the foregoing applications shall be remitted to Debtor or as a court of competent jurisdiction may otherwise direct. 

    13.  Power of Attorney.  

    (a) Debtor
does hereby irrevocably make, constitute and appoint Secured Party or any of its officers or designees its true and lawful
attorney-in-fact with full power in the name of Secured Party or Debtor to receive, open and dispose of all mail relating to the Collateral addressed to Debtor (provided,
however, that Secured Party shall provide Debtor with a copy of any mail so received), and to endorse any notes, checks, drafts, money orders or other evidence of payment relating to the Collateral
that may come into the possession of Secured Party, and to do any and all other acts necessary or proper to carry out the intent of this Agreement, and Debtor hereby ratifies and confirms all that
Secured Party or its substitutes shall properly do by virtue hereof; 

    (b) Debtor
does hereby further irrevocably make, constitute and appoint Secured Party or any of its officers or designees its true and lawful
attorney-in-fact in the name of Secured Party or Debtor, (i) to enforce all Debtor's rights under and pursuant to all agreements with respect to the Collateral, all for
the sole benefit of Secured Party, and to enter into such other agreements as may be necessary to protect Secured Party's rights and interest in and to the Collateral; (ii) to enter into and
perform such agreements as may be necessary in order to carry out the terms, covenants and conditions of this Agreement that are required to be observed or performed by Debtor; (iii) to execute
such other and further mortgages, pledges and assignments of the Collateral as Secured Party may reasonably require for the purpose of protecting, maintaining or enforcing the security interest
granted to the Secured Party herein; and (iv) to do any and all other things necessary or proper to carry out the intention of this Agreement; and Debtor ratifies and confirms all that Secured
Party as such attorney-in-fact or its substitutes shall properly do by virtue of this power of attorney; and 

    (c) Each
of the foregoing appointments shall be deemed coupled with an interest and irrevocable. 

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    15.  Private Sale Authorized.  

    (a) Debtor
recognizes that Secured Party may be unable to effect a public sale of all or part of the Collateral. Debtor consents to a private sale even though such sale
may be at prices and upon terms less favorable than if the Collateral were sold at public sales. Debtor agrees that private sales will be deemed to have been made in a commercially reasonable manner. 

    (b) Debtor
recognizes that a sale, public or private, of the Collateral may not be able to be effected and Secured Party or its assignee are hereby expressly authorized
at their election to retain the Collateral until a sale can be effected. Until such sale, Secured Party or its assignee may elect to hold the Collateral and be treated as the owner thereof, and shall
be entitled to collect all income thereon. 

    (c) The
purchaser or purchasers at any public or private sale of the Collateral shall take the Collateral free of any right or equity of redemption in Debtor, which
rights and equities Debtor hereby expressly waives. 

    (d) Debtor
agrees that written notice mailed to Debtor ten (10) business days prior to the date of public sale of the Collateral or ten (10) business days
prior to the date after which private sale or any other disposition of the Collateral will be made shall constitute reasonable notice for such sales. 

    16.  Financing Statements and Payment Directions.  To the extent permitted by law, Debtor hereby
authorizes Secured Party to file any amendments to or continuations of any financing statement filed with regard to the Collateral without the signature of Debtor. Debtor further authorizes Secured
Party upon an Event of Default to notify any account debtors that all sums payable to Debtor relating to the Collateral shall be paid directly to Secured Party. 

    17.  Termination.  Upon satisfaction in full of all of the Obligations, and the satisfaction of all
additional costs and expenses of Secured Party as provided herein, this Agreement shall terminate and Secured Party shall deliver to Debtor, at Debtor's expense, such of the Collateral as shall not
have been sold or otherwise disposed of or applied pursuant to this Agreement; provided that if Secured Party is required to return any amounts received by Secured Party on account of the Obligations,
the security interests provided hereunder shall reattach. 

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    18.  Notices.  Any notice or other communication required or permitted to be given under this Agreement
shall be in writing and sent by United States mail, registered or certified mail, postage prepaid, return receipt requested, and addressed as follows: 

	If to Debtor:	 	LTC Healthcare, Inc.
	 	 	300 Esplanade Drive, Suite 1865
	 	 	Oxnard, California 93030
	 	 	Attention:  Mr. Chris Ishikawa
	

with a copy to:	
 	

LTC Healthcare, Inc.
	 	 	300 Esplanade Drive, Suite 1865
	 	 	Oxnard, California 93030
	 	 	Attention:  Legal Department
	
If to Secured Party:	
 	

LTC Properties, Inc.
	 	 	300 Esplanade Drive, Suite 1860
	 	 	Oxnard, California 93030
	 	 	Attention:  Ms. Wendy Simpson
	

with a copy to:	
 	

LTC Healthcare, Inc.
	 	 	300 Esplanade Drive, Suite 1865
	 	 	Oxnard, California 93030
	 	 	Attention:  Legal Department

    or
such other address as either party may from time to time specify in writing to the other in the manner aforesaid. If personally delivered, such notices or other communications
shall be deemed delivered upon delivery. If sent by United States mail, registered or certified mail, postage prepaid, return receipt requested, such notices or other communications shall be deemed
delivered upon delivery or refusal to accept delivery as indicated on the return receipt. 

    19.  Survival of Representations.  All covenants, agreements or representations and warranties made
herein and in any documents delivered pursuant hereto shall survive the execution hereof. 

    20.  Assignments.  Whenever in this Agreement any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party, and all covenants, promises and
agreements by or on behalf of Debtor contained in this Agreement shall bind and inure to the benefit of the successors and assigns of Secured Party and Debtor. 

    21.  California Law.  This Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of California, without regard to conflict of laws principles. 

    22.  No Implied Waivers by Secured Party.  Neither any failure nor any delay on the part of Secured Party
in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any other right, power
or privilege. The rights, remedies and benefits of Secured Party herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits that Secured Party may have at
law, in equity, by statute or otherwise. Without limiting the generality of the foregoing, Secured Party shall have all rights and remedies of a secured party under Division 9 of the California
Uniform Commercial Code, as it may be amended or superseded from time to time. 

    23.  Modifications and Waivers.  

    (a) No
modification, amendment or waiver of any provision of this Agreement, nor consent to any departure of Debtor herefrom, shall in any event be effective unless the
same shall be in 

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writing and signed by Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. 

    (b) No
notice or demand on Debtor in any case shall entitle Debtor to any other or further notice or demand in the same, similar or other circumstances. 

    (c) Debtor
hereby waives presentment, notice of dishonor and protest of all instruments included in or evidencing the liability of Debtor in respect of the Obligations
or the Collateral and any and all other notices and demands whatsoever, whether or not relating to such instruments. 

    (d) The
Obligations shall not be affected by (i) the failure of Secured Party to assert any claim or demand or to enforce any right or remedy against Debtor;
(ii) any extension or renewal thereof; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement or of any other agreement; or
(iv) the release of any collateral held by Secured Party for the Obligations or any of them. 

    24.  Severability.  In case any one or more of the provisions contained in this Agreement should be
determined by a court of law to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be
affected or impaired thereby. 

    25.  Service of Process.  

    (a) Debtor
hereby irrevocably submits itself to the jurisdiction of the state courts of the State of California and to the jurisdiction of the United States District
Court for the Central District of California, for the purpose of any suit, action or other proceedings arising out of or based upon this Agreement or the subject matter hereof brought by Secured Party
or its successors or assigns. 

    (b) Debtor
hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. 

    (c) Debtor
hereby waives any right to jury trial and any offsets or counterclaims in any such action, suit or proceeding (other than compulsory counterclaims). 

    (d) Debtor
hereby consents to service of process by registered mail at the address to which notices are to be given. Debtor agrees that its submission to jurisdiction
and its consent to service of process by mail is made for the express benefit of Secured Party. 

    (e) Final
judgment against Debtor in any such action, suit or proceeding shall be conclusive, and may be enforced in other jurisdictions (i) by suit, action or
proceeding on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of Debtor therein described; or (ii) in
any other manner permitted by applicable law, provided, however, that Secured Party may at its option bring suit, or institute other judicial proceedings against any of Debtor's assets in any state or
federal court of the United States or of any country or place where such assets may be found. 

    26.  Indemnity and Reimbursement of Secured Party.  

    (a) Debtor
agrees (i) to indemnify and hold harmless Secured Party, to the fullest extent permitted by law, from and against any and all claims, demands, losses,
judgments and liabilities (including liabilities for penalties) arising out of, resulting from or relating to any of the Collateral, this Agreement or the administration, enforcement, exercise or
defense of any right or remedy granted to Secured Party herein; and (ii) to reimburse Secured Party for all costs and expenses, 

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including legal fees and disbursements, incurred after the date hereof and arising out of, resulting from or relating to any of the Collateral, this Agreement or the administration, enforcement,
exercise or defense of any right or remedy granted to Secured Party herein. The foregoing indemnity includes any reasonable costs incurred by Secured Party in connection with any litigation relating
to the Collateral whether or not Secured Party shall be a party to such litigation, including, but not limited to, the reasonable fees and disbursements of counsel to Secured Party and any
out-of-pocket costs incurred by Secured Party in appearing as a witness or in otherwise complying with legal process served upon it. In no event shall Secured Party be liable
to Debtor for any matter or thing in connection with this Agreement other than to account for moneys actually received by it in accordance with the terms hereof. 

    (b) If
Debtor shall fail to do any act or thing that it has covenanted to do hereunder or under any of the Loan Documents or any representation of warranty of Debtor to
Secured Party shall have been breached, Secured Party may, but shall not be obligated to, do the same or cause it to be done or remedy any such breach and there shall be added to the Obligations
hereunder the cost of such expense incurred by Secured Party in so doing, and any and all amounts expended by Secured Party in taking any such action shall be repayable to it upon its demand therefor
and shall bear interest at the applicable interest rate under the Note from the date such amounts are expended to the date of repayment. 

    27.  Captions.  The captions in this Agreement are inserted only as a matter of convenience and for
reference and shall not be deemed to define, limit, enlarge, or describe the scope of this Agreement or the relationship of the parties, and shall not affect this Agreement or the construction of any
provisions herein. 

    28.  Pronouns.  Whenever the context so requires, the masculine shall include the feminine and the
neuter, and the singular shall include the plural, and conversely. 

    29.  Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall together constitute one and the same instrument. 

    30.  Joint and Several Obligations.  Whenever Debtor comprises one or more persons or entities, the
obligations and promises set forth herein shall be joint and several undertakings of each of the persons
or entities executing this Agreement as Debtor, and Secured Party may proceed hereunder against any one or more of said persons or entities without waiving its right to proceed against any of the
others. 

[Remainder
of Page Intentionally Left Blank] 

10

 

    IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 

	 	 	DEBTOR:
	

 	
 	
LTC HEALTHCARE, INC.,

a Nevada corporation
	

 	
 	
By:	
 	

	 	 	 	 	Name:	 	Andre C. Dimitriadis
	 	 	 	 	Its:	 	Chairman and Chief Executive Officer
	

 	
 	

By:	
 	

	 	 	 	 	Name:	 	Christopher T. Ishikawa
	 	 	 	 	Its:	 	Executive Vice President and Chief Investment Officer
	

 	
 	

SECURED PARTY:
	

 	
 	
LTC PROPERTIES, INC.,

a Maryland corporation
	

 	
 	
By:	
 	

	 	 	 	 	Name:	 	Wendy Simpson
	 	 	 	 	Its:	 	Vice Chairman and Chief Financial Officer
	

 	
 	

By:	
 	

	 	 	 	 	Name:	 	James J. Pieczynski
	 	 	 	 	Its:	 	Chief Strategic Planning Officer

11

 
 
 

EXHIBIT A    
  

    LTC HEALTHCARE, INC., a Nevada corporation (f/k/a LTC Equity Holding Co.)

	 	 	 
	Centers for Long Term Care, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care Ancillary Services, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of Florida, Inc., a Nevada corporation (f/k/a LTC Senior Care, Inc.)	 	 
	 	 	 	 	 	Centers for Long Term Care of Crawfordville, Inc., a Nevada corporation	 	 
	 	 	 	 	 	LTC Healthcare of New Port Richey, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Venice, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of Georgia, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Fort Valley, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Jessup, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Jonesboro, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Roberta, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of Iowa, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of Illinois, Inc., a Delaware corporation	 	 
	 	Centers for Long Term Care of Kansas, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Bonner Springs, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Coffeyville, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Gardner, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Olathe, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Salina, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of North Carolina, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Fayetteville, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of Tennessee, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Tiptonville, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of Texas, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Richland Hills, Inc., a Nevada corporation	 	 
	 	Centers for Long Term Care of Virginia, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Richmond, Inc., a Nevada corporation	 	 
	 	 	 	 	 	Centers for Long Term Care of Tappahannock, Inc., a Nevada corporation	 	 
	

Generations Management Services, Inc., a Texas corporation	
 	

 
	

LTC GP VI, Inc., a Delaware corporation	
 	

 
	

LTC Healthcare of Red Hills, Inc., a Delaware corporation (f/k/a LTC-Sumner Hills, Inc.)	
 	

 
	

LTC-New Mexico, Inc., a Nevada corporation	
 	

 
	

LTC-Ohio, Inc., a Delaware corporation	
 	

 

12

QuickLinks

EXHIBIT 10.4

SECURITY AGREEMENT

EXHIBIT A<Page>

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

                        AMENDED AND RESTATED DECLARATION

                                    OF TRUST

                               USB CAPITAL TRUST I

                            Dated as of July 16, 2001

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

<Page>

                                TABLE OF CONTENTS
<Table>
<Caption>

                                                                                     Page
                                                                                     ----

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS
<S>            <C>                                                                    <C>
Section  1.1   Definitions.............................................................1

                                   ARTICLE II
                                  ORGANIZATION

Section  2.1   Name....................................................................9

Section  2.2   Office..................................................................9

Section  2.3   Purpose.................................................................9

Section  2.4   Authority...............................................................9

Section  2.5   Title to Property of the Trust.........................................10

Section  2.6   Powers and Duties of the Trustees and the Administrators...............10

Section  2.7   Prohibition of Actions by the Trust and the Trustees...................14

Section  2.8   Powers and Duties of the Institutional Trustee.........................14

Section  2.9   Certain Duties and Responsibilities of the Trustees and Administrators.16

Section  2.10  Certain Rights of Institutional Trustee................................18

Section  2.11  Delaware Trustee.......................................................20

Section  2.12  Execution of Documents.................................................20

Section  2.13  Not Responsible for Recitals or Issuance of Securities.................20

Section  2.14  Duration of Trust......................................................20

Section  2.15  Mergers................................................................21

                                   ARTICLE III
                                     SPONSOR

Section  3.1   Sponsor's Purchase of Common Securities................................22

Section  3.2   Responsibilities of the Sponsor........................................22

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

Section  4.1   Number of Trustees.....................................................23

Section  4.2   Delaware Trustee.......................................................23

Section  4.3   Institutional Trustee; Eligibility.....................................24

Section  4.4   Certain Qualifications of the Delaware Trustee Generally...............24

Section  4.5   Administrators.........................................................24

Section  4.6   Initial Delaware Trustee...............................................25

                                       (i)
<Page>

Section  4.7   Appointment, Removal and Resignation of Trustees and Administrators....25

Section  4.8   Vacancies Among Trustees...............................................27

Section  4.9   Effect of Vacancies....................................................27

Section  4.10  Meetings of the Trustees and the Administrators........................27

Section  4.11  Delegation of Power....................................................28

Section  4.12  Conversion, Consolidation or Succession to Business....................28

                                    ARTICLE V
                                  DISTRIBUTIONS

Section  5.1   Distributions..........................................................28

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

Section  6.1   General Provisions Regarding Securities................................28

Section  6.2   Paying Agent, Transfer Agent, Calculation Agent and Registrar..........29

Section  6.3   Form and Dating........................................................30

Section  6.4   Mutilated, Destroyed, Lost or Stolen Certificates......................30

Section  6.5   Temporary Securities...................................................31

Section  6.6   Cancellation...........................................................31

Section  6.7   Rights of Holders; Waivers of Past Defaults............................31

                                   ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

Section  7.1   Dissolution and Termination of Trust...................................33

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

Section  8.1   General................................................................34

Section  8.2   Transfer Procedures and Restrictions...................................35

Section  8.3   Deemed Security Holders................................................37

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

Section  9.1   Liability..............................................................38

Section  9.2   Exculpation............................................................38

Section  9.3   Fiduciary Duty.........................................................39

Section  9.1   Indemnification........................................................39

Section  9.2   Outside Businesses.....................................................42

                                      (ii)
<Page>

Section  9.3   Compensation; Fee......................................................42

                                    ARTICLE X
                                   ACCOUNTING

Section  10.1  Fiscal Year............................................................42

Section  10.2  Certain Accounting Matters.............................................43

Section  10.3  Banking................................................................43

Section  10.4  Withholding............................................................44

                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

Section  11.1  Amendments.............................................................44

Section  11.2  Meetings of the Holders of Securities; Action by Written Consent.......46

                                   ARTICLE XII
          REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE

Section  12.1  Representations and Warranties of Institutional Trustee................47

Section  12.2  Representations and Warranties of Delaware Trustee.....................48

                                  ARTICLE XIII
                                  MISCELLANEOUS

Section  13.1  Notices................................................................49

Section  13.2  Governing Law..........................................................50

Section  13.3  Submission to Jurisdiction.............................................50

Section  13.4  Intention of the Parties...............................................51

Section  13.5  Headings...............................................................51

Section  13.6  Successors and Assigns.................................................51

Section  13.7  Partial Enforceability.................................................51

Section  13.8  Counterparts...........................................................51

ANNEXES AND EXHIBITS

ANNEX I            Terms of Floating Rate MMCapS(SM)

EXHIBIT A-1        Form of Capital Securities Certificate
EXHIBIT A-2        Form of Common Security Certificate
EXHIBIT B          Form of Transferee Certificate to be Executed by Transferees
                   Other than QIBs
EXHIBIT C          Form of Transferee Certificate to be Executed for QIBs
</Table>

                                     (iii)
<Page>

                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                               USB CAPITAL TRUST I

                                  July 16, 2001

              AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration")
dated and effective as of July 16, 2001, by the Trustees (as defined herein),
the Administrators (as defined herein), the Sponsor (as defined herein) and the
holders, from time to time, of undivided beneficial interests in the assets of
the Trust (as defined herein) to be issued pursuant to this Declaration;

              WHEREAS, certain of the Trustees, the Administrators and the
Sponsor established USB Capital Trust I (the "Trust"), a statutory business
trust under the Business Trust Act (as defined herein) pursuant to a Declaration
of Trust dated as of June 27, 2001 (the "Original Declaration"), and a
Certificate of Trust filed with the Secretary of State of the State of Delaware
on June 28, 2001, for the sole purpose of issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in certain debentures of the Debenture Issuer (as
defined herein) in connection with the MMCapS(SM) Transaction;

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

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

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

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

              Section 1.1  DEFINITIONS

              Unless the context otherwise requires:

              (a) Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this Section
1.1 or, if not defined in this Section 1.1, in the Indenture;

<Page>

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

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

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

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

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

              "ADDITIONAL INTEREST" has the meaning set forth in Section 3.06 of
the Indenture.

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

              "ADMINISTRATORS" means each of Dennis R. Woods, Kenneth L. Donahue
and David L. Eytcheson, solely in such Person's capacity as Administrator of the
Trust created and continued hereunder and not in such Person's individual
capacity, or such Administrator's successor in interest in such capacity, or any
successor appointed as herein provided.

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

              "AUTHORIZED OFFICER" of a Person means any Person that is
authorized to bind such Person.

              "BANKRUPTCY EVENT" means, with respect to any Person:

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

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

                                        2
<Page>

              "BUSINESS DAY" means any day other than Saturday, Sunday or any
other day on which banking institutions in New York City or Fresno, California
are permitted or required by any applicable law to close.

              "BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to
time, or any successor legislation.

              "CALCULATION AGENT" has the meaning set forth in Section 1.01 of
the Indenture.

              "CAPITAL SECURITIES" has the meaning set forth in Section 6.1(a).

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

              "CAPITAL TREATMENT EVENT" has the meaning set forth in paragraph
4(a) of Annex I.

              "CERTIFICATE" means any certificate evidencing Securities.

              "CERTIFICATE OF TRUST" means the certificate of trust filed with
the Secretary of State of the State of Delaware with respect to the Trust, as
amended and restated from time to time.

              "CLOSING DATE" has the meaning set forth in the Placement
Agreement.

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

              "COMMISSION" means the Securities and Exchange Commission.

              "COMMON SECURITIES" has the meaning set forth in Section 6.1(a).

              "COMMON SECURITY CERTIFICATE" means a definitive Certificate
registered in the name of the Holder representing a Common Security
substantially in the form of Exhibit A-2.

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

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

              "COMPARABLE TREASURY PRICE" has the meaning set forth in paragraph
4(a) of Annex I.

                                        3
<Page>

              "CORPORATE TRUST OFFICE" means the office of the Institutional
Trustee at which the corporate trust business of the Institutional Trustee
shall, at any particular time, be principally administered, which office shall
at all times be located in the United States and at the date of execution of
this Declaration is located at 101 Barclay Street, Floor 21 West, New York, NY
10286.

              "COUPON RATE" has the meaning set forth in paragraph 2(a) of Annex
I.

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

              "DEBENTURE ISSUER" means United Security Bancshares, a bank
holding company incorporated in California, in its capacity as issuer of the
Debentures under the Indenture.

              "DEBENTURE TRUSTEE" means The Bank of New York, as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.

              "DEBENTURES" means the Floating Rate Junior Subordinated
Deferrable Interest Debentures due July 25, 2031 to be issued by the Debenture
Issuer under the Indenture.

              "DEFERRED INTEREST" means any interest on the Debentures that
would have been overdue and unpaid for more than one Distribution Payment Date
but for the imposition of an Extension Period, and the interest that shall
accrue (to the extent that the payment of such interest is legally enforceable)
on such interest at the Coupon Rate in effect for each such Extension Period,
compounded semi-annually from the date on which such Deferred Interest would
otherwise have been due and payable until paid or made available for payment.

              "DEFINITIVE CAPITAL SECURITIES" means any Capital Securities in
definitive form issued by the Trust.

              "DELAWARE TRUSTEE" has the meaning set forth in Section 4.2.

              "DIRECT ACTION" has the meaning set forth in Section 2.8(e).

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

              "DISTRIBUTION PAYMENT DATE" has the meaning set forth in paragraph
2(e) of Annex I.

              "EVENT OF DEFAULT" means the occurrence of an Indenture Event of
Default.

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

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

                                        4
<Page>

              "FEDERAL RESERVE" has the meaning set forth in paragraph 3 of
Annex I.

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

              "FISCAL YEAR" has the meaning set forth in Section 10.1

              "GUARANTEE" means the guarantee agreement to be dated as of July
16, 2001, of the Sponsor in respect of the Capital Securities.

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

              "INDEMNIFIED PERSON" means a Company Indemnified Person or a
Fiduciary Indemnified Person.

              "INDENTURE" means the Indenture dated as of July 16, 2001, among
the Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.

              "INDENTURE EVENT OF DEFAULT" means an "Event of Default" as
defined in the Indenture.

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

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

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

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

              "INVESTMENT COMPANY EVENT" has the meaning set forth in paragraph
4(a) of Annex I.

              "LEGAL ACTION" has the meaning set forth in Section 2.8(e).

              "LIBOR BANKING DAY" has the meaning set forth in paragraph 2(b)(1)
of Annex I.

              "LIBOR BUSINESS DAY" has the meaning set forth in paragraph
2(b)(1) of Annex I.

                                        5
<Page>

              "LIBOR DETERMINATION DATE" has the meaning set forth in paragraph
2(b)(1) of Annex I.

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

              "LIQUIDATION DISTRIBUTION" has the meaning set forth in paragraph
3 of Annex I.

              "MAJORITY IN LIQUIDATION AMOUNT OF THE SECURITIES" means Holder(s)
of outstanding Securities voting together as a single class or, as the context
may require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.

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

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

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

              (c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

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

              "PAYING AGENT" has the meaning specified in Section 6.2.

              "PAYMENT AMOUNT" has the meaning set forth in Section 5.1.

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

              "PLACEMENT AGREEMENT" means the Placement Agreement relating to
the offering and sale of Capital Securities.

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

              "PRIMARY TREASURY DEALER" has the meaning set forth in paragraph
4(a) of Annex I.

                                        6
<Page>

              "PROPERTY ACCOUNT" has the meaning set forth in Section 2.8(c).

              "PRO RATA" has the meaning set forth in paragraph 8 of Annex I.

              "QIB" means a "qualified institutional buyer" as defined under
Rule 144A.

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

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

              "REDEMPTION/DISTRIBUTION NOTICE" has the meaning set forth in
paragraph 4(a) of Annex I.

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

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

              "REFERENCE TREASURY DEALER" has the meaning set forth in paragraph
4(a) of Annex I.

              "REFERENCE TREASURY DEALER QUOTATIONS" has the meaning set forth
in paragraph 4(a) of Annex I.

              "RELEVANT TRUSTEE" has the meaning set forth in Section 4.7(a).

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

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

              "RESTRICTED SECURITIES LEGEND" has the meaning set forth in
Section 8.2(c).

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

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

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

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

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

                                        7
<Page>

              "SPONSOR" means United Security Bancshares, a bank holding company
that is a U.S. Person incorporated in California, or any successor entity in a
merger, consolidation or amalgamation that is a U.S. Person, in its capacity as
sponsor of the Trust.

              "SUCCESSOR DELAWARE TRUSTEE" has the meaning set forth in Section
4.7(a).

              "SUCCESSOR ENTITY" has the meaning set forth in Section 2.15(b).

              "SUCCESSOR INSTITUTIONAL TRUSTEE" has the meaning set forth in
Section 4.7(a).

              "SUCCESSOR SECURITIES" has the meaning set forth in Section
2.15(b).

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

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

              "10% IN LIQUIDATION AMOUNT OF THE SECURITIES" means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.

              "TRANSFER AGENT" has the meaning set forth in Section 6.2.

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

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

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

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

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

              "U.S. PERSON" means a United States Person as defined a Section
7701(a)(30) of the Code.

                                        8
<Page>

                                   ARTICLE II
                                  ORGANIZATION

              Section 2.1  NAME.

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

              Section 2.2  OFFICE.

              The address of the principal office of the Trust, which shall be
in a State of the United States or the District of Columbia, is c/o United
Security Bancshares, 1525 E. Shaw Avenue, Fresno, CA 93710. On ten Business Days
written notice to the Holders of the Securities, the Administrators may
designate another principal office, which shall be in a State of the United
States or the District of Columbia.

              Section 2.3  PURPOSE.

              The exclusive purposes and functions of the Trust are (a) to issue
and sell the Securities representing undivided beneficial interests in the
assets of the Trust, (b) to invest the gross proceeds from such sale to acquire
the Debentures and (c) except as otherwise limited herein, to engage in only
those other activities incidental thereto that are deemed necessary or advisable
by the Institutional Trustee, including, without limitation, those activities
specified in this Declaration. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, pledge any of its assets, or
otherwise undertake (or permit to be undertaken) any activity that would cause
the Trust not to be classified for United States federal income tax purposes as
a grantor trust.

              Section 2.4  AUTHORITY.

              Except as specifically provided in this Declaration, the
Institutional Trustee shall have exclusive and complete authority to carry out
the purposes of the Trust. An action taken by a Trustee on behalf of the Trust
and in accordance with its powers shall constitute the act of and serve to bind
the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person
shall be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively on the
power and authority of the Trustees as set forth in this Declaration. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders. The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.

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              Section 2.5  TITLE TO PROPERTY OF THE TRUST.

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

              Section 2.6  POWERS AND DUTIES OF THE TRUSTEES AND THE
ADMINISTRATORS.

              (a)   The Trustees and the Administrators shall conduct the
affairs of the Trust in accordance with the terms of this Declaration. Subject
to the limitations set forth in paragraph (b) of this Section, and in accordance
with the following provisions (i) and (ii), the Trustees and the Administrators
shall have the authority to enter into all transactions and agreements
determined by the Trustees to be appropriate in exercising the authority,
express or implied, otherwise granted to the Trustees or the Administrators, as
the case may be, under this Declaration, and to perform all acts in furtherance
thereof, including without limitation, the following:

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

                     (A) the issuance and sale of the Securities;

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

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

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

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

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

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

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

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

                     (J) the taking of any action incidental to the foregoing as
              the Institutional Trustee may from time to time determine is
              necessary or advisable to give effect to the terms of this
              Declaration for the benefit of the Holders (without consideration
              of the effect of any such action on any particular Holder);

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

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

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

                     (A) the establishment of the Property Account;

                     (B) the receipt of the Debentures;

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

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

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

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

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

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

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                     (I) after any Event of Default (provided that such Event of
              Default is not by or with respect to the Institutional Trustee)
              the taking of any action incidental to the foregoing as the
              Institutional Trustee may from time to time determine is necessary
              or advisable to give effect to the terms of this Declaration and
              protect and conserve the Trust Property for the benefit of the
              Holders (without consideration of the effect of any such action on
              any particular Holder); and

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

              (iii) The Institutional Trustee shall have the power and
         authority to act on behalf of the Trust with respect to any of the
         duties, liabilities, powers or the authority of the Administrators set
         forth in Section 2.6(a)(i)(E) and (F) herein but shall not have a duty
         to do any such act unless specifically requested to do so in writing by
         the Sponsor, and shall then be fully protected in acting pursuant to
         such written request; and in the event of a conflict between the action
         of the Administrators and the action of the Institutional Trustee, the
         action of the Institutional Trustee shall prevail.

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

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

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

              (ii) the determination of the States in which to take
         appropriate action to qualify or register for sale all or part of the
         Capital Securities and the determination of any and all such acts,
         other than actions which must be taken by or on behalf of the Trust,
         and the

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         advisement of the Trustees of actions they must take on behalf of the
         Trust, and the preparation for execution and filing of any documents to
         be executed and filed by the Trust or on behalf of the Trust, as the
         Sponsor deems necessary or advisable in order to comply with the
         applicable laws of any such States in connection with the sale of the
         Capital Securities;

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

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

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

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

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

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

              (h) If the Institutional Trustee or any Holder has instituted
any proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional 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 Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.

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              Section 2.7  PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.

              (a) The Trust shall not, and the Institutional Trustee and the
Administrators shall not, cause the Trust to engage in any activity other than
as required or authorized by this Declaration. In particular, the Trust shall
not and the Institutional Trustee, and the Administrators shall not, cause the
Trust to:
              (i) invest any proceeds received by the Trust from holding the
         Debentures, but shall distribute all such proceeds to Holders of the
         Securities pursuant to the terms of this Declaration and of the
         Securities;

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

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

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

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

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

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

              Section 2.8  POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.

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

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

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              (c) The Institutional Trustee shall:

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

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

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

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

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

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<Page>

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

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

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

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

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

              Section 2.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE
AND ADMINISTRATORS.

              (a) The Institutional Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 6.7), the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.

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

                                       16
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provisions of this Declaration, to the extent that they restrict the duties and
liabilities of the Administrators or the Trustees otherwise existing at law or
in equity, are agreed by the Sponsor and the Holders to replace such other
duties and liabilities of the Administrators or the Trustees.

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

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

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

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

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

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

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

              Section 2.10 CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE.

              Subject to the provisions of Section 2.9:

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

              (b) if (i) in performing its duties under this Declaration,
the Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's opinion as to the course of action to be taken
and the Institutional Trustee shall take such action, or refrain from taking
such action, as the Institutional Trustee in its sole discretion shall deem
advisable and in the best interests of the Holders, in which event the
Institutional Trustee shall have no liability except for its own negligence or
willful misconduct;

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

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

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

              (f) the Institutional Trustee may consult with counsel of its
selection (which counsel may be counsel to the Sponsor or any of its Affiliates)
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and in accordance with such advice;

                                       18
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the Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;

              (g) the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any of the Holders pursuant to this Declaration, unless
such Holders shall have offered to the Institutional Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction; provided, that nothing contained in this Section 2.10(g) shall be
taken to relieve the Institutional Trustee, upon the occurrence of an Event of
Default that has not been cured or waived, of its obligation to exercise the
rights and powers vested in it by this Declaration;

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

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

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

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

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

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

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

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

              Section 2.11 DELAWARE TRUSTEE.

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

              Section 2.12 EXECUTION OF DOCUMENTS.

              Unless otherwise determined in writing by the Institutional
Trustee, and except as otherwise required by the Business Trust Act, the
Institutional Trustee, or any one or more of the Administrators, as the case may
be, is authorized to execute on behalf of the Trust any documents that the
Trustees or the Administrators, as the case may be, have the power and authority
to execute pursuant to Section 2.6.

              Section 2.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.

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

              Section 2.14 DURATION OF TRUST.

              The Trust, unless dissolved pursuant to the provisions of
Article VII hereof, shall have existence for thirty-five (35) years from the
Closing Date.

                                       20
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              Section 2.15 MERGERS.

              (a) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described in this Section 2.15(b) and (c) and except with respect to the
distribution of Debentures to Holders of Securities pursuant to Section
7.1(a)(iv) of the Declaration or Section 4 of Annex I.

              (b) The Trust may, with the consent of the Institutional
Trustee (which consent will not be unreasonably withheld) and without the
consent of the Delaware Trustee or the Holders of the Capital Securities,
consolidate, amalgamate, merge with or into, or be replaced by a trust organized
as such under the laws of any State; provided, that:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

              (c) Notwithstanding Section 2.15(b), the Trust shall not, except
with the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other Person
or permit any other Person to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.

                                   ARTICLE III
                                     SPONSOR

              Section 3.1  SPONSOR'S PURCHASE OF COMMON SECURITIES.

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

              Section 3.2  RESPONSIBILITIES OF THE SPONSOR.

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

                                       22
<Page>

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

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

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

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

              Section 4.1  NUMBER OF TRUSTEES.

              The number of Trustees initially shall be two, and:

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

              (b) after the issuance of any Securities, the number of Trustees
may be increased or decreased by vote of the Holder of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holder of
the Common Securities; provided, however, that there shall be a Delaware Trustee
if required by Section 4.2; and there shall always be one Trustee who shall be
the Institutional Trustee, and such Trustee may also serve as Delaware Trustee
if it meets the applicable requirements, in which case Section 2.11 shall have
no application to such entity in its capacity as Institutional Trustee.

              Section 4.2  DELAWARE TRUSTEE.

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

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

              (b) if not a natural person, an entity which is organized under
the laws of the United States or any State thereof or the District of Columbia,
has its principal place of business in the State of Delaware, and otherwise
meets the requirements of applicable law, including Section 3807 of the Business
Trust Act.

                                       23
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              Section 4.3  INSTITUTIONAL TRUSTEE; ELIGIBILITY.

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

              (i)  not be an Affiliate of the Sponsor;

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

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

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

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

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

              Section 4.4  CERTAIN QUALIFICATIONS OF THE DELAWARE TRUSTEE
GENERALLY.

              The Delaware Trustee shall be a U.S. Person and either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.

              Section 4.5  ADMINISTRATORS.

              Each Administrator shall be a U.S. Person. The initial
Administrators shall be Dennis R. Woods, Kenneth L. Donahue and David L.
Eytcheson. There shall at all times be at least one Administrator.

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

                                       24
<Page>

              Section 4.6  INITIAL DELAWARE TRUSTEE.

              The initial Delaware Trustee shall be the Bank of New York
(Delaware).

              Section 4.7  APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES AND
ADMINISTRATORS.

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

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

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

                                       25
<Page>

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

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

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

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

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

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

              (e)  Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Delaware Secretary of State identifying the name
and principal place of business of such Delaware Trustee in the State of
Delaware.

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              Section 4.8  VACANCIES AMONG TRUSTEES.

              If a Trustee ceases to hold office for any reason and the number
of Trustees is not reduced pursuant to Section 4.1, or if the number of Trustees
is increased pursuant to Section 4.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Trustees or, if there are more
than two, a majority of the Trustees shall be conclusive evidence of the
existence of such vacancy. The vacancy shall be filled with a Trustee appointed
in accordance with Section 4.7.

              Section 4.9  EFFECT OF VACANCIES.

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

              Section 4.10 MEETINGS OF THE TRUSTEES AND THE ADMINISTRATORS.

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

                                       27
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              Section 4.11 DELEGATION OF POWER.

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

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

              Section 4.12 CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

              Any Person into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, provided such Person
shall be otherwise qualified and eligible under this Article, provided, further,
that such Person shall file an amendment to the Certificate of Trust with the
Delaware Secretary of State as contemplated in Section 4.7(e) without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.

                                    ARTICLE V
                                  DISTRIBUTIONS

              Section 5.1  DISTRIBUTIONS.

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

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

              Section 6.1  GENERAL PROVISIONS REGARDING SECURITIES.

              (a) The Administrators shall on behalf of the Trust issue one
series of capital securities substantially in the form of Exhibit A-1
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I (the "Capital Securities") and

                                       28
<Page>

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

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

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

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

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

              Section 6.2  PAYING AGENT, TRANSFER AGENT, CALCULATION AGENT AND
REGISTRAR.

              The Trust shall maintain in New York, New York, an office or
agency where the Securities may be presented for payment (the "Paying Agent"),
and an office or agency where Securities may be presented for registration of
transfer or exchange (the "Transfer Agent"). The Trust shall keep or cause to be
kept at such office or agency a register for the purpose of registering
Securities and transfers and exchanges of Securities, such register to be held
by a registrar (the "Registrar"). The Administrators may appoint the Paying
Agent, the Registrar and the Transfer Agent, and may appoint one or more
additional Paying Agents or one or more co-Registrars, or one or more
co-Transfer Agents in such other locations as it shall determine. The term
"Paying Agent" includes any additional paying agent, the term "Registrar"
includes any additional registrar or co-Registrar and the term "Transfer Agent"
includes any additional

                                       29
<Page>

transfer agent. The Administrators may change any Paying Agent, Transfer Agent
or Registrar at any time without prior notice to any Holder. The Administrators
shall notify the Institutional Trustee of the name and address of any Paying
Agent, Transfer Agent and Registrar not a party to this Declaration. The
Administrators hereby initially appoint the Institutional Trustee to act as
Paying Agent, Transfer Agent and Registrar for the Capital Securities and the
Common Securities. The Institutional Trustee or any of its Affiliates in the
United States may act as Paying Agent, Transfer Agent or Registrar.

              The Trust shall also appoint a Calculation Agent, which shall
determine the Coupon Rate in accordance with the terms of the Securities. The
Trust initially appoints the Institutional Trustee, in its individual capacity
and not as Institutional Trustee, as Calculation Agent.

              Section 6.3  FORM AND DATING.

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

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

              Section 6.4  MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.IF:

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

              (b) there shall be delivered to the Registrar, the
Administrators and the Institutional Trustee such security or indemnity as may
be required by them to keep each of them harmless; then, in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
an Administrator on behalf of the Trust shall execute (and in the case of a
Capital

                                       30
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Security Certificate, the Institutional Trustee shall authenticate) and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like denomination. In connection with
the issuance of any new Certificate under this Section 6.4, the Registrar or the
Administrators may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith. Any
duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.

              Section 6.5  TEMPORARY SECURITIES.

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

              Section 6.6  CANCELLATION.

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

              Section 6.7  RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS.

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

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

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

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

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

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

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

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

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

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

              Upon receipt by the Institutional Trustee of written notice
declaring such an acceleration, or rescission and annulment thereof, by Holders
of any part of the Capital Securities a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days

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<Page>

after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.7.

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

                                  ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

              Section 7.1  DISSOLUTION AND TERMINATION OF TRUST. (a) The Trust
shall dissolve on the first to occur of:

              (i) unless earlier dissolved, on July 25, 2036, the expiration
         of the term of the Trust;

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

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

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

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

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

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

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<Page>

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

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

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

              Section 8.1  GENERAL.

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

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

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

              (d) The Registrar shall provide for the registration of Securities
and of transfers of Securities, which will be effected without charge but only
upon payment (with such indemnity as the Registrar may require) in respect of
any tax or other governmental charges that may be imposed in relation to it.
Upon surrender for registration of transfer of any Securities, the Registrar
shall cause one or more new Securities to be issued in the name of the
designated transferee or transferees. Any Security issued upon any registration
of transfer or exchange pursuant to the terms of this Declaration shall evidence
the same Security and shall be entitled to the same benefits under this
Declaration as the Security surrendered upon such registration of transfer or
exchange. Every Security surrendered for registration of transfer shall be
accompanied by a written instrument of transfer in form similar to Exhibits B
and C satisfactory to the Registrar duly executed by the Holder or such Holder's
attorney duly authorized in

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<Page>

writing. Each Security surrendered for registration of transfer shall be
canceled by the Institutional Trustee pursuant to Section 6.6. A transferee of a
Security shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Security. By
acceptance of a Security, each transferee shall be deemed to have agreed to be
bound by this Declaration.

              (e) Neither the Trust nor the Registrar shall be required (i) to
issue, register the transfer of, or exchange any Securities during a period
beginning at the opening of business 15 days before the day of any selection of
Securities for redemption and ending at the close of business on the earliest
date on which the relevant notice of redemption is deemed to have been given to
all Holders of the Securities to be redeemed, or (ii) to register the transfer
or exchange of any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.

              Section 8.2  TRANSFER PROCEDURES AND RESTRICTIONS.

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

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

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

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

                                       35
<Page>

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

              THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT 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 (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR
HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN
EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO
WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING
ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY
USING THE ASSETS OF ANY

                                       36
<Page>

EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE
WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.

              IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE DECLARATION OF TRUST TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.

              THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF
$1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK
HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND
OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT
TO BE THE HOLDER OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED
TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE
SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

              (d) MINIMUM TRANSFERS. Capital Securities may only be transferred
in minimum blocks of $100,000 aggregate liquidation amount (100 Capital
Securities) and multiples of $1,000 in excess thereof. Any attempted transfer of
Capital Securities in a block having an aggregate liquidation amount of less
than $100,000 shall be deemed to be voided and of no legal effect whatsoever.
Any such purported transferee shall be deemed not to be a Holder of such Capital
Securities for any purpose, including, but not limited to, the receipt of
Distributions on such Capital Securities, and such purported transferee shall be
deemed to have no interest whatsoever in such Capital Securities.

              Section 8.3  DEEMED SECURITY HOLDERS.

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

                                       37
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                                   ARTICLE IX
                           LIMITATION OF LIABILITY OF
                    HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

              Section 9.1  LIABILITY.

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

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

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

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

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

              Section 9.2  EXCULPATION.

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

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

                                       38
<Page>

              Section 9.3  FIDUCIARY DUTY.

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

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

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

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

              Section 9.1  INDEMNIFICATION. (a) (i) The Sponsor shall indemnify,
to the full extent permitted by law, any Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by reason
of the fact that he is or was an Indemnified Person against expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Indemnified
Person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.

              (ii) The Sponsor shall indemnify, to the full extent permitted by
         law, any Indemnified Person who was or is a party or is threatened to
         be made a party to any threatened, pending or completed action or suit
         by or in the right of the Trust to procure a judgment in its favor by
         reason of the fact that he is or was an Indemnified Person against
         expenses (including attorneys' fees and expenses) actually and
         reasonably incurred by him in connection with the defense or settlement
         of such action or suit if he acted in good faith and in a manner he
         reasonably believed to be in or not opposed to the best interests of
         the Trust and except that no such indemnification shall be made in
         respect of any

                                       39
<Page>

         claim, issue or matter as to which such Indemnified Person shall have
         been adjudged to be liable to the Trust unless and only to the extent
         that the Court of Chancery of Delaware or the court in which such
         action or suit was brought shall determine upon application that,
         despite the adjudication of liability but in view of all the
         circumstances of the case, such person is fairly and reasonably
         entitled to indemnity for such expenses which such Court of Chancery or
         such other court shall deem proper.

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

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

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

                                       40
<Page>

              (b) The Sponsor shall indemnify, to the fullest extent permitted
by applicable law, each Indemnified Person from and against any and all loss,
damage, liability, tax (other than taxes based on the income of such Indemnified
Person), penalty, expense or claim of any kind or nature whatsoever incurred by
such Indemnified Person arising out of or in connection with or by reason of the
creation, administration or termination of the Trust, or any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of authority conferred on such Indemnified Person by this Declaration,
except that no Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage, liability, tax, penalty, expense or claim incurred by such
Indemnified Person by reason of negligence or willful misconduct with respect to
such acts or omissions.

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

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

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

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

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

                                       41
<Page>

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

              Section 9.2  OUTSIDE BUSINESSES.

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

              Section 9.3  COMPENSATION; FEE. THE SPONSOR AGREES:

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

              (b) except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Declaration (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct.

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

                                   ARTICLE X
                                   ACCOUNTING

              Section 10.1 FISCAL YEAR.

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

                                       42
<Page>

              Section 10.2 CERTAIN ACCOUNTING MATTERS.

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

              (b) The Administrators shall either (i) cause each Form 10K and
Form 10Q prepared by the Sponsor and filed with the Securities and Exchange
Commission in accordance with the Securities Exchange Act of 1934 to be
delivered to each Holder of Securities, within 90 days after the filing of each
Form 10K and within 30 days after the filing of each Form 10Q or (ii) cause to
be prepared at the principal office of the Trust in the United States, as
defined for purposes of Treasury regulations section 301.7701-7, and delivered
to each of the Holders of Securities, within 90 days after the end of each
Fiscal Year of the Trust, annual financial statements of the Trust, including a
balance sheet of the Trust as of the end of such Fiscal Year, and the related
statements of income or loss.

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

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

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

              Section 10.3 BANKING.

              The Trust shall maintain one or more bank accounts in the United
States, as defined for purposes of Treasury regulations section 301.7701-7, in
the name and for the sole benefit of the Trust; provided, however, that all
payments of funds in respect of the Debentures held by the Institutional Trustee
shall be made directly to the Property Account and no other funds of the Trust
shall be deposited in the Property Account. The sole signatories for such
accounts (including the Property Account) shall be designated by the
Institutional Trustee.

                                       43
<Page>

              Section 10.4 WITHHOLDING.

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

                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

              Section 11.1 AMENDMENTS.

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

              (i) the Institutional Trustee,

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

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

              (iv) the Holder of a Majority in liquidation amount of the Common
         Securities.

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

              (i) unless the Institutional Trustee shall have first received

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

                                       44
<Page>

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

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

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

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

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

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

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

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

              (e) Section 9.1(b) and 9.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.

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

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

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

                                       45
<Page>

              (i) cure any ambiguity;

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

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

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

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

              Section 11.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY
WRITTEN CONSENT.

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

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

              (i) notice of any such meeting shall be given to all the Holders
         of the Securities having a right to vote thereat at least 7 days and
         not more than 60 days before the date of such meeting. Whenever a vote,
         consent or approval of the Holders of the Securities is permitted or
         required under this Declaration or the rules of any stock exchange on
         which the Capital Securities are listed or admitted for trading, if
         any, such vote, consent or approval may be given at a meeting of the
         Holders of the Securities. Any action that may be taken at a meeting of
         the Holders of the Securities may be taken without a meeting if a

                                       46
<Page>

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

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

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

                                  ARTICLE XII
                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
                              AND DELAWARE TRUSTEE

              Section 12.1 REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL
TRUSTEE.

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

                                       47
<Page>

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

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

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

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

              Section 12.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.

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

              (a) if it is not a natural person, the Delaware Trustee is duly
organized, validly existing and in good standing under the laws of the State of
Delaware;

              (b) if it is not a natural person, the execution, delivery and
performance by the Delaware Trustee of this Declaration has been duly authorized
by all necessary corporate action on the part of the Delaware Trustee. This
Declaration has been duly executed and delivered by the Delaware Trustee, and it
constitutes a legal, valid and binding obligation of the Delaware Trustee,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, reorganization, moratorium, insolvency and other similar laws
affecting creditors' rights generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law);

              (c) if it is not a natural person, the execution, delivery and
performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the charter or by-laws of the Delaware Trustee;

              (d) it has trust power and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, this Declaration;

                                       48
<Page>

              (e) 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;
and

              (f) the Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, it is an entity which has its
principal place of business in the State of Delaware and, in either case, a
Person that satisfies for the Trust the requirements of Section 3807 of the
Business Trust Act.

                                  ARTICLE XIII
                                  MISCELLANEOUS

              Section 13.1 NOTICES.

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

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

                           USB Capital Trust I
                           c/o United Security Bancshares
                           1525 E. Shaw Avenue
                           Fresno, CA 93710
                           Attention: Kenneth L. Donahue

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

                           The Bank of New York (Delaware)
                           White Clay Center, Route 273
                           Newark, Delaware 19711
                           Attention: Corporate Trust Administration
                           Telecopy: 302-283-8279

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

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

                                       49
<Page>

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

                           United Security Bancshares
                           1525 E. Shaw Avenue
                           Fresno, CA  93710
                           Attention: Kenneth L. Donahue

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

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

              Section 13.2 GOVERNING LAW.

              This Declaration and the rights and obligations of the parties
hereunder shall be governed by and interpreted in accordance with the law of the
State of Delaware and all rights, obligations and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware.

              Section 13.3 SUBMISSION TO JURISDICTION.

              Each of the parties hereto agrees that any suit, action or
proceeding arising out of or based upon this Declaration, or the transactions
contemplated hereby, may be instituted in any of the courts of the State of New
York and the United State District Courts, in each case located in the Borough
of Manhattan, City and State of New York, and further agrees to submit to the
jurisdiction of any competent court in the place of its corporate domicile in
respect of actions brought against it as a defendant. In addition, each such
party irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of such suit,
action or proceeding brought in any such court and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum and irrevocably waives any right to which it
may be entitled on account of its place of corporate domicile. Each such party
hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Declaration or the transactions
contemplated hereby. Each such party agrees that final judgment in any
proceedings brought in such a court shall be conclusive and binding upon it and
may be enforced in any court to the jurisdiction of which it is subject by a
suit upon such judgment.

                                       50
<Page>

              Each of the Sponsor and the Holder of the Common Securities
irrevocably consents to the service of process on it in any such suit, action or
proceeding in any such court by the mailing thereof by registered or certified
mail, postage prepaid, to it at its address given in or pursuant to Section 13.1
hereof.

              To the extent permitted by law, nothing herein contained shall
preclude any party from effecting service of process in any lawful manner or
from bringing any suit, action or proceeding in respect of this Declaration in
any other state, country or place.

              Section 13.4 INTENTION OF THE PARTIES.

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

              Section 13.5 HEADINGS.

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

              Section 13.6 SUCCESSORS AND ASSIGNS.

              Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.

              Section 13.7 PARTIAL ENFORCEABILITY.

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

              Section 13.8 COUNTERPARTS.

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

                                       51
<Page>

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

                                              THE BANK OF NEW YORK (DELAWARE)
                                                as Delaware Trustee

                                              By: /s/ James Longshaw, SVP
                                                  -----------------------
                                                  Name: James Longshaw, SVP
                                                  Title:

                                              THE BANK OF NEW YORK
                                                as Institutional Trustee

                                              By: /s/ Mary LaGumina
                                                  -----------------------
                                                  Name:  Mary LaGumina
                                                  Title: Vice President

                                              UNITED SECURITY BANCSHARES
                                                as Sponsor

                                              By: /s/ Kenneth L.Donahue
                                                  -----------------------
                                                  Name:  Kenneth L.Donahue
                                                  Title: Senior Vice President
                                                         and Chief Finanical
                                                         Officer

                                              By:
                                                  -----------------------
                                                  Dennis R.Woods
                                                  Administrator

                                              By:
                                                  -----------------------
                                                  Kenneth L.Donahue
                                                  Administrator

                                              By:
                                                  -----------------------
                                                  David L.Eytcheson
                                                  Administrator

<Page>

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

                                              THE BANK OF NEW YORK (DELAWARE)
                                                as Delaware Trustee

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

                                              THE BANK OF NEW YORK
                                                as Institutional Trustee

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

                                              UNITED SECURITY BANCSHARES
                                                as Sponsor

                                              By: /s/ Kenneth L.Donahue
                                                  -----------------------
                                                  Name:  Kenneth L.Donahue
                                                  Title: Senior Vice President
                                                         and Chief Finanical
                                                         Officer

                                              By: /s/ Dennis R. Wood
                                                  -----------------------
                                                  Dennis R.Woods

                                              By: /s/ Kenneth L. Donahue
                                                  -----------------------
                                                  Kenneth L.Donahue

                                              By: /s/ David L. Eytcheson
                                                  -----------------------
                                                  David L.Eytcheson

<Page>

                                     ANNEX I

                                    TERMS OF
                             FLOATING RATE MMCapS(SM)
                         FLOATING RATE COMMON SECURITIES

              Pursuant to Section 6.1 of the Amended and Restated Declaration of
Trust, dated as of July 16, 2001 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration):

              1.   DESIGNATION AND NUMBER.

              (a)  CAPITAL SECURITIES. 15,000 Capital Securities of USB Capital
Trust I (the "Trust"), with an aggregate stated liquidation amount with respect
to the assets of the Trust of Fifteen Million Dollars ($15,000,000) and a stated
liquidation amount with respect to the assets of the Trust of $1,000 per Capital
Security, are hereby designated for the purposes of identification only as the
"Floating Rate MMCapS(SM) (the "Capital Securities"). The Capital Security
Certificates evidencing the Capital Securities shall be substantially in the
form of Exhibit A-1 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or practice
or to conform to the rules of any stock exchange on which the Capital Securities
are listed, if any.

              (b)  COMMON SECURITIES. 464 Common Securities of the Trust (the
"Common Securities") will be evidenced by Common Security Certificates
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice. In the absence of an Event of Default the Common
Securities will have an aggregate stated liquidation amount with respect to the
assets of the Trust of Four Hundred Sixty-Four Thousand Dollars ($464,000) and a
stated liquidation amount with respect to the assets of the Trust of $1,000 per
Common Security.

              2.   DISTRIBUTIONS.(a) Distributions payable on each Security will
be payable at a variable per annum rate of interest, reset semi-annually, equal
to LIBOR (as defined in the Indenture) plus 3.75% (the "Coupon Rate") of the
stated liquidation amount of $1,000 per Security, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee;
PROVIDED, that the applicable Coupon Rate may not exceed 12.50% through the
Distribution Payment Date in July 2011. Except as set forth below in respect of
an Extension Period, Distributions in arrears for more than one semi-annual
period will bear interest thereon compounded semi-annually at the applicable
Coupon Rate for each such semi-annual period (to the extent permitted by
applicable law). The term "Distributions" as used herein includes cash
distributions and any such compounded distributions payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Institutional Trustee and to the extent
the Institutional Trustee has funds available in the Property Account therefor.
The amount of Distributions payable for any period will be computed for any full
semi-annual period on the basis of a 360-day year and the actual number of days
elapsed in the relevant period.

                                    Annex I-1
<Page>

              (b)  LIBOR shall be determined BY the Calculation Agent in
accordance with the following provisions:

                   (1)  On the second LIBOR Business Day (provided that on such
         day commercial banks are open for business (including dealings in
         foreign currency deposits) in London (a "LIBOR Banking Day"), and
         otherwise the next preceding LIBOR Business Day that is also a LIBOR
         Banking Day) prior August 1 and February 1 (except, with respect to the
         first interest payment period, on July 12, 2001), (each such day, a
         "LIBOR Determination Date"), LIBOR shall equal the rate, as obtained by
         the Calculation Agent for six-month Eurodollar deposits in Europe which
         appears on Telerate Page 3750 (as defined in the International Swaps
         and Derivatives Association, Inc. 1991 Interest Rate and Currency
         Exchange Definitions) or such other page as may replace such Page 3750,
         as of 11:00 a.m. (London time) on such LIBOR Determination Date, as
         reported by Bloomberg Financial Markets Commodities News. "LIBOR
         Business Day" means any day that is not a Saturday, Sunday or other day
         on which commercial banking institutions in New York, New York, are
         authorized or obligated by law or executive order to be closed. If such
         rate is superseded on Telerate Page 3750 by a corrected rate before
         12:00 noon (London time) on the same LIBOR Determination Date, the
         corrected rate as so substituted will be the applicable LIBOR for that
         LIBOR Determination Date.

                    (2) If, on any LIBOR Determination Date, such rate does not
         appear on Telerate Page 3750 or such other page as may replace such
         Page 3750, the Calculation Agent shall determine the arithmetic mean of
         the offered quotations of the Reference Banks (as defined below) to
         leading banks in the London interbank market for six-month U.S. Dollar
         deposits in Europe (in an amount determined by the Calculation Agent)
         by reference to requests for quotations as of approximately 11:00 a.m.
         (New York time) on the LIBOR Determination Date made by the Calculation
         Agent to the Reference Banks. If, on any LIBOR Determination Date, at
         least two of the Reference Banks provide such quotations, LIBOR shall
         equal the arithmetic mean of such quotations. If, on any LIBOR
         Determination Date, only one or none of the Reference Banks provide
         such quotations, LIBOR shall be deemed to be the arithmetic mean of the
         offered quotations that at least two leading banks in The City of New
         York (as selected by the Calculation Agent) are quoting on the relevant
         LIBOR Determination Date for six-month U.S. Dollar deposits in Europe
         at approximately 11:00 a.m. (New York time) (in an amount determined by
         the Calculation Agent). As used herein, "Reference Banks" means four
         major banks in the London interbank market selected by the Calculation
         Agent.

                    (3) If the Calculation Agent is required but is unable to
         determine a rate in accordance with at least one of the procedures
         provided above, LIBOR shall be LIBOR in effect on the previous LIBOR
         Determination Date (whether or not LIBOR for such period was in fact
         determined on such LIBOR Determination Date).

              (c)  All percentages resulting from any calculations on the Debt
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward).

                                    Annex I-2
<Page>

              (d)  On each LIBOR Determination Date, the Calculation Agent shall
notify the Company and the Paying Agent of the applicable Coupon Rate in effect
for the related interest payment period. The Calculation Agent shall, upon the
request of the holder of any Debt Securities, provide the Coupon Rate then in
effect. All calculations made by the Calculation Agent in the absence of
manifest error shall be conclusive for all purposes and binding on the Company
and the Holders of the Debt Securities. The Paying Agent shall be entitled to
rely on information received from the Calculation Agent or the Company as to the
Coupon Rate. The Company shall, from time to time, provide any necessary
information to the Paying Agent relating to any original issue discount and
interest on the Debt Securities that is included in any payment and reportable
for taxable income calculation purposes.

              (e)  Distributions on the Securities will be cumulative, will
accrue from the date of original issuance, and will be payable, subject to
extension of distribution payment periods as described herein, semi-annually in
arrears on January 25th and July 25th of each year, commencing on January 25,
2002 (each, a "Distribution Payment Date"). The Debenture Issuer has the right
under the Indenture to defer payments of interest on the Debentures by extending
the interest payment period for up to 10 consecutive semi-annual periods (each,
an "Extension Period") at any time and from time to time on the Debentures,
subject to the conditions described below, during which Extension Period no
interest shall be due and payable (except any Additional Interest that may be
due and payable) although such interest would continue to accrue on the
Debentures, and interest will accrue on such Deferred Interest at an annual rate
equal to the Coupon Rate in effect for each such Extension Period, compounded
semi-annually to the extent permitted by law. No Extension Period may end on a
date other than a Distribution Payment Date. At the end of any such Extension
Period the Debenture Issuer shall pay all Deferred Interest; provided, however,
that no Extension Period may extend beyond the Maturity Date and provided
further, that, during any such Extension Period, the Debenture Issuer may not
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Debenture
Issuer's capital stock or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Debenture Issuer that rank PARI PASSU in all respects with or junior in interest
to the Debentures (other than (a) repurchases, redemptions or other acquisitions
of shares of capital stock of the Debenture Issuer in connection with any
employment contract, benefit plan or other similar arrangement with or for the
benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Debenture Issuer (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of any exchange or conversion of any class or
series of the Debenture Issuer's capital stock (or any capital stock of a
subsidiary of the Debenture Issuer) for any class or series of the Debenture
Issuer's capital stock or of any class or series of the Debenture Issuer's
indebtedness for any class or series of the Debenture Issuer's capital stock,
(c) the purchase of fractional interests in shares of the Debenture Issuer's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend

                                    Annex I-3
<Page>

stock or the stock issuable upon exercise of such warrants, options or other
rights is the same stock as that on which the dividend is being paid or ranks
PARI PASSU with or junior to such stock). Prior to the termination of any
Extension Period, the Debenture Issuer may further extend such period, provided
that such period together with all such previous and further consecutive
extensions thereof shall not exceed 10 consecutive semi-annual periods, or
extend beyond the Maturity Date. Upon the termination of any Extension Period
and upon the payment of all Deferred Interest, the Debenture Issuer may commence
a new Extension Period, subject to the foregoing requirements. No interest or
Deferred Interest shall be due and payable during an Extension Period, except at
the end thereof, but each installment of interest that would otherwise have been
due and payable during such Extension Period shall bear Deferred Interest. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, or, if such date is not a Distribution
Payment Date, on the immediately following Distribution Payment Date, to Holders
of the Securities as they appear on the books and records of the Trust on the
record date immediately preceding such date. Distributions on the Securities
must be paid on the dates payable (after giving effect to any Extension Period)
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account of the Trust. The Trust's funds available
for Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

              (f) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. The relevant record dates shall be selected by the Administrators,
which dates shall be 15 days before the relevant payment dates. Distributions
payable on any Securities that are not punctually paid on any Distribution
Payment Date, as a result of the Debenture Issuer having failed to make a
payment under the Debentures, as the case may be, when due (taking into account
any Extension Period), will cease to be payable to the Person in whose name such
Securities are registered on the relevant record date, and such defaulted
Distribution will instead be payable to the Person in whose name such Securities
are registered on the special record date or other specified date determined in
accordance with the Indenture. If any date on which Distributions are payable on
the Securities is not a Business Day, then payment of the Distribution payable
on such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except that,
if such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such payment date.

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

              3.  LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of the
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each, a "Liquidation") other than in connection with a redemption of
the Debentures, the Holders of the Securities will be entitled to receive out of
the assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the aggregate of the
stated liquidation

                                    Annex I-4
<Page>

amount of $1,000 per Security plus accrued and unpaid Distributions thereon to
the date of payment (such amount being the "Liquidation Distribution"), unless
in connection with such Liquidation, the Debentures in an aggregate stated
principal amount equal to the aggregate stated liquidation amount of such
Securities, with an interest rate equal to the Coupon Rate of, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on, and having the same record date as, such Securities, after
paying or making reasonable provision to pay all claims and obligations of the
Trust in accordance with Section 3808(e) of the Business Trust Act, shall be
distributed on a Pro Rata basis to the Holders of the Securities in exchange for
such Securities.

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

              The Trust shall dissolve on the first to occur of (i) July 25,
2036, the expiration of the term of the Trust, (ii) a Bankruptcy Event with
respect to the Sponsor, Trust or the Debenture Issuer, (iii) (other than in
connection with a merger, consolidation or similar transaction not prohibited by
the Indenture, this Declaration or the Guarantee, as the case may be) the filing
of a certificate of dissolution of the Sponsor or upon the revocation of the
charter of the Sponsor and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) the distribution to the Holders
of the Securities of the Debentures, upon exercise of the right of the Holder of
all of the outstanding Common Securities to dissolve the Trust as described
above, (v) the entry of a decree of a judicial dissolution of the Sponsor or the
Trust, or (vi) when all of the Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to the
Holders in accordance with the terms of the Securities. As soon as practicable
after the dissolution of the Trust and upon completion of the winding up of the
Trust, the Trust shall terminate upon the filing of a certificate of
cancellation with the Secretary of State of the State of Delaware.

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

                                    Annex I-5
<Page>

              If, upon any such Liquidation the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on such Capital Securities shall be paid to the Holders of the
Securities on a pro rata basis, except that if an Event of Default has occurred
and is continuing, the Capital Securities shall have a preference over the
Common Securities with regard to such distributions.

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

              After the date for any distribution of the Debentures upon
dissolution of the Trust, (i) the Securities of the Trust will be deemed to be
no longer outstanding, (ii) any certificates representing the Capital Securities
will be deemed to represent undivided beneficial interests in such of the
Debentures as have an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the distribution rate
of, and bearing accrued and unpaid interest equal to accrued and unpaid
distributions on, the Securities until such certificates are presented to the
Debenture Issuer or its agent for transfer or reissuance (and until such
certificates are so surrendered, no payments of interest or principal shall be
made to Holders of Securities in respect of any payments due and payable under
the Debentures) and (iii) all rights of Holders of Securities under the Capital
Securities or the Common Securities, as applicable, shall cease, except the
right of such Holders to receive Debentures upon surrender of certificates
representing such Securities.

              4.   REDEMPTION AND DISTRIBUTION.

              (a)  The Debentures will mature on July 25, 2031. The Debentures
may be redeemed by the Debenture Issuer, in whole or in part, on any January
25th or July 25th on or after July 25, 2006, at the Redemption Price, upon not
less than 30 days nor more than 60 day's notice to Holders of such Debentures.
In addition, upon the occurrence and continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event, the Debentures may be redeemed by
the Debenture Issuer in whole but not in part, at any time within 90 days
following the occurrence of such Tax Event, Investment Company Event or Capital
Treatment Event, as the case may be (the "Special Redemption Date"), at the
Special Redemption Price , upon not less than 30 nor more than 60 days' notice
to Holders of the Debentures so long as such Tax Event, Investment Company Event
or Capital Treatment Event, as the case may be, is continuing. In each case, the
right of the Debenture Issuer to redeem the Debentures is subject to the
Debenture Issuer having received prior approval from the Federal Reserve, if
then required under applicable capital guidelines or policies of the Federal
Reserve.

              "Tax Event" means the receipt by the Debenture Issuer and the
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of any amendment to or change (including any announced prospective
change) in the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement (including any private letter ruling,

                                    Annex I-6
<Page>

technical advice memorandum, regulatory procedure, notice or announcement (an
"Administrative Action")) or judicial decision interpreting or applying such
laws or regulations, regardless of whether such Administrative Action or
judicial decision is issued to or in connection with a proceeding involving the
Debenture Issuer or the Trust and whether or not subject to review or appeal,
which amendment, clarification, change, Administrative Action or decision is
enacted, promulgated or announced, in each case on or after the date of original
issuance of the Debentures, there is more than an insubstantial risk that: (i)
the Trust is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Debentures; (ii) interest payable by the Debenture Issuer on the Debentures
is not, or within 90 days of the date of such opinion, will not be, deductible
by the Debenture Issuer, in whole or in part, for United States federal income
tax purposes; or (iii) the Trust is, or will be within 90 days of the date of
such opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.

              "Investment Company Event" means the receipt by the Debenture
Issuer and the Trust of an opinion of counsel experienced in such matters to the
effect that, as a result of the occurrence of a change in law or regulation or
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that the Trust is or, within 90 days of the date
of such opinion will be, considered an "investment company" that is required to
be registered under the Investment Company Act of 1940, as amended, which change
or prospective change becomes effective or would become effective, as the case
may be, on or after the date of the original issuance of the Debentures.

              "Capital Treatment Event" means the receipt by the Debenture
Issuer and the Trust of an opinion of counsel experienced in such matters to the
effect that, as a result of the occurrence of any amendment to, or change in,
the laws, rules or regulations of the United States or any political subdivision
thereof or therein, or as the result of any official or administrative
pronouncement or action or decision interpreting or applying such laws, rules or
regulations, which amendment or change is effective or which pronouncement,
action or decision is announced on or after the date of original issuance of the
Debentures, there is more than an insubstantial risk that the Debenture Issuer
will not, within 90 days of the date of such opinion, be entitled to treat an
amount equal to the aggregate Liquidation Amount of the Capital Securities as
"Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable to
the Debenture Issuer; provided, however, that the distribution of the Debentures
in connection with the Liquidation of the Trust by the Debenture Issuer shall
not in and of itself constitute a Capital Treatment Event unless such
Liquidation shall have occurred in connection with a Tax Event or an Investment
Company Event.

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

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

                                    Annex I-7
<Page>

<Table>
<Caption>

                      Year Beginning                       Percentage
                      --------------                       ----------
                <S>                                        <C>
                      July 25, 2006                        107.6875%
                      July 25, 2007                        106.1500%
                      July 25, 2008                        104.6125%
                      July 25, 2009                        103.0750%
                      July 25, 2010                        101.5375%
                July 25, 2011 and after                    100.0000%
</Table>

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

              "Special Redemption Price" means (1) if the Special Redemption
Date is before July 25, 2006, the greater of (a) 100% of the principal amount of
the Debentures being redeemed pursuant to Section 10.02 of the Indenture or (b)
as determined by a Quotation Agent, the sum of the present values of the
principal amount and the premium payable as part of the Redemption Price with
respect to a redemption as of July 25, 2006 together with the present value of
interest payments calculated at a fixed per annum rate of interest equal to
10.25% over the Remaining Life of such Debentures, discounted to the Special
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 0.50%, plus, in the case of
either (a) or (b), accrued and unpaid interest on such Debentures to the Special
Redemption Date and (2) if the Special Redemption Date is on or after July 25,
2006, the Redemption Price for such Special Redemption Date.

              "Comparable Treasury Issue" means, with respect to any Special
Redemption Date, the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Life. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
July 25, 2006, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.

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

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

                                    Annex I-8
<Page>

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

              "Redemption Date" shall mean the date fixed for the redemption of
Capital Securities, which shall be any January 25th or July 25th commencing on
July 25, 2006.

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

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

              "Remaining Life" means, with respect to any Debenture, the period
from the Special Redemption Date for such Debenture to July 25, 2006.

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

              (b)  Upon the repayment in full at maturity or redemption in whole
or in part of the Debentures (other than following the distribution of the
Debentures to the Holders of the Securities), the proceeds from such repayment
or payment shall concurrently be applied to redeem Pro Rata at the applicable
Redemption Price, Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Debentures so repaid or redeemed; provided,
however, that holders of such Securities shall be given not less than 30 nor
more than 60 days' notice of such redemption (other than at the scheduled
maturity of the Debentures).

                                    Annex I-9
<Page>

              (c)  If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be as described in Section
4(e)(ii) below.

              (d)  The Trust may not redeem fewer than all the outstanding
Capital Securities unless all accrued and unpaid Distributions have been paid on
all Capital Securities for all semi-annual Distribution periods terminating on
or before the date of redemption.

              (e)  Redemption or Distribution Procedures.

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

                   (ii)  In the event that fewer than all the outstanding
         Securities are to be redeemed, the Securities to be redeemed shall be
         redeemed Pro Rata from each Holder of Capital Securities.

                   (iii) If the Securities are to be redeemed and the Trust
         gives a Redemption/Distribution Notice, which notice may only be issued
         if the Debentures are redeemed as set out in this Section 4 (which
         notice will be irrevocable), then, provided that the Institutional
         Trustee has a sufficient amount of cash in connection with the related
         redemption or maturity of the Debentures, the Institutional Trustee
         will pay the relevant Redemption Price to the Holders of such
         Securities by check mailed to the address of each such Holder appearing
         on the books and records of the Trust on the redemption date. If a
         Redemption/Distribution Notice shall have been given and funds
         deposited as required then immediately prior to the close of business
         on the date of such deposit Distributions will cease to accrue on the
         Securities so called for redemption and all rights of Holders of such
         Securities so called for redemption will cease, except the right of the
         Holders of such Securities to receive the applicable Redemption Price
         specified in Section 4(a), but without interest on such Redemption
         Price. If any date fixed for redemption of Securities is not a Business
         Day, then payment of any such Redemption Price payable on such date
         will be made on the next succeeding day that is a Business Day (and
         without any interest or other payment in respect of any such delay)
         except that, if such Business Day falls in the next calendar year, such
         payment will be made on the immediately preceding Business Day, in each
         case with the same force and

                                   Annex I-10
<Page>

         effect as if made on such date fixed for redemption. If payment of the
         Redemption Price in respect of any Securities is improperly withheld or
         refused and not paid either by the Trust or by the Debenture Issuer as
         guarantor pursuant to the Guarantee, Distributions on such Securities
         will continue to accrue at the then applicable rate from the original
         redemption date to the actual date of payment, in which case the actual
         payment date will be considered the date fixed for redemption for
         purposes of calculating the Redemption Price. In the event of any
         redemption of the Capital Securities issued by the Trust in part, the
         Trust shall not be required to (i) issue, register the transfer of or
         exchange any Security during a period beginning at the opening of
         business 15 days before any selection for redemption of the Capital
         Securities and ending at the close of business on the earliest date on
         which the relevant notice of redemption is deemed to have been given to
         all Holders of the Capital Securities to be so redeemed or (ii)
         register the transfer of or exchange any Capital Securities so selected
         for redemption, in whole or in part, except for the unredeemed portion
         of any Capital Securities being redeemed in part.

                   (iv)  Redemption/Distribution Notices shall be sent by the
         Administrators on behalf of the Trust (A) in respect of the Capital
         Securities, to the Holders thereof, and (B) in respect of the Common
         Securities, to the Holder thereof.

                   (v)   Subject to the foregoing and applicable law (including,
         without limitation, United States federal securities laws), and
         provided that the acquiror is not the Holder of the Common Securities
         or the obligor under the Indenture, the Sponsor or any of its
         subsidiaries may at any time and from time to time purchase outstanding
         Capital Securities by tender, in the open market or by private
         agreement.

              5.   VOTING RIGHTS - CAPITAL SECURITIES. (a) Except as provided
under Sections 5(b) and 7 and as otherwise required by law and the Declaration,
the Holders of the Capital Securities will have no voting rights. The
Administrators are required to call a meeting of the Holders of the Capital
Securities if directed to do so by Holders of at least 10% in liquidation amount
of the Capital Securities.

              (b)  Subject to the requirements of obtaining a tax opinion by
the Institutional Trustee in certain circumstances set forth in the last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Capital Securities, voting separately as a class, have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as holder of the Debentures, to (i)
exercise the remedies available under the Indenture as the holder of the
Debentures, (ii) waive any past default that is waivable under the Indenture, or
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv) consent on behalf of all the
Holders of the Capital Securities to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required;
provided, however, that, where a consent or action under the Indenture would
require the consent or act of the holders of greater than a simple majority in
principal amount of Debentures (a "Super Majority") affected thereby, the
Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Capital Securities outstanding which the relevant Super

                                   Annex I-11
<Page>

Majority represents of the aggregate principal amount of the Debentures
outstanding. If the Institutional Trustee fails to enforce its rights under the
Debentures after the Holders of a Majority in liquidation amount of such Capital
Securities have so directed the Institutional Trustee, to the fullest extent
permitted by law, a Holder of the Capital Securities may institute a legal
proceeding directly against the Debenture Issuer to enforce the Institutional
Trustee's rights under the Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest or principal on the Debentures on the date the interest or
principal is payable (or in the case of redemption, the redemption date), then a
Holder of record of the Capital Securities may directly institute a proceeding
for enforcement of payment, on or after the respective due dates specified in
the Debentures, to such Holder directly of the principal of or interest on the
Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of the Capital Securities of such Holder. The Institutional
Trustee shall notify all Holders of the Capital Securities of any default
actually known to the Institutional Trustee with respect to the Debentures
unless (x) such default has been cured prior to the giving of such notice or (y)
the Institutional Trustee determines in good faith that the withholding of such
notice is in the interest of the Holders of such Capital Securities, except
where the default relates to the payment of principal of or interest on any of
the Debentures. Such notice shall state that such Indenture Event of Default
also constitutes an Event of Default hereunder. Except with respect to directing
the time, method and place of conducting a proceeding for a remedy, the
Institutional Trustee shall not take any of the actions described in clause (i),
(ii) or (iii) above unless the Institutional Trustee has obtained an opinion of
tax counsel to the effect that, as a result of such action, the Trust will not
be classified as other than a grantor trust for United States federal income tax
purposes.

              In the event the consent of the Institutional Trustee, as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the written direction of the Holders of the Securities
with respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a Majority
in liquidation amount of the Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require the
consent of a Super Majority, the Institutional Trustee may only give such
consent at the written direction of the Holders of at least the proportion in
liquidation amount of such Securities outstanding which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding. The Institutional Trustee shall not take any such action in
accordance with the written directions of the Holders of the Securities unless
the Institutional Trustee has obtained an opinion of tax counsel to the effect
that, as a result of such action, the Trust will not be classified as other than
a grantor trust for United States federal income tax purposes.

              A waiver of an Indenture Event of Default will constitute a waiver
of the corresponding Event of Default hereunder. Any required approval or
direction of Holders of the Capital Securities may be given at a separate
meeting of Holders of the Capital Securities convened for such purpose, at a
meeting of all of the Holders of the Securities in the Trust or pursuant to
written consent. The Institutional Trustee will cause a notice of any meeting at
which Holders of the Capital Securities are entitled to vote, or of any matter
upon which action

                                   Annex I-12
<Page>

by written consent of such Holders is to be taken, to be mailed to each Holder
of record of the Capital Securities. Each such notice will include a statement
setting forth the following information (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the Holders of
the Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.

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

              In no event will Holders of the Capital Securities have the right
to vote to appoint, remove or replace the Administrators, which voting rights
are vested exclusively in the Sponsor as the Holder of all of the Common
Securities of the Trust. Under certain circumstances as more fully described in
the Declaration, Holders of Capital Securities have the right to vote to
appoint, remove or replace the Institutional Trustee and the Delaware Trustee.

              6.   VOTING RIGHTS - COMMON SECURITIES. (a) Except as provided
under Sections 6(b), 6(c) and 7 and as otherwise required by law and the
Declaration, the Common Securities will have no voting rights.

              (b)  The Holders of the Common Securities are entitled, in
accordance with Article IV of the Declaration, to vote to appoint, remove or
replace any Administrators.

              (c)  Subject to Section 6.7 of the Declaration and only after each
Event of Default (if any) with respect to the Capital Securities has been cured,
waived or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under the Indenture or (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable, provided, however, that, where a consent or action under the
Indenture would require a Super Majority, the Institutional Trustee may only
give such consent or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. Notwithstanding this Section 6(c), the Institutional
Trustee shall not revoke any action previously authorized or approved by a vote
or consent of the Holders of the Capital Securities. Other than with respect to
directing the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee or the Debenture Trustee as

                                   Annex I-13
<Page>

set forth above, the Institutional Trustee shall not take any action described
in clause (i), (ii) or (iii) above, unless the Institutional Trustee has
obtained an opinion of tax counsel to the effect that for the purposes of United
States federal income tax the Trust will not be classified as other than a
grantor trust on account of such action. If the Institutional Trustee fails to
enforce its rights under the Declaration to the fullest extent permitted by law,
any Holder of the Common Securities may institute a legal proceeding directly
against any Person to enforce the Institutional Trustee's rights under the
Declaration, without first instituting a legal proceeding against the
Institutional Trustee or any other Person.

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

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

              7.  AMENDMENTS TO DECLARATION AND INDENTURE.(a) In addition to any
requirements under Section 11.1 of the Declaration, if any proposed amendment to
the Declaration provides for, or the Trustees otherwise propose to effect, (i)
any action that would adversely affect the powers, preferences or special rights
of the Securities, whether by way of amendment to the Declaration or otherwise,
or (ii) the Liquidation of the Trust, other than as described in Section 7.1 of
the Declaration, then the Holders of outstanding Securities, voting together as
a single class, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, affected
thereby; provided, however, if any amendment or proposal referred to in clause
(i) above would adversely affect only the Capital Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.

              (b)  In the event the consent of the Institutional Trustee as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
a Super Majority, the Institutional Trustee may only give such consent at the
written direction of the Holders of at least

                                   Annex I-14
<Page>

the proportion in liquidation amount of the Securities which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding.

              (c)  Notwithstanding the foregoing, no amendment or modification
may be made to a Declaration if such amendment or modification would (i) cause
the Trust to be classified for purposes of United States federal income taxation
as other than a grantor trust, (ii) reduce or otherwise adversely affect the
powers of the Institutional Trustee or (iii) cause the Trust to be deemed an
"investment company" which is required to be registered under the Investment
Company Act.

              (d)  Notwithstanding any provision of the Declaration, the right
of any Holder of the Capital Securities to receive payment of distributions and
other payments upon redemption or otherwise, on or after their respective due
dates, or to institute a suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder. For the protection and enforcement of the foregoing
provision, each and every Holder of the Capital Securities shall be entitled to
such relief as can be given either at law or equity.

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

              9.   RANKING. The Capital Securities rank PARI PASSU with and
payment thereon shall be made Pro Rata with the Common Securities except that,
where an Event of Default has occurred and is continuing, the rights of Holders
of the Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price of, any Common Security, and no other
payment on account of redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all outstanding Capital Securities for all distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all outstanding
Capital Securities then called for redemption, shall have been made or provided
for, and all funds immediately available to the Institutional Trustee shall
first be applied to the payment in full in cash of all Distributions on, or the
Redemption Price of, the Capital Securities then due and payable.

                                   Annex I-15
<Page>

              10.  ACCEPTANCE OF GUARANTEE AND INDENTURE. Each Holder of the
Capital Securities and the Common Securities, by the acceptance of such
Securities, agrees to the provisions of the Guarantee, including the
subordination provisions therein and to the provisions of the Indenture.

              11. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have
no preemptive or similar rights to subscribe for any additional securities.

              12. MISCELLANEOUS. These terms constitute a part of the
Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee,
and the Indenture to a Holder without charge on written request to the Sponsor
at its principal place of business.

                                   Annex I-16
<Page>

                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

              THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY
(A) TO THE DEBENTURE ISSUER OR THE TRUST, (B) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT,
OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
DEBENTURE ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM
THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

              THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT 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 (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14

                                  Exhibit A-1-1
<Page>

OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS
NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT
TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY
INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF
SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT
PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

              IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE DECLARATION OF TRUST TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.

              THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN
EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A
LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE
THE HOLDER OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL
BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

                                  Exhibit A-1-2
<Page>

Certificate Number:_________            Number of Capital Securities:__________

                             CUSIP NO [___________]

                    Certificate Evidencing Capital Securities

                                       of

                               USB CAPITAL TRUST I

                            Floating Rate MMCapS(SM)

                (liquidation amount $1,000 per Capital Security)

              USB Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that [__________]
(the "Holder") is the registered owner of securities of the Trust representing
undivided beneficial interests in the assets of the Trust, designated the
Floating Rate MMCapS(SM) (liquidation amount $1,000 per Capital Security) (the
"Capital Securities"). Subject to the Declaration (as defined below), the
Capital Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this Certificate duly
endorsed and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Capital
Securities represented hereby are issued pursuant to, and shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of July 16, 2001, among Kenneth L. Donahue, Dennis R.
Woods and David L. Eytcheson, as Administrators, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Institutional Trustee,
United Security Bancshares, as Sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, including the
designation of the terms of the Capital Securities as set forth in Annex I to
the Declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee, and the Indenture to the Holder without charge
upon written request to the Trust at its principal place of business.

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

              By acceptance of this Security, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Capital Securities as evidence of beneficial ownership in the Debentures.

              This Capital Security is governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to principles of
conflict of laws.

                                  Exhibit A-1-3
<Page>

              IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                              USB CAPITAL TRUST I

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

                                              Dated:
                                                    ---------------------

                          CERTIFICATE OF AUTHENTICATION

              This is one of the Capital Securities referred to in the within-
mentioned Declaration.

                                              THE BANK OF NEW YORK, as the
                                              Institutional Trustee

                                              By:
                                                  -----------------------
                                                     Authorized Officer

                                              Dated:
                                                    ---------------------

                                  Exhibit A-1-4
<Page>

                          [FORM OF REVERSE OF SECURITY]

              Distributions payable on each Capital Security will be payable at
a variable per annum rate of interest, reset semi-annually, equal to LIBOR (as
defined in the Indenture) plus 3.75% (the "Coupon Rate") (PROVIDED, that the
applicable Coupon Rate may not exceed 12.50% through the Distribution Payment
Date in July 2011) of the stated liquidation amount of $1,000 per Capital
Security, such rate being the rate of interest payable on the Debentures to be
held by the Institutional Trustee. Except as set forth below in respect of an
Extension Period, Distributions in arrears for more than one semi-annual period
will bear interest thereon compounded semi-annually at the applicable Coupon
Rate for each such semi-annual period (to the extent permitted by applicable
law). The term "Distributions" as used herein includes cash distributions, any
such compounded interest and any Additional Interest payable on the Debentures
unless otherwise stated. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the Institutional Trustee
and to the extent the Institutional Trustee has funds available in the Property
Account therefor. The amount of Distributions payable for any period will be
computed for any full semi-annual Distribution period on the basis of a 360-day
year and the actual number of days elapsed in the relevant Distribution period.

              Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable semi-annually in arrears on January 25th and July 25th of
each year, commencing on January 25, 2002 (each, a "Distribution Payment Date").
The Debenture Issuer has the right under the Indenture to defer payments of
interest on the Debentures by extending the interest payment period for up to 10
consecutive semi-annual periods (each, an "Extension Period") at any time and
from time to time on the Debentures, subject to the conditions described below,
during which Extension Period no interest shall be due and payable (except any
Additional Interest that may be due and payable) although such interest would
continue to accrue on the Debentures, and Interest will accrue on such Deferred
Interest, at an annual rate equal to the Coupon Rate in effect for each such
Extension Period, compounded semi-annually to the extent permitted by law. No
Extension Period may end on a date other than a Distribution Payment Date. At
the end of any such Extension Period the Debenture Issuer shall pay all Deferred
Interest then accrued and unpaid on the Debentures; provided however, that no
Extension Period may extend beyond the Maturity Date. Prior to the termination
of any Extension Period, the Debenture Issuer may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 10 consecutive semi-annual
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all Deferred Interest, the Debenture
Issuer may commence a new Extension Period, subject to the foregoing
requirements. No interest or Deferred Interest shall be due and payable during
an Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension Period
shall bear Deferred Interest. If Distributions are deferred, the Distributions
due shall be paid on the date that the related Extension Period terminates, or,
if such date is not a Distribution Payment Date, on the immediately following
Distribution Payment Date, to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date. Distributions on the Securities must be paid on the dates payable (after
giving effect to any Extension Period) to the extent that the Trust has funds
available for the payment of such distributions in the Property Account of the
Trust. The Trust's funds available for Distribution to

                                  Exhibit A-1-5
<Page>

the Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

              The Capital Securities shall be redeemable as provided in the
Declaration.

                                  Exhibit A-1-6
<Page>

                                   ASSIGNMENT

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

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

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

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

(Insert address and zip code of assignee), and irrevocably appoints
                                                                    ------------
as agent to transfer this Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.

                  Date:
                       ---------------------------

                  Signature:
                            ---------------------------

                  (Sign exactly as your name appears on the other side of this
Capital Security Certificate)

                  Signature Guarantee:(1)
                                         ---------------------------

----------
(1)   Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Security registrar, which requirements include
membership or participation in the Securities Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Security registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

                                  Exhibit A-1-7
<Page>

                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

              THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE
 SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

              EXCEPT AS SET FORTH IN SECTION 8.1(b) OF THE DECLARATION (AS
DEFINED BELOW), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.

                                  Exhibit A-2-1
<Page>

Certificate Number:________                Number of Common Securities:_________

                    Certificate Evidencing Common Securities

                                       of

                               USB CAPITAL TRUST I

              USB Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that [__________]
(the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust (the
"Common Securities"). The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities represented
hereby are issued pursuant to, and shall in all respects be subject to, the
provisions of the Amended and Restated Declaration of Trust of the Trust dated
as of July 16, 2001, among Kenneth L. Donahue, Dennis R. Woods and David L.
Eytcheson, as Administrators, The Bank of New York (Delaware), as Delaware
Trustee, The Bank of New York, as Institutional Trustee, United Security
Bancshares, as Sponsor, and the holders from time to time of undivided
beneficial interest in the assets of the Trust including the designation of the
terms of the Common Securities as set forth in Annex I to the Declaration, as
the same may be amended from time to time (the "Declaration"). Capitalized terms
used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Guarantee to the
extent provided therein. The Sponsor will provide a copy of the Declaration, the
Guarantee and the Indenture to the Holder without charge upon written request to
the Sponsor at its principal place of business.

              As set forth in the Declaration, where an Event of Default has
occurred and continuing, the rights of Holders of Common securities to payment
in respect of Distributions and payments upon Liquidation, redemption or
otherwise are subordinated to the rights of payment of Holders of the Capital
Securities.

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

              By acceptance of this Certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Common Securities as evidence of undivided beneficial ownership in the
Debentures.

              This Common Security is governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to principles of
conflict of laws.

                                  Exhibit A-2-2
<Page>

              IN WITNESS WHEREOF, the Trust has executed this certificate this
______ day of _________________, ______.

                                           USB CAPITAL TRUST I

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

                                  Exhibit A-2-3
<Page>

                          [FORM OF REVERSE OF SECURITY]

              Distributions payable on each Common Security will be identical in
amount to the Distributions payable on each Capital Security, which is at a
variable per annum rate of interest, reset semi-annually, equal to LIBOR (as
defined in the Indenture) plus 3.75% (the "Coupon Rate") (PROVIDED, that the
applicable Coupon Rate may not exceed 12.50% through the Distribution Payment
Date in July 2011) of the stated liquidation amount of $1,000 per Capital
Security, such rate being the rate of interest payable on the Debentures to be
held by the Institutional Trustee. Except as set forth below in respect of an
Extension Period, Distributions in arrears for more than one semi-annual period
will bear interest thereon compounded semi-annually at the applicable Coupon
Rate for each such semi-annual period (to the extent permitted by applicable
law). The term "Distributions" as used herein includes cash distributions, any
such compounded distribution and any Additional Interest payable on the
Debentures unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Institutional
Trustee and to the extent the Institutional Trustee has funds available in the
Property Account therefor. The amount of Distributions payable for any period
will be computed for any full semi-annual Distribution period on the basis of a
360-day year and actual number of days elapsed in the relevant Distribution
period.

              Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable semi-annually in arrears on January 25th and July 25th of
each year, commencing on January 25, 2002 (each, a "Distribution Payment Date").
The Debenture Issuer has the right under the Indenture to defer payments of
interest on the Debentures by extending the interest payment period for up to 10
consecutive semi-annual periods (each, an "Extension Period") at any time and
from time to time on the Debentures, subject to the conditions described below,
during which Extension Period no interest shall be due and payable (except any
Additional Interest that may be due and payable). No Extension Period may end on
a date other than a Distribution Payment Date. During an Extension Period,
interest would continue to accrue on the Debentures, and interest on such
accrued interest (such accrued interest and interest thereon referred to herein
as "Deferred Interest") will accrue at an annual rate equal to the Coupon Rate
in effect for each such Extension Period, compounded semi-annually from the date
such Deferred Interest would have been payable were it not for the Extension
Period to the extent permitted by law. At the end of any such Extension Period
the Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on
the Debentures; provided, however, that no Extension Period may extend beyond
the Maturity Date. Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 10 consecutive semi-annual periods, or extend beyond the Maturity
Date. Upon the termination of any Extension Period and upon the payment of all
Deferred Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Deferred Interest shall be
due and payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Deferred Interest. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, or, if such date is not a Distribution Payment
Date, on the immediately following Distribution Payment Date, to Holders of the
Securities as they appear on the books and records of the Trust on the record
date immediately preceding such date.

                                  Exhibit A-2-4
<Page>

Distributions on the Securities must be paid on the dates payable (after giving
effect to any Extension Period) to the extent that the Trust has funds available
for the payment of such distributions in the Property Account of the Trust. The
Trust's funds available for Distribution to the Holders of the Securities will
be limited to payments received from the Debenture Issuer. The payment of
Distributions out of moneys held by the Trust is guaranteed by the Guarantor
pursuant to the Guarantee.

              The Common Securities shall be redeemable as provided in the
Declaration.

                                  Exhibit A-2-5
<Page>

                                   ASSIGNMENT

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

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

Insert assignee's social security or tax identification number)

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

(Insert address and zip code of assignee), and irrevocably appoints
                                                                    ------------
as agent to transfer this Common Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.

                  Date:
                       ---------------------------

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

                  Signature Guarantee:(1)
                                         ---------------------------

----------
(1)   Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Security registrar, which requirements include
membership or participation in the Securities Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Security registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

                                  Exhibit A-2-6
<Page>

                                                                       Exhibit B

                         FORM OF TRANSFEREE CERTIFICATE
                  TO BE EXECUTED BY TRANSFEREES OTHER THAN QIBS

                                                             ___________, [    ]

United Security Banchsares
USB Capital Trust I
1525 E. Shaw Avenue
Fresno, CA 93710

Re:    Purchase of $1,000 stated liquidation amount of Floating Rate
       MMCapS(SM) (the "Capital Securities") of USB Capital Trust I

Ladies and Gentlemen:

              In connection with our purchase of the Capital Securities we
confirm that:

              1.   We understand that the Floating Rate MMCapS(SM) (the "Capital
Securities") of USB Capital Trust I (the "Trust") (including the guarantee (the
"Guarantee") of United Security Bancshares (the "Company") executed in
connection therewith) and the Floating Rate Junior Subordinated Deferrable
Interest Debentures due July 25, 2031 of the Company (the "Subordinated Debt
Securities") (the Capital Securities, the Guarantee and the Subordinated Debt
Securities together being referred to herein as "Offered Securities"), have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold except as permitted in the following
sentence. We agree on our own behalf and on behalf of any investor account for
which we are purchasing the Offered Securities that, if, we decide to offer,
sell or otherwise transfer any such Offered Securities, such offer, sale or
transfer will be made only (a) to the Company or the Trust, (b) pursuant to Rule
144A under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (c) to an "accredited investor" with the
meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring Offered Securities for its own account or for
the account of such an accredited investor for investment purposes and not with
a view to, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act, or (d) pursuant to another available exemption
from the registration requirements of the Securities Act, and in each of the
foregoing cases in accordance with any applicable state securities laws and any
requirements of law that govern the disposition of our property. The foregoing
restrictions on resale will not apply subsequent to the date on which, in the
written opinion of counsel, the Capital Securities are not "restricted
securities" within the meaning of Rule 144 under the Securities Act. If any
resale or other transfer of the Offered Securities is proposed to be made
pursuant to clause (c) or (d) above the transferor shall deliver a letter from
the transferee substantially in the form of this letter to The Bank of New York
as Transfer Agent, which shall provide as applicable, among other things, that
the transferee is an "accredited investor" within

                                   Exhibit B-1
<Page>

the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring such Securities for investment purposes and not
for distribution in violation of the Securities Act. We acknowledge on our
behalf and on behalf of any investor account for which we are purchasing
Securities that the Trust and the Company reserve the right prior to any offer,
sale or other transfer pursuant to clause (c) or (d) to require the delivery of
any opinion of counsel, certifications and/or other information satisfactory to
the Trust and the Company. We understand that the certificates for any Offered
Security that we receive will bear a legend substantially to the effect of the
foregoing.

              2.   We are an "accredited investor" with the meaning of
subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act
purchasing for our own account or for the account of such an "accredited
investor," and we are acquiring the Offered Securities for the investment
purposes and not with view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act, and we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Offered Securities, and we and any
account for which we are acting are each able to bear the economic risks of our
or its investment.

              3.   We are acquiring the Offered Securities purchased by us for
our own account(or for one or more accounts as to each of which we exercise sole
investment discretion and have authority to make, and do make, the statements
contained in this letter) and not with a view to any distribution of the Offered
Securities, subject, nevertheless, to the understanding that the disposition of
our property will at all times be and remain within our control.

              4.   In the event that we purchase any Capital Securities or any
Subordinated Debt Securities, we will acquire such Capital Securities having an
aggregate stated liquidation amount of not less than $100,000 or such
Subordinated Debt Securities having an aggregate principal amount not less than
$100,000, for our own account and for each separate account for which we are
acting.

              5.   We acknowledge that we either (A) are not a fiduciary of a
pension, profit-sharing or other employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (a "Plan"), or an
entity whose assets include "plan assets" by reason of any Plan's investment in
the entity and are not purchasing the Offered Securities on behalf of or with
"plan assets" by reason of any Plan's investment in the entity and is not
purchasing the Offered Securities on behalf of or with "plan assets" of any Plan
or (B) are eligible for the exemptive relief available under one ore more of the
following prohibited transaction class exemptions ("PTCEs") issued by the U.S.
Department of Labor: PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.

              6.   We acknowledge that the Trust and the Company and others will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agree that if any of the
acknowledgments, representations, warranties and agreements deemed to have been
made by our purchase of the Offered Securities are no longer accurate, we shall
promptly notify the Placement Agents. If we are acquiring any Offered Securities
as a fiduciary or agent for one or more investor accounts, we represent that we
have

                                   Exhibit B-2
<Page>

sole discretion with respect to each such investor account and that we have
full power to make the foregoing acknowledgments, representations and agreement
on behalf of each such investor account.

                                              Very truly yours,

                                              ---------------------------
                                                   (Name of Purchaser)

                                              By:
                                                  -----------------------

                                              Date:
                                                  -----------------------

              Upon transfer of the Offered Securities would be registered in the
name of the new beneficial owner as follows.

Name:
         ----------------------------------

Address:
         ----------------------------------

Taxpayer ID Number:
                    -----------------------

                                   Exhibit B-3
<Page>

                                                                       EXHIBIT C

                         FORM OF TRANSFEROR CERTIFICATE
                             TO BE EXECUTED FOR QIBs

                                                             ___________, [    ]

United Security Bancshares
USB Capital Trust I
1525 E. Shaw Avenue
Fresno, CA 93710

Re:    Purchase of $1,000 stated liquidation amount of Floating Rate
       MMCapS(SM) (THE "CAPITAL SECURITIES") OF USB CAPITAL TRUST I

              Reference is hereby made to the Amended and Restated Declaration
dated as of July 16, 2001 (the "Declaration") among Kenneth L. Donahue, Dennis
R. Woods and David L. Eytcheson, as Administrators, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Institutional Trustee,
United Security Bancshares, as Sponsor, and the holders from time to time of
undivided beneficial interest in the assets of USB Capital Trust I. Capitalized
terms used but not defined herein shall have the meanings given them in the
Declaration.

              This letter relates to $[_______________] aggregate liquidation
amount of Capital Securities which are held in the name of [name of transferor]
(the "Transferor").

              In connection with such request, and in respect to such Capital
Securities, the transferor does hereby certify that such Capital Securities are
being transferred in accordance with (i) the transfer restrictions set forth in
the Capital Securities and (ii) Rule 144A under the United States Securities Act
of 1933, as amended ("Rule 144A"), to a transferee that the Transferor
reasonably believes is purchasing the Capital Securities for its own account or
an account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.

              You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

                                                 (Name of Transferor)

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

                                   Exhibit C-1

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