Document:

Exhibit (10)(j)

    CAPITAL
      SECURITIES PURCHASE AGREEMENT

     

    June
      26,
      2006

     

    THIS
      CAPITAL SECURITIES PURCHASE AGREEMENT (this "Purchase Agreement") is made among
      PEBK Capital Trust II, a statutory trust created under the laws of the State
      of
      Delaware (the "Trust"), Peoples Bancorp of North Carolina, Inc. (the "Company"
      and, collectively with the Trust, the "Offerors") and Bear, Stearns Securities
      Corp. (the "Purchaser").

     

    RECITALS:

     

    A. The
      Trust
      desires to issue $20,000,000 of its TP Securities (the "Capital Securities"),
      with a liquidation amount of $1,000 per Capital Security, representing undivided
      beneficial interests in the assets of the Trust (the "Offering"), to be issued
      pursuant to an Amended and Restated Declaration of Trust (the "Declaration"),
      by
      the Company, as Sponsor, LaSalle Bank National Association, as Institutional
      Trustee, and Christiana Bank & Trust Company, as Delaware Trustee, the
      Administrators named therein, and the holders, from time to time, of the Capital
      Securities, which Capital Securities are to be guaranteed by the Company with
      respect to distributions and payments upon liquidation, redemption and otherwise
      to the extent provided in and pursuant to the terms of a Guarantee Agreement
      between the Company and LaSalle Bank National Association, as Guarantee Trustee
      (the "Guarantee"); and

     

    B. The
      proceeds from the sale of the Capital Securities will be combined with the
      proceeds from the sale of the Common Securities by the Trust to the Company
      and
      will be used by the Trust to purchase an equivalent aggregate principal amount
      of Junior Subordinated Debt Securities due September 15, 2036 of the Company
      (the "Debentures"), to be issued by the Company pursuant to an Indenture to
      be
      executed by the Company, as Issuer, and LaSalle Bank National Association,
      as
      Debenture Trustee (the "Indenture"); and

     

    C. In
      consideration of the premises and the mutual representations and covenants
      hereinafter set forth, the parties hereto agree as follows:

     

    ARTICLE
      1  

     

    PURCHASE
      AND SALE OF CAPITAL SECURITIES

     

    1.1  Upon
      the
      execution of this Purchase Agreement, the Purchaser hereby agrees to purchase
      from the Trust 20,000 Capital Securities at a price equal to $1,000 per Capital
      Security (the "Purchase Price") and the Trust agrees to sell such number of
      Capital Securities with a liquidation amount of $1,000 per Capital Security
      to
      the Purchaser for the Purchase Price. The rights and preferences of the Capital
      Securities will be set forth in the Declaration in form and substance reasonably
      acceptable to the Purchaser. The Purchase Price is payable by the Purchaser
      on
      the Closing Date in immediately available funds to the account designated by
      LaSalle Bank National Association.

     

    1.2  The
      certificate for the Capital Securities shall be delivered in definitive form
      by
      the Trust on the Closing Date (as defined in the Declaration) to the Purchaser
      or its designee, and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      shall
        be
        registered in the name of the Purchaser and shall represent the aggregate
        liquidation amount of the Capital Securities being purchased by the
        Purchaser.

    

     

    1.3  The
      Purchaser acknowledges and the Offerors agree that they will not register any
      transfer of the Capital Securities not made in accordance with Regulation S,
      pursuant to registration under the Securities Act of 1933, as amended (the
      "Securities Act"), or pursuant to an available exemption from
      registration.

     

    1.4  The
      Placement Agreement, dated June 26, 2006 (the "Placement Agreement"), among
      the
      Offerors and the Placement Agent identified therein includes certain
      representations and warranties, covenants and conditions to closing and certain
      other matters governing the issuance and sale of the Capital Securities by
      the
      Trust to the Purchaser. Each of the provisions of the Placement Agreement,
      including the definitions therein, are hereby incorporated by reference into
      this Purchase Agreement. In addition, to the extent provided for in the
      Placement Agreement, the Purchaser shall be entitled to the benefits of the
      Placement Agreement and shall be entitled to enforce such obligations of the
      Offerors under the Placement Agreement as fully as if the Purchaser were a
      party
      to such Placement Agreement, it being agreed between the parties that any and
      all representations made by the Offerors to the Placement Agent in the Placement
      Agreement shall be deemed to have also been made to the Purchaser.

     

    1.5  If
      any
      condition specified herein or in the Placement Agreement shall not have been
      fulfilled when and as required to be fulfilled by, on behalf of or in respect
      of
      the Offerors or the Capital Securities, this Purchase Agreement may be
      terminated by the Purchaser by notice to the Offerors at any time at or prior
      to
      the Closing Date, and such termination shall be without liability of any party
      to any other party except that Sections 3, 9, 10 and 15 of the Placement
      Agreement shall survive any such termination and remain in full force and
      effect.

     

    ARTICLE
      2  

     

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    2.1  The
      Purchaser understands and acknowledges that none of the Capital Securities,
      the
      Debentures or the Guarantee have been registered under the Securities Act,
      or
      any other applicable securities laws, and are being offered for sale by the
      Trust in a transaction not requiring registration under the Securities Act,
      and
      the Capital Securities may not be offered, sold, pledged or otherwise
      transferred by the Purchaser except in compliance with the registration
      requirements of the Securities Act, or any other applicable securities laws,
      pursuant to an exemption therefrom or in a transaction not subject
      thereto.

     

    2.2  The
      Purchaser represents and warrants that it is purchasing the Capital Securities
      for its own account, for investment and not with a view to, or for offer or
      sale
      in connection with, any distribution thereof in violation of the Securities
      Act
      or other applicable securities laws, subject to any requirement of law that
      the
      disposition of its property be at all times within its control and subject
      to
      its ability to resell such Capital Securities pursuant to an effective
      registration statement under the Securities Act or under Rules 144A and 902
      under the Securities Act or any other exemption from registration available
      under the Securities Act, and the Purchaser agrees to the legends and transfer
      restrictions applicable to the Capital Securities

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        
contained
        in the Declaration. The Purchaser represents that it is an accredited investor
        within the meaning of Regulation D under the Securities Act. The Purchaser
        represents and warrants that the office or offices of the Purchaser in which
        its
        investment decision was made is located at the address set forth in Section
        3.1
        hereof.

    

     

    2.3  The
      Purchaser has full power and authority to execute and deliver this Purchase
      Agreement, to make the representations and warranties specified herein, and
      to
      consummate the transactions contemplated herein and it has full right and power
      to subscribe for the Capital Securities and perform its obligations pursuant
      to
      this Purchase Agreement.

     

    2.4  The
      Purchaser believes it has received all the information it considers necessary
      or
      appropriate for deciding whether to purchase the Capital Securities. The
      Purchaser further represents that it has had an opportunity to ask questions
      and
      receive answers from the Offerors regarding the terms and conditions of the
      offering of the Capital Securities and the business, properties, prospects
      and
      financial condition of the Offerors.

     

    2.5  No
      filing
      with, or authorization, approval, consent, license, order, registration,
      qualification or decree of, any governmental body, agency or court having
      jurisdiction over the Purchaser, other than those that have been made or
      obtained, is necessary or required for the performance by the Purchaser of
      its
      obligations under this Purchase Agreement or to consummate the transactions
      contemplated herein.

     

    2.6  This
      Purchase Agreement has been duly authorized, executed and delivered by the
      Purchaser.

     

    2.7  The
      Purchaser is not in violation of or default under any term of its Memorandum
      of
      Association or Articles of Association, of any provision of any mortgage,
      indenture, contract, agreement, instrument or contract to which it is a party
      or
      by which it is bound or of any judgment, decree, order, writ or, any statute,
      rule or regulation applicable to the Purchaser which would prevent the Purchaser
      from performing any material obligation set forth in this Purchase Agreement.
      The execution, delivery and performance of and compliance with this Purchase
      Agreement, and the consummation of the transactions contemplated herein, will
      not, with or without the passage of time or giving of notice, result in any
      such
      material violation, or be in conflict with or constitute a default under any
      such term, or the suspension, revocation, impairment, forfeiture or non-renewal
      of any permit, license, authorization or approval applicable to the Purchaser,
      its business or operations or any of its assets or properties which would
      prevent the Purchaser from performing any material obligations set forth in
      this
      Purchase Agreement.

     

    2.8  The
      Purchaser understands and acknowledges that the Company will rely upon the
      truth
      and accuracy of the foregoing acknowledgments, representations, warranties
      and
      agreements and agrees that, if any of the acknowledgments, representations,
      warranties or agreements deemed to have been made by it by its purchase of
      the
      Capital Securities are no longer accurate, it shall promptly notify the
      Company.

     

    2.9  The
      Purchaser understands that no public market exists for any of the Capital
      Securities, and that it is unlikely that a public market will ever exist for
      the
      Capital Securities.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    ARTICLE
      3  

     

    MISCELLANEOUS

     

    3.1  Any
      notice or other communication given hereunder shall be deemed sufficient if
      in
      writing and sent by registered or certified mail, return receipt requested,
      international courier, or delivered by hand against written receipt therefor,
      or
      by facsimile transmission and confirmed by telephone, to the following
      addresses, or such other address as may be furnished to the other parties as
      herein provided:

    

      
        	 	 	 	 	 
	 	
                To
                  the Offerors:

              	 	
                Peoples
                  Bancorp of North Carolina, Inc.

              	 
	 	 	 	
                518
                  West C Street

              	 
	 	 	 	
                Newton,
                  North Carolina 28658

              	 
	 	 	 	
                Attention:
                  A. Joseph Lampron

              	 
	 	 	 	
                Telephone:
                  (828) 464-5620

              	 
	 	 	 	
                Fax:
                  (828) 465-6780

              	 
	 	 	 	 	 
	 	
                To
                  the Purchaser:

              	 	
                Bear,
                  Stearns Securities Corp.

              	 
	 	 	 	
                c/o
                  Bear Stearns & Co. Inc.

              	 
	 	 	 	
                383
                  Madison Avenue

              	 
	 	 	 	
                New
                  York, New York 10179

              	 
	 	 	 	
                Attention:
                  Asset Backed Securities

              	 
	 	 	 	
                Telephone:
                  (212) 272-2000

              	 
	 	 	 	
                Fax:
                  (212) 272-3182

              	 
	 	 	 	 	 

      

    

     

    Unless
      otherwise expressly provided herein, notices shall be deemed to have been given
      when received.

     

    3.2  This
      Purchase Agreement shall not be changed, modified or amended except by a writing
      signed by the parties to be charged.

     

    3.3  Upon
      the
      execution and delivery of this Purchase Agreement by the parties hereto, this
      Purchase Agreement shall become a binding obligation of each such party with
      respect to the matters covered herein, including those incorporated by reference
      from the Placement Agreement.

     

    3.4  NOTWITHSTANDING
      THE PLACE WHERE THIS PURCHASE AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES
      HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF
      SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
      OF
      NEW YORK. EACH OF THE TRUST, PURCHASER AND THE COMPANY, ON BEHALF OF ITSELF
      AND
      ITS SUBSIDIARIES (INCLUDING, WITHOUT LIMITATION, THE TRUST), HEREBY IRREVOCABLY
      SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS
      LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR
      PROCEEDING RELATED TO THIS PURCHASE AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED
      HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

       

      JURISDICTION
        AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR
        PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH OF THE TRUST,
        PURCHASER AND THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES (INCLUDING,
        WITHOUT LIMITATION, THE TRUST), IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
        IT MAY
        EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
        HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
        BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
        BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
        FORUM.

    

     

    3.5  The
      parties agree to execute and deliver all such further documents, agreements
      and
      instruments and take such other and further action as may be necessary or
      appropriate to carry out the purposes and intent of this Purchase
      Agreement.

     

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

     

    3.7  This
      Agreement constitutes the entire agreement among the parties hereto with respect
      to the subject matter hereof and supersedes all prior and contemporaneous
      agreements and understandings, inducements or conditions, express or implied,
      oral or written, except as herein contained. No course of conduct or dealing
      shall be construed to modify, amend or otherwise affect any of the provisions
      hereof.

     

    Signatures
      appear on the following pages

     

     

     

     

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    

      IN
        WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
        the day
        and year first written above.

       

    

    

      
        	 	
                Peoples
                  Bancorp of North Carolina, Inc.

              
	 	 	 
	 	 	 
	 	
                By:
                  

              	
                /s/
                  A. Joseph Lampron

              
	 	
                Name:
                  

              	
                A.
                  Joseph Lampron

              
	 	
                Title:
                  

              	
                Executive
                  Vice President, Chief Financial

              
	 	 	
                Officer
                  and Corporate Treasurer

              
	 	 	 
	 	
                PEBK
                  Capital Trust II

              
	 	
                By
                  Peoples Bancorp of North Carolina, Inc., as 

              
	 	
                Sponsor

              
	 	 	 
	 	
                By:
                  

              	
                /s/
                  A. Joseph Lampron

              
	 	
                Name:
                  

              	
                A.
                  Joseph Lampron

              
	 	
                Title:
                  

              	
                Administrator

              

      

    

     

     

     

     

     

     

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    

      IN
        WITNESS WHEREOF, this Purchase Agreement is agreed to and accepted as of
        the day
        and year first written above.

       

    

     

    

      
        	 	
                Bear,
                  Stearns Securities Corp.

              
	 	 	 
	 	 	 
	 	
                By:
                  

              	
                /s/
                  Jeff Mayer

              
	 	
                Print
                  Name: 

              	
                Jeff
                  Mayer

              
	 	
                Title:
                  

              	
                Managing
                  Director

              

      

    

     

     

     

     

     

     

    
      
        
        

      

      
        -7-Exhibit (10)(k)

    

     

    AMENDED
      AND RESTATED DECLARATION

     

    OF
      TRUST

     

    PEBK
      CAPITAL TRUST II

     

    Dated
      as
      of June 28, 2006

     

    
 

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    
      
        	 	 	
                TABLE
                  OF CONTENTS

              	 
	 	 	 	 
	 	 	
                 Pa

              	ge
	 	 	 	 
	 	 	
                 ARTICLE
                  I

              	 
	
                 

              	 	
                INTERPRETATION
                  AND DEFINITIONS

              	 
	
                SECTION
                  1.1.

              	
                 

              	
                Definitions
                  ....................................................................................................................................................................................................................

              	
                1

              
	 	 	 	 
	
                 

              	
                 

              	
                ARTICLE
                  II

              	 
	
                 

              	 	
                 ORGANIZATION

              	 
	
                SECTION
                  2.1.

              	 	
                Name
                  ..............................................................................................................................................................................................................................

              	8
	 	 	 	 
	SECTION
                2.2.	 	
                Office
                  .............................................................................................................................................................................................................................

              	8
	 	 	
                 

              	
                 

              
	SECTION
                2.3.	 	Purpose
                .........................................................................................................................................................................................................................	9
	 	 	
                 

              	 
	SECTION
                2.4.	 	
                Authority
                  ......................................................................................................................................................................................................................

              	
                9

              
	 	 	 	 
	SECTION
                2.5.	 	
                Title
                  to Property of the Trust
                  .....................................................................................................................................................................................

              	9
	 	 	
                 

              	
                 

              
	SECTION
                2.6.	 	Powers
                and Duties of the Trustees and the Administrators
                .................................................................................................................................	9
	 	 	
                 

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

              	
                14

              
	 	 	 	 
	SECTION
                2.8.	 	
                Powers
                  and Duties of the Institutional Trustee
                  ......................................................................................................................................................

              	
                15

              
	 	 	 	 
	
                SECTION
                  2.9.

              	 	
                Certain
                  Duties and Responsibilities of the Trustees and the 

              	 
	 	 	
                Administrators
                  .............................................................................................................................................................................................................

              	
                16

              
	 	 	 	 
	
                SECTION
                  2.10.

              	 	
                Certain
                  Rights of Institutional Trustee
                  .....................................................................................................................................................................

              	
                18

              
	 	 	 	 
	
                SECTION
                  2.11.

              	 	
                Delaware
                  Trustee
                  .........................................................................................................................................................................................................

              	
                20

              
	 	 	 	 
	SECTION
                2.12.	 	Execution
                of Documents
                .............................................................................................................................................................................................	21
	 	 	 	 
	SECTION
                2.13.	 	Not
                Responsible for Recitals or Issuance of Securities
                .........................................................................................................................................	21
	 	 	 	 
	SECTION
                2.14.	 	Duration
                of Trust
                .........................................................................................................................................................................................................	21
	 	 	 	 
	SECTION
                2.15.	 	Mergers
                .........................................................................................................................................................................................................................	21
	 	 	 	 
	
                 

              	
                 

              	
                ARTICLE
                  III

              	 
	 	 	
                SPONSOR

              	 
	SECTION
                3.1.	 	Sponsor's
                Purchase of Common Securities
                .............................................................................................................................................................	23
	 	 	 	 
	SECTION
                3.2.	 	Responsibilities
                of the Sponsor
                ................................................................................................................................................................................	23
	 	 	 	 
	
                 

              	 	
                ARTICLE
                  IV

              	 
	
                 

              	 	
                TRUSTEES
                  AND ADMINISTRATORS

              	 
	 	 	 	 
	SECTION
                4.1.	 	Number
                of Trustees
                ....................................................................................................................................................................................................	24

      

    

    
       

    

     

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

     

     

    

      
        	 	 	
                TABLE
                  OF CONTENTS

              	 
	 	 	
                 (continued)

              	 
	 	 	
                 Pa

              	
                ge

              
	 	 	 	 
	
                SECTION
                  4.2.

              	 	
                Delaware
                  Trustee
                  ......................................................................................................................................................................................................

              	24
	 	 	 	 
	SECTION
                4.3.	 	
                Institutional
                  Trustee; Eligibility
                  ..............................................................................................................................................................................

              	24
	 	 	
                 

              	
                 

              
	SECTION
                4.4.	 	Certain
                Qualifications of the Delaware Trustee Generally
                ..................................................................................................................................	25
	 	 	
                 

              	 
	SECTION
                4.5.	 	
                Administrators
                  ..........................................................................................................................................................................................................

              	
                25

              
	 	 	 	 
	SECTION
                4.6.	 	
                Initial
                  Delaware Trustee
                  ...........................................................................................................................................................................................

              	25
	 	 	
                 

              	
                 

              
	SECTION
                4.7.	 	Appointment,
                Removal and Resignation of the Trustees and the 	 
	 	 	
                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. 	 	Merger,
                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
                .................................................................................................................................................................	
                29

              
	
                 

              	 	 	
                 

              
	SECTION
                6.2.	 	Paying
                Agent, Transfer Agent, Calculation Agent and Registrar
                .......................................................................................................................	30
	 	 	 	 
	SECTION
                6.3.	 	Form
                and Dating
                ..........................................................................................................................................................................................................	31
	 	 	 	 
	SECTION
                6.4.	 	Book-Entry
                Capital Securities
                ....................................................................................................................................................................................	31
	 	 	 	 
	SECTION
                6.5.	 	Mutilated,
                Destroyed, Lost or Stolen Certificates
                ..................................................................................................................................................	33
	 	 	 	 
	SECTION
                6.6.	 	
                Temporary
                  Securities
                  ..................................................................................................................................................................................................

              	33
	 	 	 	 
	SECTION
                6.7.	 	Cancellation
                ..................................................................................................................................................................................................................	34
	 	 	 	 
	SECTION
                6.8.	 	Rights
                of Holders; Waivers of Past Defaults
                ..........................................................................................................................................................	34
	 	 	 	 
	
                 

              	 	
                ARTICLE
                  VII

              	 
	 	 	
                DISSOLUTION
                  AND TERMINATION OF TRUST

              	 

      

    

     

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    

      
        	 	 	
                TABLE
                  OF CONTENTS

              	 
	 	 	
                 (continued)

              	 
	
                 

              	
                 

              	 	
                 

              
	 	 	
                 Pa

              	
                ge 

              
	 	 	 	 
	
                SECTION
                  7.1.

              	 	
                Dissolution and
                  Termination of Trust
                  .....................................................................................................................................................................

              	36
	 	 	 	 
	
              	 	
                ARTICLE
                  VIII 

              	 
	 	 	
                TRANSFER
                  OF INTERESTS

              	
                 

              
	 	 	 	 
	SECTION
                8.1.	 	
                General
                  ..........................................................................................................................................................................................................................

              	37
	 	 	
                 

              	
                 

              
	SECTION
                8.2.	 	Transfer
                Procedures and Restrictions
                ......................................................................................................................................................................	38
	 	 	
                 

              	 
	SECTION
                8.3.	 	
                Deemed
                  Security Holders
                  ...........................................................................................................................................................................................

              	
                41

              
	 	 	 	 
	 	 	
                ARTICLE
                  IX 

              	
                 

              
	
                 

              	
                 

              	
                LIMITATION
                  OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

              	
                 

              
	 	 	 	 
	SECTION
                9.1.	 	
                Liability
                  .........................................................................................................................................................................................................................

              	
                41

              
	 	 	 	 
	
                SECTION
                  9.2.

              	 	
                Exculpation
                  ...................................................................................................................................................................................................................

              	42
	 	 	
                 

              	
                 

              
	SECTION
                9.3.	 	Fiduciary
                Duty
                .............................................................................................................................................................................................................	43
	
                 

              	 	
                 

              	
                 

              
	SECTION
                9.4.	 	Indemnification
                ............................................................................................................................................................................................................	43
	
                 

              	 	
                 

              	
                 

              
	SECTION
                9.5. 	 	Outside
                Businesses
                ....................................................................................................................................................................................................	46
	
                 

              	
                 

              	 	 
	SECTION
                9.6.	 	Compensation;
                Fee
                .....................................................................................................................................................................................................	47
	
                 

              	 	
                 

              	
                 

              
	
                 

              	 	
                ARTICLE
                  X

              	
                 

              
	
                 

              	 	
                ACCOUNTING

              	
                 

              
	
                 

              	 	
                 

              	
                 

              
	
                SECTION
                  10.1.

              	 	
                Fiscal
                  Year
                  ....................................................................................................................................................................................................................

              	
                47

              
	
                 

              	 	
                 

              	
                 

              
	
                SECTION
                  10.2.

              	 	Certain
                Accounting Matters
                .....................................................................................................................................................................................	
                47

              
	
                 

              	 	 	
                 

              
	SECTION
                10.3.	 	Banking
                .........................................................................................................................................................................................................................	48
	 	 	 	 
	SECTION
                10.4.	 	Withholding
                .................................................................................................................................................................................................................	48
	 	 	 	 
	
                 

              	
                 

              	
                 ARTICLE
                  XI

              	 
	
                 

              	 	
                 AMENDMENTS
                  AND MEETINGS

              	 
	 	 	 	 
	SECTION
                11.1.	 	Amendments ................................................................................................................................................................................................................	49
	 	 	 	 
	SECTION
                11.2.	 	Meetings
                of the Holders of the Securities; Action by Written	 
	 	 	Consent
                .........................................................................................................................................................................................................................	51 
	 	 	 	 
	
                 

              	 	
                ARTICLE
                  XII

              	 
	
                 

              	 	
                REPRESENTATION
                  OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE

              	 
	 	 	 	 
	SECTION
                12.1.	 	Representations
                and Warranties of Institutional Trustee
                ....................................................................................................................................	52
	 	 	 	 
	SECTION
                12.2.	 	Representations
                and Warranties of Delaware Trustee
                .........................................................................................................................................	53

      

       

    

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

     

     

    

      
        	 	 	
                TABLE
                  OF CONTENTS

              	 
	 	 	
                 (continued)

              	 
	
                 

              	
                 

              	 	
                 

              
	 	 	
                 Pa

              	ge
	 	 	 	 
	 	 	
                ARTICLE
                  XIII

              	 
	 	 	
                MISCELLANEOUS

              	
                 

              
	 	 	 	 
	SECTION
                13.1.	 	
                Notices
                  ..........................................................................................................................................................................................................................

              	54
	 	 	 	 
	SECTION
                13.2.	 	
                Governing
                  Law
                  ............................................................................................................................................................................................................

              	55
	 	 	 	 
	SECTION
                13.3.	 	
                Submission
                  to Jurisdiction
                  ........................................................................................................................................................................................

              	55
	 	 	 	 
	SECTION
                13.4.	 	
                Intention
                  of the Parties
                  ...............................................................................................................................................................................................

              	
                56

              
	 	 	 	 
	
                SECTION
                  13.5.

              	 	
                Headings
                  .......................................................................................................................................................................................................................

              	56
	 	 	
                 

              	
                 

              
	SECTION
                13.6.	 	Successors
                and Assigns
                ............................................................................................................................................................................................	56
	 	 	 	 
	SECTION
                13.7.	 	Partial
                Enforceability
                ...................................................................................................................................................................................................	56
	 	 	 	 
	
                SECTION
                  13.8.

              	 	
                Counterparts
                  ................................................................................................................................................................................................................

              	
                56

              

      

    

     

     

     

     

     

     

     

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

     

     

    
      
        	 	 	
                TABLE
                  OF CONTENTS

              	 
	 	 	
                 (continued)

              	 
	 	 	 	 
	 	 	
                 Pa

              	ge
	
                ANNEXES
                  AND EXHIBITS

              	
                 

              	 
	 	 	 	 
	ANNEX
                I	 	
                Terms
                  of TP Securities and Common Securities

              	 
	 	 	
                 

              	
                 

              
	EXHIBIT
                A-1	 	Form
                of Capital Security Certificate	 
	EXHIBIT
                A-2	 	
                Form
                  of Common Security Certificate

              	 

      

    

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        -v-

        
          

        

      

      
        
        

      

    

     

    

      AMENDED
        AND RESTATED DECLARATION OF TRUST

       

      OF

       

      PEBK
        CAPITAL TRUST II

       

      June
        28,
        2006

       

      AMENDED
        AND RESTATED DECLARATION OF TRUST (this "Declaration"), dated and effective
        as
        of June 28, 2006, 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,
        the Delaware Trustee and the Sponsor established PEBK Capital Trust II (the
        "Trust"), a statutory trust under the Statutory Trust Act (as defined herein),
        pursuant to a Declaration of Trust, dated as of June 26, 2006 (the "Original
        Declaration"), and a Certificate of Trust filed with the Secretary of State
        of
        the State of Delaware on June 26, 2006, 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 the Debentures
        (as
        defined herein) of the Debenture Issuer (as defined herein) in connection
        with
        the issuance of the Capital Securities (as defined herein);

       

      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 trust under the Statutory Trust Act and that this Declaration
        constitutes the governing instrument of such statutory trust, and 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, and, in consideration of the mutual covenants contained
        herein and other good and valuable consideration, the receipt of which is
        hereby
        acknowledged, the parties, intending to be legally bound hereby, amend and
        restate in its entirety the Original Declaration and agree as
        follows:

       

      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 or
        elsewhere herein have the respective meanings assigned to them in this Section
        1.1 or, if not defined in this Section 1.1 or elsewhere herein, in the
        Indenture;

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (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 Tony W. Wolfe and A. Joseph Lampron, solely in such Person's
        capacity as Administrator of the Trust 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.

       

      "Applicable
        Depositary Procedures" means, with respect to any transfer or transaction
        involving a Book-Entry Capital Security, the rules and procedures of the
        Depositary for such Book-Entry Capital Security, in each case to the extent
        applicable to such transaction and as in effect from time to time.

       

      "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

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

         

        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.

      

       

      "Book-Entry
        Capital Security" means a Capital Security, the ownership and transfers of
        which
        shall be made through book entries by a Depositary.

       

      "Business
        Day" means any day other than Saturday, Sunday or any other day on which
        banking
        institutions in Wilmington, Delaware or New York City or the city of the
        Corporate Trust Office are permitted or required by any applicable law or
        executive order to close.

       

      "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
        Securities Purchase Agreement" means the Capital Securities Purchase Agreement
        dated as of June 26, 2006 among the Trust, the Sponsor and Bear, Stearns
        Securities Corp..

       

      "Capital
        Security Certificate" means a definitive Certificate registered in the name
        of
        the Holder 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" means the date of execution and delivery of this Declaration.

       

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

       

      "Commission"
        means the United States 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.

       

      "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

       

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

         

        execution
          of this Declaration is located at LaSalle Bank National Association, 135
          S.
          LaSalle Street, Suite 1511, Chicago, Illinois 60603, Attn: CDO Trust Services
          Group - PEBK Capital Trust II.

      

       

      "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 Peoples Bancorp of North Carolina, Inc., a bank holding company
        incorporated in North Carolina, in its capacity as issuer of the Debentures
        under the Indenture.

       

      "Debenture
        Trustee" means LaSalle Bank National Association, not in its individual capacity
        but solely as trustee under the Indenture until a successor is appointed
        thereunder, and thereafter means such successor trustee.

       

      "Debentures"
        means the Junior Subordinated Debt Securities due September 15, 2036 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 applicable during such Extension Period, compounded quarterly 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.

       

      "Depositary"
        means an organization registered as a clearing agency under the Exchange
        Act
        that is designated as Depositary by the Sponsor or any successor thereto.
        DTC
        will be the initial Depositary.

       

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

       

      "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.

       

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

       

      "DTC"
        means The Depository Trust Company or any successor thereto.

       

      "Distribution
        Payment Period" means the period from and including a Distribution Payment
        Date,
        or in the case of the first Distribution Payment Period, the original date
        of
        issuance of the Securities, to, but excluding, the next succeeding Distribution
        Payment Date or, in the case of the last Distribution Payment Period, the
        Redemption Date, Special Redemption Date or Maturity Date (each as defined
        in
        the Indenture), as the case may be, for the related Debentures.

       

      "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(e) of Annex I.

       

      "Fiduciary
        Indemnified Person" shall mean each of the Institutional Trustee (including
        in
        its individual capacity), the Delaware Trustee (including in its individual
        capacity), 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
        or
        the Delaware Trustee.

       

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

       

      "Global
        Capital Security" means a Capital Securities Certificate evidencing ownership
        of
        Book-Entry Capital Securities.

       

      "Guarantee"
        means the Guarantee Agreement, dated as of the Closing Date, of the Sponsor
        (the
“Guarantor”) in respect of the Capital Securities.

       

      "Holder"
        means a Person in whose name a Certificate representing a Security is registered
        on the register maintained by or on behalf of the Registrar, such Person
        being a
        beneficial owner within the meaning of the Statutory Trust Act.

       

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

       

      "Indenture"
        means the Indenture, dated as of the Closing Date, between 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.

       

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

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

       

      "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"
        means the London Interbank Offered Rate for U.S. Dollar deposits in Europe
        as
        determined by the Calculation Agent according to paragraph 2(b) of Annex
        I.

       

      "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.

       

      "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 Holders 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.

       

      "Notice"
        has the meaning set forth in Section 2.11 of the Indenture.

       

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

       

      (a) a
        statement that each officer signing the 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.

       

      "Owner"
        means each Person who is the beneficial owner of Book-Entry Capital Securities
        as reflected in the records of the Depositary or, if a Depositary Participant
        is
        not the 

       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

         

        beneficial
          owner, then the beneficial owner as reflected in the records of the Depositary
          Participant.

      

       

      "Paying
        Agent" has the meaning set forth 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)(E).

       

      "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.

       

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

       

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

       

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

       

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

       

      "Responsible
        Officer" means, with respect to the Institutional Trustee, any officer within
        the Corporate Trust Office of the Institutional Trustee with direct
        responsibility for the administration of this Declaration, including any
        vice-president, any assistant vice-president, any secretary, any assistant
        secretary, the treasurer, any assistant treasurer, any trust officer or other
        officer of the 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. 

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

       

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

       

      "Securities"
        means the Common Securities and the Capital Securities, as
        applicable.

       

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

       

      "Sponsor"
        means Peoples Bancorp of North Carolina, Inc., a bank holding company that
        is a
        U.S. Person incorporated in North Carolina, or any successor entity in a
        merger,
        consolidation or amalgamation that is a U.S. Person, in its capacity as sponsor
        of the Trust.

       

      "Statutory
        Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code
§
3801 et seq., as it may be amended from time to time, or any successor
        legislation.

       

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

       

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

       

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

       

      "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 Holders 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.

       

      "Trust
        Indenture Act" means the Trust Indenture Act of 1939, as amended from
        time-to-time, or any successor legislation.

       

      "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

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

         

        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 in Section 7701(a)(30) of
        the
        Code.

       

           
        ARTICLE II  

      ORGANIZATION

       

      SECTION
        2.1.   Name.
        The
        Trust is continued hereby and shall be known as "PEBK Capital Trust II,"
        as such
        name may be modified from time to time by the Administrators following written
        notice to the Institutional Trustee and 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 518 West C Street, Newton,
        North
        Carolina 28658. On ten Business Days' written notice to the Institutional
        Trustee and 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, (c) to facilitate direct investment in the assets of the Trust
        through issuance of the Common Securities and the Capital Securities and
        (d) 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 such
        Trustee's 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.

       

    

    
      SECTION
        2.5.   Title
        to Property of the Trust.
        Except
        as provided in Section 2.6(g) and 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

       

      
        
          
          

        

        
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        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 Administrators and, at the direction of the
        Administrators, the Trustees, shall have the authority to enter into all
        transactions and agreements determined by the Administrators 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, duty and authority, and is hereby
        authorized, to act on behalf of the Trust with respect 

        
        to the
        following matters:

       

      (A)  the
        issuance and sale of the Securities;

       

      (B)  to
        acquire the Debentures with the proceeds of the sale of the Securities;
        provided, however, that the 

      Administrators
        shall cause legal title to the Debentures to be held of record in the name
        of
        the Institutional Trustee for the benefit 

      of
        the
        Holders;

       

      (C)  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,
        a
Debenture
        subscription agreement between the Trust and the Sponsor and a Common Securities
        subscription

      agreement
        between
        the Trust and the Sponsor;

       

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

       

      (E)  if
        and at
        such time determined solely 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
        if
        available;

       

      (F)  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, including notice of any
        notice received from the Debenture

       Issuer of
        its
        election to defer
        payments of interest on the Debentures by extending the interest payment
        period
        under the 

       Indenture;

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      (I)  execution
        and delivery of closing certificates pursuant to the Placement Agreement
        and the
        application for a

       taxpayer
        identification number;

       

      (J)  unless
        otherwise determined by the Holders of a Majority in liquidation amount of
        the
        Securities or as otherwise

       required
        by the Statutory 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;

       

      (K)  the
        taking of any action incidental to the foregoing as the Sponsor or an
        Administrator 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);

       

      (L)  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;

       

      (M)  to
        duly
        prepare and file on behalf of the Trust all applicable tax returns and tax
        information reports that are

       required
        to be filed with respect to the Trust;

       

      (N)  to
        negotiate the terms of, and the execution and delivery of, the Placement
        Agreement and the Capital Securities

       Purchase
        Agreement related thereto, providing for the sale of the Capital
        Securities;

       

      (O)  to
        employ
        or otherwise engage employees, agents (who may be designated as officers
        with
        titles), managers, 

       contractors,
        advisors, attorneys and consultants and pay reasonable compensation for such
        services;

       

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

       

      (Q)  to
        give
        the certificate required by § 314(a)(4) of the Trust Indenture Act to the
        Institutional Trustee, which

       certificate
        may be executed by an Administrator; and

       

      
        
          
          

        

        
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      (R)  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 trust under
        the laws of each jurisdiction (other than the State of 

       
        Delaware) 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.

       

      (ii)  As
        among
        the Trustees and the Administrators, the Institutional Trustee shall have
        the
        power, duty and authority, and is hereby

      authorized,
        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;

       

      (I)  after
        any
        Event of Default (of which the Institutional Trustee has knowledge (as provided
        in Section 2.10(m) 

      hereof))
        (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);

       

      (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 trust under the
        laws
        of the State of Delaware to protect the

       limited
        liability of the Holders of the Capital

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

         

                        Securities
          or to
          enable the Trust to effect the purposes for which the Trust was created;
          and

      

       

      (K)  to
        undertake any actions set forth in § 317(a) of the Trust Indenture
        Act.

       

      (iii)  The
        Institutional Trustee shall have the power and authority, and is hereby
        authorized, 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 (or in the case of the Institutional Trustee, to the actual
        knowledge of a Responsible Officer 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 advisement of and

      direction
        to the Trustees of actions they must take on behalf of the Trust, and the
        preparation for execution and filing of any documents to be

      executed
        and filed by the Trust or on behalf of the Trust, as the Sponsor deems necessary
        or advisable in order to comply with the applicable laws

      of
        any
        such States in connection with the sale of the Capital Securities;
        and

       

      
        
          
          

        

        
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      (iii)  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
        (in
        the case of the Institutional Trustee, to the actual knowledge of a Responsible
        Officer), and (ii) the Trust will not fail to be classified as a grantor
        trust
        for United States federal income tax purposes (in the case of the Institutional
        Trustee, to the actual knowledge of a Responsible Officer) 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 the case of the Institutional Trustee, to the actual knowledge
        of a
        Responsible Officer). In this connection, the Institutional Trustee, the
        Administrators and the Holders of a Majority in liquidation amount of the
        Common
        Securities are authorized to take any action, not inconsistent with applicable
        laws or this Declaration, as amended from time to time, that each of the
        Institutional Trustee, the Administrators 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 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.

       

      SECTION
        2.7.   Prohibition
        of Actions by the Trust and the Trustees.
        The
        Trust shall not, and the Institutional Trustee and the Administrators shall
        not,
        and the Administrators shall cause the Trust not to, engage in any activity
        other than as required or authorized by this Declaration. In particular,
        the
        Trust shall not, and the Institutional Trustee and the Administrators shall
        not
        cause the Trust to:

       

                                     
        (a)  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;

                  
        

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

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

       

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

       

      SECTION
        2.8.   Powers
        and Duties of the Institutional Trustee.
        

       

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

       

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

       

      (c)  The
        Institutional Trustee shall:

       

      (i)  establish
        and maintain a segregated non-interest bearing trust account (the "Property
        Account") in the United States (as defined in 

      Treasury
        Regulations § 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;

       

      
        
          
          

        

        
          -15-

          
            

          

        

        
          
          

        

      

       

      (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 arise 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 premium,
        if any, on or principal of the Debentures on the date such interest, premium,
        if
        any, 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
        premium, if any, or interest on the Debentures having a principal amount
        equal
        to the aggregate liquidation amount of the Capital Securities of such Holder
        (a
        "Direct Action") on or after the respective due date specified in the
        Debentures. In connection with such Direct Action, the rights of the Holders
        of
        the Common Securities will be subrogated to the rights of such Holder of
        the
        Capital Securities to the extent of any payment made by the Debenture Issuer
        to
        such Holder of the Capital Securities in such Direct Action; provided,
        however,
        that a
        Holder of the Common Securities may exercise such right of subrogation only
        if
        no Event of Default with respect to the Capital Securities has occurred and
        is
        continuing.

       

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

       

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

       the
        terms of the Securities and this Declaration (including Annex I) and the
        certificate of cancellation referenced in Section 7.1(b) has been filed;
        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.

       

      
        
          
          

        

        
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      (h)  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 Trustees and the
        Administrators.
        

       

      (a)  The
        Institutional Trustee, before the occurrence of any Event of Default (of
        which
        the Institutional Trustee has knowledge (as provided in Section 2.10(m) hereof))
        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 (of which the
        Institutional Trustee has knowledge (as provided in Section 2.10(m) hereof)),
        has occurred (that has not been cured or waived pursuant to Section 6.8),
        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 any Trustee or Administrator to expend or risk
        its own
        funds or otherwise incur any financial liability in the performance of any
        of
        its duties hereunder, or in the exercise of any of its rights or powers,
        if it
        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 the Administrators shall be
        subject to the provisions of this Article. Nothing in this Declaration shall
        be
        construed to release a Trustee from liability for its own negligent action,
        its
        own negligent failure to act, or its own willful misconduct or bad faith.
        Nothing in this Declaration shall be construed to release an Administrator
        from
        liability for its own gross negligent action, its own gross negligent failure
        to
        act, or its own willful misconduct or bad faith. To the extent that, at law
        or
        in equity, a Trustee or an Administrator has duties and liabilities relating
        to
        the Trust or to the Holders, such Trustee or Administrator shall not be liable
        to the Trust or to any Holder for such Trustee's or Administrator's good
        faith
        reliance on the provisions of this Declaration. The provisions of this
        Declaration, to the extent that they restrict the duties and liabilities
        of the
        Administrators or the Trustees otherwise existing at law or in equity, are
        agreed by the Sponsor and the Holders to replace such other duties and
        liabilities of the Administrators or the Trustees.

       

      (c)  All
        payments made by the Institutional Trustee or a Paying Agent in respect of
        the
        Securities shall be made only from the revenue and proceeds from the Trust
        Property and only to the extent that there shall be sufficient revenue or
        proceeds from the Trust Property to enable the Institutional Trustee or a
        Paying
        Agent to make payments in accordance with the terms hereof. Each Holder,
        by its
        acceptance of a Security, agrees that it will look solely to the revenue
        and
        proceeds from the Trust Property to the extent legally available for
        distribution to it as herein provided and that the Trustees and the
        Administrators are not 

       

      
        
          
          

        

        
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        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 for its own negligent action, its own negligent failure
        to act, or its own willful misconduct or bad faith with respect to matters
        that
        are within the authority of the Institutional Trustee under this Declaration,
        except that:

       

      (i)  the
        Institutional Trustee shall not be liable for any error or judgment made
        in good
        faith by a Responsible Officer of the Institutional

      Trustee,
        unless it shall be proved that the Institutional Trustee was negligent in
        ascertaining the pertinent facts;

       

      (ii)  the
        Institutional Trustee shall not be liable with respect to any action taken
        or
        omitted to be taken by it in good faith in accordance

       with
        the direction of the Holders of not less than a Majority in liquidation amount
        of the Capital Securities or the Common Securities, as

      applicable,
        relating to the time, method and place of conducting any proceeding for any
        remedy available to the Institutional Trustee, or

      exercising
        any
        trust
        or power conferred upon the Institutional Trustee under this
        Declaration;

       

      (iii)  the
        Institutional Trustee's sole duty with respect to the custody, safe keeping
        and
        physical preservation of the Debentures and the

      Property
        Account shall be to deal with such property in a similar manner as the
        Institutional Trustee deals with similar property for its own

      account,
        subject to the protections and limitations on liability afforded to the
        Institutional Trustee under this Declaration and the Trust
        Indenture

      Act;

       

      (iv)  the
        Institutional Trustee shall not be liable for any interest on any money received
        by it except as it may otherwise agree in writing

      with
        the
        Sponsor; and money held by the Institutional Trustee need not be segregated
        from
        other funds held by it except in relation to the

      Property
        Account maintained by the Institutional Trustee pursuant to Section 2.8(c)(i)
        and except to the extent otherwise required by law; and

       

      (v)  the
        Institutional Trustee shall not be responsible for monitoring the compliance
        by
        the Administrators or the Sponsor with their

      respective
        duties under this Declaration, nor shall the Institutional Trustee be liable
        for
        any default or misconduct of the Administrators or the

      Sponsor.

       

       

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

    

    
       

      (a)  the
        Institutional Trustee may conclusively rely and shall fully be protected
        in
        acting or refraining from acting in good faith upon any resolution, written
        opinion of counsel, certificate, written representation of a Holder or
        transferee, certificate of auditors or any other

       

      
        
          
          

        

        
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        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, willful misconduct or bad
        faith;

       

      (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
        which, upon receipt of such request, shall be promptly delivered by the Sponsor
        or the Administrators;

       

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

       

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

       

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

       

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

       

      (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 has actual knowledge
        of such event or the Institutional Trustee receives written notice of such
        event
        from any Holder, except with respect to an Event of Default pursuant to Sections
        5.01(a), 5.01(b) or 5.01(c) of the Indenture (other than an Event of Default
        resulting from the default in the payment of Additional Interest or premium,
        if
        any, if the Institutional Trustee does not have actual knowledge or written
        notice that such payment is due and payable), of which the Institutional
        Trustee
        shall be deemed to have knowledge;

       

      (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

       

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

       

      (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 Statutory 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 § 3807 of the Statutory Trust Act.

       

      SECTION
        2.12.   Execution
        of Documents.
        Unless
        otherwise determined in writing by the Institutional Trustee, and except
        as
        otherwise required by the Statutory Trust Act, the Institutional Trustee,
        or any
        one or more of the Administrators, as the case may be, is authorized to execute
        and deliver on behalf of the Trust any documents, agreements, instruments
        or
        certificates 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.

       

      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
        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 3 of Annex
        I.

       

      (b)  The
        Trust
        may, with the consent of the Administrators and the Institutional Trustee
        (which
        consent will not be unreasonably withheld) and without the consent of the
        Holders of the Capital Securities, consolidate, amalgamate, merge with or
        into,
        or be replaced by, or convey, transfer or lease its properties and assets
        as an
        entirety or substantially as an entirety to a trust organized as such under
        the
        laws of any state; provided,
        that:

       

      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

       

      (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 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 

      quoted,
        or any Successor Securities will be listed or quoted 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, replacement, conveyance, transfer or
        lease
        does not cause the rating on the Capital

       Securities
        (including any Successor Securities) to be downgraded or withdrawn by any
        nationally recognized statistical rating organization, if the

       Capital
        Securities are then rated;

       

      (v)  such
        merger, consolidation, amalgamation, replacement, conveyance, transfer or
        lease
        does not adversely affect the rights,

       preferences
        and privileges of the Holders of the Securities (including any Successor
        Securities) in any material respect (other than with respect to

       any
        dilution of such Holders' interests in the Successor Entity as a result of
        such
        merger, consolidation, amalgamation or replacement);

       

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

       

      (vii)  prior
        to
        such merger, consolidation, amalgamation, replacement, conveyance, transfer
        or
        lease, 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, replacement, conveyance, transfer or
        lease
        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' interests in the Successor
        Entity);

       

      
        
          
          

        

        
          -22-

          
            

          

        

        
          
          

        

      

       

      (B)  following
        such merger, consolidation, amalgamation, replacement, conveyance, transfer
        or
        lease, neither the Trust

       nor
        the Successor Entity will be required to register as an Investment Company;
        and

       

      (C)  following
        such merger, consolidation, amalgamation, replacement, conveyance, transfer
        or
        lease, 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 to the same extent provided by

       the
        Guarantee, the Debentures and this Declaration; and

       

      (ix)  prior
        to
        such merger, consolidation, amalgamation, replacement, conveyance, transfer
        or
        lease, 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, or convey, transfer or lease its properties and
        assets
        as an entirety or substantially as an entirety to, any other Person or permit
        any other Person to consolidate, amalgamate, merge with or into, or replace
        it
        if such consolidation, amalgamation, merger, replacement, conveyance, transfer
        or lease would cause the Trust or 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 and sole decision to engage in,
        or
        direct the Administrators to engage in, the following activities:

       

      (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 

       

      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

         

        quotation
          upon notice of issuance of any Capital Securities, as requested by the
          Holders
          of not less than a Majority in liquidation amount of the Capital Securities;
          and

      

       

      (c)  to
        negotiate the terms of and/or execute and deliver 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 Statutory 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 §3807 of the Statutory Trust Act.

       

      SECTION
        4.3.   Institutional
        Trustee; Eligibility.
        

       

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

       

      (i)  not
        be an
        Affiliate of the Sponsor;

       

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

       

      (iii)  be
        a
        banking corporation or national association 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 fifty million U.S. dollars ($50,000,000), and subject to supervision
        or examination by federal, state or District of Columbia

      authority.  
        If
        such
        corporation or national 

       

      
        
          
          

        

        
          -24-

          
            

          

        

         

        association
          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 or national association 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.

       

      (c)  If
        the
        Institutional Trustee has or shall acquire any "conflicting interest" within
        the
        meaning of § 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 LaSalle Bank National
        Association.

       

      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. 

       

      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 acting alone.

       

      SECTION
        4.6.   Initial
        Delaware Trustee.
        The
        initial Delaware Trustee shall be Christiana Bank & Trust
        Company.

       

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

       

      (b)  Subject
        to Section 4.7(a), 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, except in the case of the Delaware Trustee's successor
        which
        shall be appointed by Holders of a Majority in liquidation amount of the
        Common
        Securities. 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 their expenses and 

       

      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

         

        charges
          to serve as the successor Institutional Trustee on a form provided by the
          Administrators, and selecting the Person who agrees to the lowest reasonable
          expense and charges (the "Successor Institutional Trustee"). If the instrument
          of acceptance by the successor Relevant Trustee required by this 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.

      

       

      (c)  Unless
        an
        Event of Default shall have occurred and be continuing, any Trustee may be
        removed at any time by an act of the Holders 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 delivered to the Relevant Trustee, shall promptly appoint
        a successor Relevant Trustee, 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 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.

       

      (d)  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 and
        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.

       

      (e)  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 (provided
        the Institutional Trustee satisfies the requirements of a Delaware Trustee
        as
        set forth in Section 4.2) 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").

       

      
        
          
          

        

        
          -26-

          
            

          

        

        
          
          

        

      

       

      (f)  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.

       

      (g)  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.

       

      (h)  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.

       

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

       

      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.

       

      
        
          
          

        

        
          -27-

          
            

          

        

        
          
          

        

      

       

      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,
        in the case of the Administrators, a Quorum is present, or without a meeting
        by
        the unanimous written consent of the Trustees or the Administrators, as the
        case
        may be. Meetings of the Trustees and the Administrators together shall be
        held
        from time to time upon the call of any Trustee or Administrator.

       

      SECTION
        4.11.   Delegation
        of Power.

       

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

       

      (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 or other writings 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.   Merger,
        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, without the execution or filing of any paper
        or
        any further act on the part of any of the parties hereto, provided such Person
        shall be otherwise qualified and eligible

       

      
        
          
            
            

          

          
            -28-

            
              

            

          

          
            
            

          

        

         

        under
          this Article and, provided, further, that such Person shall file an amendment
          to
          the Certificate of Trust with the Secretary of State of the State of Delaware
          as
          contemplated in Section 4.7(i).

      

       

           
        ARTICLE V  

      DISTRIBUTIONS

       

      SECTION
        5.1.   Distributions.
        

       

      (a) 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) or premium, if any, on 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. For the avoidance of doubt,
        funds in the Property Account shall not be distributed to Holders to the
        extent
        of any taxes payable by the Trust, in the case of withholding taxes, as
        determined by the Institutional Trustee or any Paying Agent and, in the case
        of
        taxes other than withholding tax taxes, as determined by the Administrators
        in a
        written notice to the Institutional Trustee.

       

      (b) As
        a
        condition to the payment of any principal of or interest on the Securities
        without the imposition of withholding tax, the Administrators shall require
        the
        previous delivery of properly completed and signed applicable U.S. federal
        income tax certifications (generally, an Internal Revenue Service Form W-9
        (or
        applicable successor form) in the case of a person that is a "United States
        person" within the meaning of Section 7701(a)(30) of the Code or an Internal
        Revenue Service Form W-8 (or applicable successor form) in the case of a
        person
        that is not a "United States person" within the meaning of Section 7701(a)(30)
        of the Code, and any other certification acceptable to it to enable the
        Institutional Trustee or any Paying Agent to determine their respective duties
        and liabilities with respect to any taxes or other charges that they may
        be
        required to pay, deduct or withhold in respect of such Securities.

       

      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, evidenced by a certificate substantially in the form of Exhibit
        A-1,
        representing undivided beneficial interests in the assets of the Trust and
        having such terms as are set forth in Annex I (the "Capital Securities"),
        and
        one series of common securities, evidenced by a certificate substantially
        in the
        form of Exhibit A-2, representing undivided beneficial interests in the assets
        of the Trust and 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

       

      
        
          
          

        

        
          -29-

          
            

          

        

        
          
          

        

         

        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. 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 and shall be valid upon execution
        by one or more Administrators.

       

      (c)  The
        Capital Securities issued pursuant to Regulation S of the Securities Act
        or to
        QIBs shall be, except as provided in Section 6.4, Book-Entry Capital Securities
        issued in the form of one or more Global Capital Securities registered in
        the
        name of the Depositary, or its nominee and deposited with the Depositary
        or a
        custodian for the Depositary for credit by the Depositary to the respective
        accounts of the Depositary Participants thereof (or such other accounts as
        they
        may direct).

       

      (d)  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.

       

      (e)  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,
        and
        each Holder thereof shall be entitled to the benefits provided by this
        Declaration.

       

      (f)  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.
        

       

      (a)  The
        Trust
        shall maintain 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 hereby appoints the Institutional Trustee as Paying Agent and Transfer
        Agent at LaSalle Bank National

       

      
        
          
          

        

        
          -30-

          
            

          

        

        
          
          

        

         

        Association,
          CDO Trust Services Group, 135 South LaSalle Street, Suite 1511, Chicago,
          Illinois 60603 - PEBK Capital Trust II. The Trust shall also keep or cause
          to be
          kept 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,
          one or
          more co-Registrars, or one or more co-Transfer Agents in such other locations
          as
          it shall determine. The term "Paying Agent" includes any additional Paying
          Agent, the term "Registrar" includes any additional Registrar or co-Registrar
          and the term "Transfer Agent" includes any additional Transfer Agent or
          co-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
          Registrar for the Capital Securities and the Common Securities at its Corporate
          Trust Office. The Institutional Trustee or any of its Affiliates in the
          United
          States may act as Paying Agent, Transfer Agent or Registrar.

      

       

      (b)  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 as Calculation Agent.

       

      SECTION
        6.3.   Form
        and Dating.
        

       

      (a)  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 Certificates 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 $100,000
        and
        multiples of $1,000 in excess thereof.

       

      (b)  The
        Capital Securities sold by the Trust to the initial purchasers pursuant to
        the
        Placement Agreement and the Capital Securities Purchase Agreement shall be
        issued in book entry form, registered in the name of Cede & Co., as nominee
        on behalf of the Depository Trust Company, without coupons and with the
        Restricted Securities Legend.

       

      
        
          
          

        

        
          -31-

          
            

          

        

        
          
          

        

      

       

      SECTION
        6.4.   Book-Entry
        Capital Securities.

       

      (a)  A
        Global
        Capital Security may be exchanged, in whole or in part, for Definitive Capital
        Securities Certificates registered in the names of Owners only if such exchange
        complies with Article VIII and (i) the Depositary advises the
        Administrators and the Institutional Trustee in writing that the Depositary
        is
        no longer willing or able properly to discharge its responsibilities with
        respect to the Global Capital Security, and no qualified successor is appointed
        by the Administrators within ninety (90) days of receipt of such notice,
        (ii) the Depositary ceases to be a clearing agency registered under the
        Exchange Act and the Administrators fail to appoint a qualified successor
        within
        ninety (90) days of obtaining knowledge of such event, (iii) the Administrators
        at their option advise the Institutional Trustee in writing that the Trust
        elects to terminate the book-entry system through the Depositary or (iv) an
        Indenture Event of Default has occurred and is continuing. Upon the occurrence
        of any event specified in clause (i), (ii), (iii) or (iv) above, the
        Administrators shall notify the Depositary and instruct the Depositary to
        notify
        all Owners of Book-Entry Capital Securities and the Institutional Trustee
        of the
        occurrence of such event and of the availability of Definitive Capital
        Securities Certificates to Owners of the Capital Securities requesting the
        same.
        Upon the issuance of Definitive Capital Securities Certificates, the
        Administrators and the Institutional Trustee shall recognize the Holders
        of the
        Definitive Capital Securities Certificates as Holders. Notwithstanding the
        foregoing, if an Owner of a beneficial interest in a Global Capital Security
        wishes at any time to transfer an interest in such Global Capital Security
        to a
        Person other than a QIB, such transfer shall be effected, subject to the
        Applicable Depository Procedures, in accordance with the provisions of this
        Section 6.4 and Article VIII, and the transferee shall receive a Definitive
        Capital Securities Certificate in connection with such transfer. A holder
        of a
        Definitive Capital Securities Certificate that is a QIB may upon request,
        and in
        accordance with the provisions of this Section 6.4 and Article VIII, exchange
        such Definitive Capital Securities Certificate for a beneficial interest
        in a
        Global Capital Security.

       

      (b)  If
        any
        Global Capital Security is to be exchanged for Definitive Capital Securities
        Certificates or canceled in part, or if any Definitive Capital Securities
        Certificate is to be exchanged in whole or in part for any Global Capital
        Security, then either (i) such Global Capital Security shall be so surrendered
        for exchange or cancellation as provided in this Section 6.4 and Article
        VIII or
        (ii) the aggregate liquidation amount represented by such Global Capital
        Security shall be reduced, subject to Section 6.3, or increased by an amount
        equal to the liquidation amount represented by that portion of the Global
        Capital Security to be so exchanged or canceled, or equal to the liquidation
        amount represented by such Definitive Capital Securities Certificates to
        be so
        exchanged for any Global Capital Security, as the case may be, by means of
        an
        appropriate adjustment made on the records of the Securities Registrar,
        whereupon the Institutional Trustee, in accordance with the Applicable
        Depositary Procedures, shall instruct the Depositary or its authorized
        representative to make a corresponding adjustment to its records. Upon any
        such
        surrender to the Administrators or the Registrar of any Global Capital Security
        or Securities by the Depositary, accompanied by registration instructions,
        the
        Administrators, or any one of them, shall execute the Definitive Capital
        Securities Certificates in accordance with the instructions of the Depositary.
        None of the Registrar, Administrators, or the Institutional Trustee shall
        be
        liable for any delay in delivery of such instructions and may conclusively
        rely
        on, and shall be fully protected in relying on, such instructions.

       

      
        
          
          

        

        
          -32-

          
            

          

        

        
          
          

        

      

       

      (c)  Every
        Definitive Capital Securities Certificate executed and delivered upon
        registration or transfer of, or in exchange for or in lieu of, a Global Capital
        Security or any portion thereof shall be executed and delivered in the form
        of,
        and shall be, a Global Capital Security, unless such Definitive Capital
        Securities Certificate is registered in the name of a Person other than the
        Depositary for such Global Capital Security or a nominee thereof.

       

      (d)  The
        Depositary or its nominee, as registered owner of a Global Capital Security,
        shall be the Holder of such Global Capital Security for all purposes under
        this
        Declaration and the Global Capital Security, and Owners with respect to a
        Global
        Capital Security shall hold such interests pursuant to the Applicable Depositary
        Procedures. The Registrar, the Administrators and the Institutional Trustee
        shall be entitled to deal with the Depositary for all purposes of this
        Declaration relating to the Global Capital Securities (including the payment
        of
        the liquidation amount of and Distributions on the Book-Entry Capital Securities
        represented thereby and the giving of instructions or directions by Owners
        of
        Book-Entry Capital Securities represented thereby and the giving of notices)
        as
        the sole Holder of the Book-Entry Capital Securities represented thereby
        and
        shall have no obligations to the Owners thereof. None of the Administrators,
        the
        Institutional Trustee nor the Registrar shall have any liability in respect
        of
        any transfers effected by the Depositary.

       

      (e)  The
        rights of the Owners of the Book-Entry Capital Securities shall be exercised
        only through the Depositary and shall be limited to those established by
        law,
        the Applicable Depositary Procedures and agreements between such Owners and
        the
        Depositary and/or the Depositary Participants; provided,
        solely
        for the purpose of determining whether the Holders of the requisite amount
        of
        Capital Securities have voted on any matter provided for in this Declaration,
        to
        the extent that Capital Securities are represented by a Global Capital Security,
        the Administrators and the Institutional Trustee may conclusively rely on,
        and
        shall be fully protected in relying on, any written instrument (including
        a
        proxy) delivered to the Institutional Trustee by the Depositary setting forth
        the Owners' votes or assigning the right to vote on any matter to any other
        Persons either in whole or in part. To the extent that Capital Securities
        are
        represented by a Global Capital Security, the initial Depositary will make
        book-entry transfers among the Depositary Participants and receive and transmit
        payments on the Capital Securities that are represented by a Global Capital
        Security to such Depositary Participants, and none of the Sponsor, the
        Administrators or the Institutional Trustee shall have any responsibility
        or
        obligation with respect thereto.

       

      (f)  To
        the
        extent that a notice or other communication to the Holders is required under
        this Declaration, for so long as Capital Securities are represented by a
        Global
        Capital Security, the Administrator and the Institutional Trustee shall give
        all
        such notices and communications to the Depositary, and shall have no obligations
        to the Owners.

       

    

    
      SECTION
        6.5.   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 hold each of them harmless; then, in the absence of
        notice that such Certificate shall have been acquired by a bona fide purchaser,
        an Administrator on behalf of the Trust shall execute (and in the case of
        a
        Capital Security Certificate, the Institutional Trustee

       

      
        
          
          

        

        
          -33-

          
            

          

        

        
          
          

        

         

        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
          6.5,
          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
        6.6.   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
        6.7.   Cancellation.
        The
        Administrators at any time may deliver Securities to the Registrar 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 in accordance with its standard
        procedures or otherwise as the Administrators direct. The Administrators
        may not
        issue new Securities to replace Securities that have been paid or, except
        for
        Securities surrendered for purposes of transfer or exchange, that have been
        delivered to the Institutional Trustee for cancellation.

       

      SECTION
        6.8.   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, and the issuance of the Securities shall not
        be
        subject to, preemptive or other similar rights and when issued and delivered
        to
        Holders against payment of the purchase price therefor, the Securities 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 under Section 5.01(c), (e) or (f) of the Indenture, 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 not less than 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.

       

      
        
          
          

        

        
          -34-

          
            

          

        

        
          
          

        

      

       

      (c)  Upon
        an
        Indenture Event of Default under Sections 5.01(c), (e) or (f) at any time
        after a declaration of acceleration of maturity of 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 not less than 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)  all
        payments 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, 

      documented
        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 or premium, if any, on the

       Debentures
        that has become due solely by such acceleration, have been cured or waived
        as
        provided in Section 5.07 of the Indenture.

       

      (d)  The
        Holders of not less than 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.

       

      (e)  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

       

      
        
          
          

        

        
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        effective
          by virtue of the requisite percentage having joined in such notice prior
          to the
          day that is 90 days after such record date, such notice of declaration
          of
          acceleration, or rescission and annulment, as the case may be, shall
          automatically and without further action by any Holder be canceled and
          of no
          further effect. Nothing in this paragraph shall prevent a Holder, or a
          proxy of
          a Holder, from giving, after expiration of such 90-day period, a new written
          notice of declaration of acceleration, or rescission and annulment thereof,
          as
          the case may be, that is identical to a written notice that has been canceled
          pursuant to the proviso to the preceding sentence, in which event a new
          record
          date shall be established pursuant to the provisions of this Section
          6.8.

      

       

      (f)  Except
        as
        otherwise provided in this Section 6.8, the Holders of not less than 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 Declaration, 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 September 15, 2041, 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 all 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

       

      
        
          
          

        

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

       

      (b)  As
        soon
        as is practicable after the occurrence of an event referred to in Section
        7.1(a), and after satisfaction of liabilities to creditors of the Trust as
        required by applicable law, including Section 3808 of the Statutory Trust
        Act,
        and subject to the terms set forth in Annex I, the Delaware Trustee, when
        notified in writing of the completion of the winding up of the Trust in
        accordance with the Statutory Trust Act, shall terminate the Trust by filing,
        at
        the expense of the Sponsor, 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)  Subject
        to Section 6.4 and Section 8.1(c), when Capital Securities are presented
        to the
        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 the requirements
        provided for herein for such transactions are met. To permit registrations
        of
        transfers 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

       

      
        
          
          

        

        
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        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 satisfactory to the Registrar duly executed by the Holder
          or
          such Holder's attorney duly authorized in writing. Each Security surrendered
          for
          registration of transfer shall be canceled by the Institutional Trustee
          pursuant
          to Section 6.7. 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)  The
        Capital Securities shall bear the Restricted Securities Legend (as defined
        below), which shall not be removed unless there is delivered to the Trust
        such
        satisfactory evidence, which may include an opinion of counsel reasonably
        acceptable to the Administrators and the Institutional Trustee, as may be
        reasonably required by the Trust or the Institutional Trustee, 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 Administrators, shall authenticate
        and
        deliver Capital Securities that do not bear the Restricted Securities Legend
        (other than the legend contemplated by Section 8.2(d)).

       

      (b)  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 represented by different Certificates,
        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 Administrators, the Institutional Trustee
        and the Registrar, duly executed by the Holder thereof or his attorney duly
        authorized in writing.

       

      (c)  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
        CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
        DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
        DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL SECURITY
        IS
        EXCHANGEABLE FOR CAPITAL

       

      
        
          
          

        

        
          -38-

          
            

          

        

        
          
          

        

         

        SECURITIES
          REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN
          THE
          LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO TRANSFER OF
          THIS
          CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE
          BY
          DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE
          OF DTC)
          MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

      

       

      UNLESS
        THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
        TO
PEBK
        CAPITAL TRUST II
        OR ITS
        AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
        SECURITY ISSUED IS REGISTERED AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
        OF
        DTC (AND ANY PAYMENT HEREON IS MADE TO SUCH OTHER ENTITY AS IS REQUESTED
        BY AN
        AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
        FOR
        VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
        OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

       

      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 THE HOLDER 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 A "NON U.S. PERSON" IN AN "OFFSHORE
        TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D)
        PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
        ACT 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 SUCH 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 (E) 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 (D) OR (E) TO REQUIRE THE DELIVERY
        OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
        TO
        EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST,
        A
        COPY OF WHICH MAY BE

       

      
        
          
          

        

        
          -39-

          
            

          

        

        
          
          

        

         

        OBTAINED
          FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY BY
          ITS
          ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING
          RESTRICTIONS.

      

       

      THE
        HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS
        THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS
        SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT.

       

      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 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 OF THE CERTIFICATE WILL DELIVER
        TO THE
        REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY
        BE
        REQUIRED BY THE AMENDED AND RESTATED 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

       

      
        
          
          

        

        
          -40-

          
            

          

        

        
          
          

        

         

        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)  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
        void
        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. 

       

      (e)  Each
        party hereto understands and hereby agrees that the initial purchaser is
        intended solely to be an interim holder of the Capital Securities and is
        purchasing such securities to facilitate consummation of the transactions
        contemplated herein and in the documents ancillary hereto. Notwithstanding
        any
        provision in this Declaration to the contrary, the initial purchaser shall
        have
        the right upon notice (a "Transfer Notice") to the Institutional Trustee
        and the
        Sponsor to transfer title in and to the Capital Securities; provided the
        initial
        purchaser shall take reasonable steps to ensure that such transfer is exempt
        from registration under the Securities Act of 1933, as amended, and rules
        promulgated thereunder. Any Transfer Notice delivered to the Institutional
        Trustee and Sponsor pursuant to the preceding sentence shall indicate the
        aggregate liquidation amount of Capital Securities being transferred, the
        name
        and address of the transferee thereof (the "Transferee") and the date of
        such
        transfer. Notwithstanding any provision in this Declaration to the contrary,
        the
        transfer by the initial purchaser of title in and to the Capital Securities
        pursuant to a Transfer Notice shall not be subject to any requirement relating
        to Opinions of Counsel, Certificates of Transfer or any other Opinion or
        Certificate applicable to transfers hereunder and relating to Capital
        Securities.

       

      (f) Neither
        the Institutional Trustee nor the Registrar shall be responsible for
        ascertaining whether any transfer hereunder complies with the registration
        provisions of or any exemptions from the Securities Act, applicable state
        securities laws or the applicable laws of any other jurisdiction, ERISA,
        the
        Code or the Investment Company Act.

       

      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.

       

      
        
          
          

        

        
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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)  Except
        to
        the extent provided in Section 9.1(b), and pursuant to § 3803(a) of the
        Statutory Trust Act, the Holders of the 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, except as otherwise specifically set forth herein.

       

      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 (other than an Administrator) shall be liable for any
        such
        loss, damage or claim incurred by reason of such Indemnified Person's negligence
        or willful misconduct or bad faith with respect to such acts or omissions
        and
        except that an Administrator shall be liable for any such loss, damage or
        claim
        incurred by reason of such Administrator's gross negligence or willful
        misconduct or bad faith 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.

       

      
        
          
          

        

        
          -42-

          
            

          

        

        
          
          

        

      

       

      (c) It
        is
        expressly understood and agreed by the parties hereto that insofar as any
        document, agreement or certificate is executed on behalf of the Trust by
        any
        Trustee (i) such document, agreement or certificate is executed and delivered
        by
        such Trustee, not in its individual capacity, but solely as Trustee under
        this
        Declaration in the exercise of the powers and authority conferred and vested
        in
        it, (ii) each of the representations, undertakings and agreements made on
        the
        part of the Trust is made and intended not as representations, warranties,
        covenants, undertakings and agreements by any Trustee in its individual
        capacity, but is made and intended for the purpose of binding only the Trust
        and
        (iii) under no circumstances shall any Trustee in its individual capacity
        be
        personally liable for the payment of any indebtedness or expenses of the
        Trust
        or be liable for the breach or failure of any obligation, representation,
        warranty or covenant made or undertaken by the Trust under this Declaration
        or
        any other document, agreement or certificate.

       

      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
        9.4.   Indemnification.

       

      (a) (i) The
        Sponsor shall indemnify, to the fullest 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 such Person 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 such Person

       

      
        
          
          

        

        
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       in
        connection with such action, suit or proceeding if such Person acted in good
        faith and in a manner such Person 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 such 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 such Person 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 such conduct was
        unlawful.

       

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

       

      (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, such Person shall be indemnified,
        to the fullest extent permitted by law, against expenses (including attorneys'
        fees and expenses) actually and reasonably incurred by such Person 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 such Person 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.

       

      
        
          
          

        

        
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      (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 such Person 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 (1) in the case of a Company
        Indemnified Person (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
        either believed to be opposed to or did not believe to be in the best interests
        of the Trust, or, with respect to any criminal proceeding, that such Indemnified
        Person believed or had reasonable cause to believe such conduct was unlawful,
        or
        (2) in the case of a Fiduciary Indemnified Person, by independent legal counsel
        in a written opinion that, based upon the facts known to the counsel at the
        time
        such determination is made, such Indemnified Person acted in bad faith or
        in a
        manner that such Indemnified Person either believed to be opposed to or did
        not
        believe to be in the best interests of the Trust, or, with respect to any
        criminal proceeding, that such Indemnified Person believed or had reasonable
        cause to believe such conduct was unlawful. In no event shall any advance
        be
        made (i) to a Company Indemnified Person in instances where the Administrators,
        independent legal counsel or the Common Security Holder reasonably determine
        that such Person deliberately breached such Person's duty to the Trust or
        its
        Common or Capital Security Holders or (ii) to a Fiduciary Indemnified Person
        in
        instances where independent legal counsel promptly and reasonably determines
        in
        a written opinion that such Person deliberately breached such Person's duty
        to
        the Trust or its Common or Capital Security Holders.

       

      (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 of 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, willful misconduct or bad faith with respect
        to
        such acts or omissions.

       

      
        
          
          

        

        
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      (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 such Person's 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
        such
        Person and incurred by such Person in any such capacity, or arising out of
        such
        Person's status as such, whether or not the Sponsor would have the power
        to
        indemnify such Person 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 such Person 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.

       

      (g) The
        provisions of this Section 9.4 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 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 Capital Securities,
        provided,
        that
        the Sponsor is the holder of the Common Securities.

       

      SECTION
        9.5.   Outside
        Businesses.
        Any
        Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee
        (subject to Section 4.3(c)) may engage in or possess an interest in other
        business ventures of any nature or description, independently or with others,
        similar or dissimilar to the business of the Trust, and the Trust and the
        Holders of Securities shall have no rights by virtue of this Declaration
        in and
        to such independent ventures or the income or profits derived therefrom,
        and the
        pursuit of any such venture, even if competitive with the business of the
        Trust,
        shall not be deemed wrongful or improper. None of any Covered
        Person,

       

      
        
          
          

        

        
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        the
          Sponsor, the Delaware Trustee or the Institutional Trustee shall be obligated
          to
          present any particular investment or other opportunity to the Trust even
          if such
          opportunity is of a character that, if presented to the Trust, could be
          taken by
          the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and
          the
          Institutional Trustee shall have the right to take for its own account
          (individually or as a partner or fiduciary) or to recommend to others any
          such
          particular investment or other opportunity. Any Covered Person, the Delaware
          Trustee and the Institutional Trustee may engage or be interested in any
          financial or other transaction with the Sponsor or any Affiliate of the
          Sponsor,
          or may act as depositary for, trustee or agent for, or act on any committee
          or
          body of holders of, securities or other obligations of the Sponsor or its
          Affiliates.

      

       

      SECTION
        9.6.   Compensation;
        Fee.

       

      (a)  Subject
        to the provisions set forth in the Fee Agreement between the Institutional
        Trustee, Cohen Bros. & Company and the Company of even date herewith, the
        Sponsor agrees:

       

      (i)  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

       

      (ii)  except
        as
        otherwise expressly provided herein, to reimburse the Trustees upon request
        for
        all reasonable, documented 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

       attributable
        to their negligence or willful misconduct.

       

      (b)  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.

       

      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 § 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 10-K and Form 10-Q prepared
        by
        the Sponsor and filed with the Commission in accordance with the Exchange
        Act
        to

       

      
        
          
          

        

        
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        be
          delivered to each Holder of Securities, within 90 days after the filing
          of each
          Form 10-K and within 30 days after the filing of each Form 10-Q or (ii)
          cause to
          be prepared at the principal office of the Trust in the United States,
          as
          defined for purposes of Treasury Regulations § 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 § 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)  The
        Administrators will cause the Sponsor’s regulatory reports 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 § 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.

       

      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. As a condition to the payment of any principal of or interest on any
        Debt
        Security without the imposition of withholding tax, the Institutional Trustee
        or
        any Paying Agent shall require the previous delivery of properly completed
        and
        signed applicable U.S. federal income tax certifications (generally, an Internal
        Revenue Service Form W-9 (or applicable successor form) in the case of a
        person
        that is a "United States person" within the meaning of Section 7701(a)(30)
        of
        the Code or an Internal Revenue Service Form W-8 (or applicable successor
        form)
        in the case of a person that is not a "United States person" within the meaning
        of Section 7701(a)(30) of the Code) and any other certification acceptable
        to it
        to enable the Institutional Trustee or any Paying Agent and the Trustee to
        determine their respective duties and liabilities with respect to any taxes
        or
        other charges that they may be required to pay, deduct or withhold in respect
        of
        such Debt Security or the holder of such Debt Security under any present
        or
        future law or regulation of the United States or any political subdivision
        thereof or taxing authority therein or to comply with any reporting or other
        requirements under any such law or regulation. The Administrators shall file
        required forms with applicable jurisdictions and, unless an
        exemption

       

      
        
          
          

        

        
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        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
        Administrators, the Administrators, and

       

      (iv)  the
        Holders 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

       

      (B)  an
        opinion of counsel (who may be counsel to the Sponsor or the Trust) that
        such
        amendment is permitted by,

       and
        conforms to, the terms of this Declaration (including the terms of the
        Securities) and that all conditions precedent to the

       execution
        and delivery of such amendment have been satisfied; or

       

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

       

      
        
          
          

        

        
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      (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 Capital 

      Securities
        as "Tier 1 Capital" for purposes of the capital adequacy guidelines of
        (x) the Federal Reserve (or, if the Debenture

      Issuer
        is
        not a bank holding company, such guidelines or policies applied to the Debenture
        Issuer as if the Debenture Issuer

      were
        subject to such guidelines of policies) or of (y) any other regulatory
        authority having jurisdiction over the Debenture

      Issuer.

       

      (c)  Except
        as
        provided in Section 11.1(d), (e) or (g), 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 any
        redemption or liquidation provisions applicable to 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)  Sections
        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)  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.

       

      (g)  Subject
        to Section 11.1(a), 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:

       

      (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; or

       

      
        
          
          

        

        
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      (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 rights of
        Holders of Capital Securities.

       

      SECTION
        11.2.   Meetings
        of the Holders of the 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 not less than
        10%
        in liquidation amount of such class of Securities. Such direction shall be
        given
        by delivering to the Administrators one or more notices 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 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

       

      
        
          
          

        

        
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        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 Statutory 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 § 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:

       

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

       

      
        
          
          

        

        
          -52-

          
            

          

        

        
          
          

        

      

       

      (b)  the
        Institutional Trustee has a combined capital and surplus of at least fifty
        million U.S. dollars ($50,000,000);

       

      (c)  the
        Institutional Trustee is not an affiliate of the Sponsor, nor does the
        Institutional Trustee offer or provide credit or credit enhancement to the
        Trust;

       

      (d)  the
        execution, delivery and performance by the Institutional Trustee of this
        Declaration has been duly authorized by all necessary action on the part
        of the
        Institutional Trustee. This Declaration has been duly executed and delivered
        by
        the Institutional Trustee, and under Delaware law (excluding any securities
        laws) 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
        and the discretion of the court (regardless of whether considered in a
        proceeding in equity or at law);

       

      (e)  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

       

      (f)  no
        consent, approval or authorization of, or registration with or notice to,
        any
        state or federal banking authority governing the trust powers of the
        Institutional Trustee 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 has its principal place of business in 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 under Delaware law
        (excluding any securities laws) constitutes a legal, valid and binding
        obligation of the Delaware Trustee, enforceable against it in accordance
        with
        its terms, subject to applicable bankruptcy, reorganization, moratorium,
        insolvency and other similar laws affecting creditors' rights generally and
        to
        general principles of equity and the discretion of the court (regardless
        of
        whether 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 articles of association 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;

       

      
        
          
          

        

        
          -53-

          
            

          

        

        
          
          

        

      

       

      (e)  no
        consent, approval or authorization of, or registration with or notice to,
        any
        state or federal banking authority governing the trust powers of the Delaware
        Trustee is required for the execution, delivery or performance by the Delaware
        Trustee of this Declaration; and

       

      (f)  if
        the
        Delaware Trustee is a natural person, he or she is a resident of the State
        of
        Delaware.

       

           
        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):

       

      PEBK
        Capital Trust II

      c/o
        Peoples Bancorp of North Carolina, Inc.

      518
        West
        C Street

      Newton,
        North Carolina 28658

      Attention:
        A. Joseph Lampron

      Telecopy:
        (828) 465-6780

      Telephone:
        (828) 464-5620

       

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

       

      Christiana
        Bank & Trust Company

      1314
        King
        Street

      Wilmington,
        Delaware 19801

      Attn:
        Corporate Trust Administration

      Telecopy:
        302-421-9015

      Telephone:
        302-888-7437

       

      (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):

       

      
        
          
          

        

        
          -54-

          
            

          

        

        
          
          

        

      

       

      LaSalle
        Bank National Association

      135
        S.
        LaSalle Street, Suite 1511

      Chicago,
        Illinois 60603

      Attention:
        CDO Trust Services Group

      PEBK
        Capital Trust II

      Telecopy:
        312-904-0524

      Telephone:
        312-904-0283

      

      (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):

       

      Peoples
        Bancorp of North Carolina, Inc.

      518
        West
        C Street

      Newton,
        North Carolina 28658

      Attention:
        A. Joseph Lampron

      Telecopy:
        (828) 465-6780

      Telephone:
        (828) 464-5620

       

      (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.
        

       

      (a)  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 located in the Borough
        of Manhattan, City and State of New York, and further agrees to submit to
        the
        jurisdiction of Delaware, and to any actions that are instituted in state
        or
        Federal court in Wilmington, Delaware and 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

       

      
        
          
          

        

        
          -55-

          
            

          

        

        
          
          

        

         

        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.

      

       

      (b)  Each
        of
        the Sponsor, the Trustees, the Administrators and the Holder of the Common
        Securities irrevocably consents to the service of process on it in any such
        suit, action or proceeding 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.

       

      (c)  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.

      
 

      
        
          
          

        

        
          -56-

          
            

          

        

        
          
          

        

      

       

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

       

      

        
          	 	
                  CHRISTIANA
                    BANK & TRUST COMPANY,

                
	 	
                       
                    as Delaware Trustee

                
	 	 	 	 
	 	
                  By:

                	 	
                  /s/
                    James M. Young

                
	 	 	
                  Name:

                	JAMES
                  M. YOUNG
	 	 	
                  Title:

                	ASSISTANT
                  VICE PRESIDENT
	 	 	 	 
	 	 	 	 
	 	
                  LASALLE
                    BANK NATIONAL

                
	 	
                  ASSOCIATION,

                
	 	
                        
                    as Institutional Trustee

                
	 	 	 	 
	 	
                  By:

                	 	
                  /s/
                    Suzanne Smith

                
	 	 	
                  Name:

                	SUZANNE
                  SMITH
	 	 	
                  Title:

                	VICE
                  PRESIDENT
	 	 	 	 
	 	 	 	 
	 	
                  PEOPLES
                    BANCORP OF NORTH

                
	 	
                  CAROLINA,
                    INC.,

                
	 	
                        
                    as Sponsor

                
	 	 	 	 
	 	
                  By:

                	 	
                  /s/
                    A. Joseph Lampron

                
	 	 	
                  Name:

                	A.
                  JOSEPH LAMPRON
	 	 	
                  Title:

                	Executive
                  Vice President, Chief Financial
	 	 	 	Officer
                  and Corporate Treasurer
	 	 	 	 
	 	
                  By:

                	 	
                  /s/
                    Tony W. Wolfe

                
	 	 	
                                Administrator

                
	 	 	 	 
	 	
                  By:

                	 	
                  /s/
                    A. Joseph Lampron

                
	 	 	
                                Administrator

                

        

         

      

       

       

       

      
        
          
          

        

        
          -57-

          
            

          

        

        
          
          

        

      

       

      ANNEX
        I

       

      TERMS
        OF

      CAPITAL
        SECURITIES AND

      COMMON
        SECURITIES

       

      Pursuant
        to Section 6.1 of the Amended and Restated Declaration of Trust, dated as
        of
        June 28, 2006 (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. 20,000 Capital Securities of PEBK Capital Trust II (the "Trust"),
        with an aggregate stated liquidation amount with respect to the assets of
        the
        Trust of Twenty Million Dollars ($20,000,000) 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 "TP Securities"
        (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. 619 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 Six
        Hundred
        Nineteen Thousand Dollars ($619,000) 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 quarterly, equal to LIBOR, as determined on the LIBOR
        Determination Date for such Distribution Payment Period, plus 1.63% (the
        "Coupon
        Rate") of the stated liquidation amount of $1,000 per Security (provided,
        however, that the Coupon Rate for any Distribution Payment Period may not
        exceed
        the highest rate permitted by New York law, as the same may be modified by
        United States law of general applicability), such Coupon 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 quarterly period will bear interest thereon compounded
        quarterly at the applicable Coupon Rate for each such quarterly period (to
        the
        extent permitted by applicable law). The term "Distributions" as used herein
        includes cash distributions, any such compounded distributions 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

       

      
        
          
          

        

        
          A-I-1

          
            

          

        

        
          
          

        

         

        Institutional
          Trustee and to the extent the Institutional Trustee has funds legally available
          in the Property Account therefor. The amount of Distributions payable for
          any
          Distribution Payment Period will be computed for any full quarterly Distribution
          Payment Period on the basis of a 360-day year and the actual number of
          days
          elapsed in the relevant Distribution period; provided, however, that upon
          the
          occurrence of a Special Event redemption pursuant to paragraph 4(a) below
          the
          amounts payable pursuant to this Declaration shall be calculated as set
          forth in
          the definition of Special Redemption Price.

      

       

      (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 to March 15, June 15, September 15 and December 15 (or, with respect
        to the first Distribution Payment Period, on June 26,

       2006),
        (each such day, a "LIBOR Determination Date") for such Distribution Payment
        Period), the Calculation Agent shall obtain the rate for

       three-month
        U.S. Dollar deposits in Europe, which appears on Telerate Page 3750 (as defined
        in the International Swaps and Derivatives

       Association,
        Inc. 2000 Interest Rate and Currency Exchange Definitions) or such other
        page as
        may replace such Telerate Page 3750 on the

       Moneyline
        Telerate, Inc. service (or such other service or services as may be nominated
        by
        the British Banker's Association as the information 

       vendor
        for the purpose of displaying London interbank offered rates for U.S. dollar
        deposits), as of 11:00 a.m. (London time) on such LIBOR

       Determination
        Date, and the rate so obtained shall be LIBOR for such Distribution Payment
        Period. "LIBOR Business Day" means any day that

       is not
        a
        Saturday, Sunday or other day on which commercial banking institutions in
        The
        City of New York or Chicago, Illinois 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 Distribution Payment

       Period.

       

      (2)  If,
        on
        any LIBOR Determination Date, such rate does not appear on Telerate Page
        3750 or
        such other page as may replace such

       Telerate
        Page 3750 on the Moneyline Telerate, Inc. service (or such other service
        or
        services as may be nominated by the British Banker's

       Association
        as the information vendor for the purpose of displaying London interbank
        offered
        rates for U.S. dollar deposits), 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 three-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. (London 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

       

      
        
          
          

        

        
          A-I-2

          
            

          

        

        
          
          

        

      

       

       LIBOR
        Determination Date, only one or none of the Reference Banks provide such
        a
        quotation, 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 three-month U.S.
        Dollar
        deposits in Europe at approximately

       11:00
        a.m. (London 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 for the applicable Distribution Payment Period shall be LIBOR in effect
        for the immediately preceding Distribution Payment Period.

       

      (c)  All
        percentages resulting from any calculations on the 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).

       

      (d)  As
        soon
        as practicable following each LIBOR Determination Date, but in no event later
        than the 30th day following such LIBOR Determination Date, the Calculation
        Agent
        shall notify, in writing, the Sponsor and the Paying Agent of the applicable
        Coupon Rate in effect for the related Distribution Payment Period. The
        Calculation Agent shall, upon the request of the Holder of any 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 Sponsor and the Holders of the Securities. Any error in a
        calculation of the Coupon Rate by the Calculation Agent may be corrected
        at any
        time by the delivery of notice of such corrected Coupon Rate as provided
        above.
        The Paying Agent shall be entitled to rely on information received from the
        Calculation Agent or the Sponsor as to the Coupon Rate. The Sponsor shall,
        from
        time to time, provide any necessary information to the Paying Agent relating
        to
        any original issue discount and interest on the Securities that is included
        in
        any payment and reportable for taxable income calculation purposes. Failure
        to
        notify the Company, the Institutional Trustee or the Paying Agent of the
        applicable Coupon Rate shall not affect the obligation of the Company to
        make
        payment on the Debentures at such Coupon Rate.

       

      (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, quarterly in arrears on March 15, June 15,
        September 15 and December 15 of each year, commencing September 15, 2006
        (each,
        a "Distribution Payment Date"). Subject to prior submission of Notice (as
        defined in the Indenture), and so long as no Event of Default pursuant to
        paragraphs (c), (e) or (f) of Section 5.01 of the Indenture has occurred
        and is continuing the Debenture Issuer has the right under the Indenture
        to
        defer payments of interest on the Debentures by extending the interest
        distribution period for up to 20 consecutive quarterly 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). During any Extension

       

      
        
          
          

        

        
          A-I-3

          
            

          

        

        
          
          

        

         

        Period,
          interest will 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 quarterly from the date
          such
          Deferred Interest would have been payable were it not for the Extension
          Period,
          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, Redemption Date (to
          the
          extent redeemed) or Special Redemption 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 or premium or interest 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 or (iii) make any
          payment
          under any guarantees of the Debenture Issuer that rank in all respects
          pari
          passu
          with or
          junior in interest to the Guarantee (other than (a) repurchases, redemptions
          or
          other acquisitions of shares of capital stock of the Debenture Issuer (A)
          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, (B) in connection with a dividend reinvestment
          or
          stockholder stock purchase plan or (C) 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, reclassification, combination or conversion of
          any class
          or series of the Debenture Issuer's capital stock (or any capital stock
          of a
          subsidiary of the Debenture Issuer) for any class or series of the Debenture
          Issuer's capital stock or of any class or series of the Debenture Issuer's
          indebtedness for any class or series of the Debenture Issuer's capital
          stock,
          (c) the purchase of fractional interests in shares of the Debenture Issuer's
          capital stock pursuant to the conversion or exchange provisions of such
          capital
          stock or the security being converted or exchanged, (d) any declaration
          of a
          dividend in connection with any stockholder's rights plan, or the issuance
          of
          rights, stock or other property under any stockholder's rights plan, or
          the
          redemption or repurchase of rights pursuant thereto, or (e) any dividend
          in the
          form of stock, warrants, options or other rights where the dividend stock
          or the
          stock issuable upon exercise of such warrants, options or other rights
          is the
          same stock as that on which the dividend is being paid or ranks pari
          passu
          with or
          junior to such stock). Prior to the termination of any Extension Period,
          the
          Debenture Issuer may further extend such period; provided,
          that
          such period together with all such previous and further consecutive extensions
          thereof shall not exceed 20 consecutive quarterly 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 Deferred Interest shall accrue upon each installment of interest that
          would
          otherwise have been due and payable during such Extension Period until
          such
          installment is paid. If Distributions are deferred, the Distributions due
          shall
          be paid on the date that the related Extension Period terminates 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 legally available for the payment
          of
          such

         

        
          
            
            

          

          
            A-I-4

            
              

            

          

          
            
            

          

        

         

        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 Registrar on the relevant record dates. The relevant
        record dates shall be 15 days before the relevant Distribution Payment Date.
        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. Notwithstanding anything to
        the
        contrary contained herein, if any Distribution Payment Date, other than on
        the
        Maturity Date, any Redemption Date or the Special Redemption Date, falls
        on a
        day that is not a Business Day, then any Distributions payable will be paid
        on,
        and such Distribution Payment Date will be moved to, the next succeeding
        Business Day, and additional Distributions will accrue for each day that
        such
        payment is delayed as a result thereof. If the Maturity Date, any Redemption
        Date or the Special Redemption Date falls on a day that is not a Business
        Day,
        then the principal, premium, if any, and/or Distributions payable on such
        date
        will be paid on the next succeeding Business Day, and no additional
        Distributions will accrue in respect of such payment made on such next
        succeeding Business Day (except that, if such Business Day falls in the next
        calendar year, such payment will be made on the immediately preceding Business
        Day).

       

      (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 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 Statutory
        Trust Act, shall be distributed on a Pro Rata basis to the Holders of the
        Securities in exchange for such Securities.

       

      
        
          
          

        

        
          A-I-5

          
            

          

        

        
          
          

        

      

       

      The
        Sponsor, as the Holder of all of the Common Securities, has the right at
        any
        time to, upon receipt of an opinion of nationally recognized tax counsel
        that
        Holders will not recognize any gain or loss for United States federal income
        tax
        purposes as a result of the distribution Debentures, 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 any regulatory authority having
        jurisdiction over the Sponsor that is primarily responsible for regulating
        the
        activities of the Sponsor if such approval is then required under applicable
        capital guidelines or policies of such regulatory authority, 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) September 15, 2041, 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
        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
        Institutional Trustee of the Trust as expeditiously as such Trustee determines
        to be possible by distributing, after satisfaction of liabilities to creditors
        of the Trust as provided by applicable law, 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 to 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) of
        the
        immediately preceding paragraph shall occur if the Institutional Trustee
        determines that such Liquidation is possible by distributing, after satisfaction
        of liabilities to creditors of Trust, to the Holders of the Securities on
        a Pro
        Rata basis, the Debentures, and such distribution occurs.

       

      If,
        upon
        any such Liquidation, the Liquidation Distribution can be paid only in part
        because the Trust has insufficient assets available to pay in full the aggregate
        Liquidation Distribution, then the amounts payable directly by the Trust
        on such
        Capital Securities shall be paid to the Holders of the Securities on a Pro
        Rata
        basis, except that if an Event of Default has

       

      
        
          
          

        

        
          A-I-6

          
            

          

        

        
          
          

        

         

        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 September 15, 2036. The Debentures may be redeemed
        by
        the Debenture Issuer, in whole or in part, on any March 15, June 15, September
        15 or December 15 on or after September 15, 2011 at the Redemption Price,
        upon
        not less than 30 nor more than 60 days' 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 or 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 any regulatory authority having jurisdiction
        over the Debenture Issuer, if such approval is then required under applicable
        capital guidelines or policies of such regulatory authority.

       

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

       

      
        
          
          

        

        
          A-I-7

          
            

          

        

        
          
          

        

         

        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) if the Debenture Issuer is organized and existing under
          the
          laws of the United States or any state thereof or the District of Columbia,
          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 (including withholding
          taxes), duties, assessments 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 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, 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, if the Debenture Issuer is organized and existing
        under
        the laws of the United States or any state thereof or the District of Columbia,
        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 (a) any amendment
        to, or change in, the laws, rules or regulations of the United States or
        any
        political subdivision thereof or therein, or any rules, guidelines or policies
        of any applicable regulatory authority for the Debenture Issuer or (b) 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, within 90 days of the receipt of such opinion, the aggregate Liquidation
        Amount of the Capital Securities will not be eligible to be treated by the
        Debenture Issuer as "Tier 1 Capital" (or the then equivalent thereof) for
        purposes of the capital adequacy guidelines of the Federal Reserve (or any
        successor regulatory authority with jurisdiction over bank or financial holding
        companies), as then in effect and applicable to the Debenture Issuer (or
        if the
        Debenture Issuer is not a bank holding company, such guidelines applied to
        the
        Debenture Issuer as if the Debenture Issuer were subject to such guidelines);
        provided, however, that the inability of the Debenture Issuer to treat all
        or
        any portion of the aggregate Liquidation Amount of the Capital Securities
        as
        Tier 1 Capital shall not constitute the basis for a Capital Treatment
        Event, if such inability results from the Debenture Issuer having cumulative
        preferred stock, minority interests in consolidated subsidiaries, or any
        other
        class of security or interest which the Federal Reserve or OTS, as applicable,
        may now or hereafter accord Tier 1 Capital treatment in excess of the
        amount which may now or hereafter qualify for treatment as Tier 1 Capital
        under applicable capital adequacy guidelines; provided further, 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.

       

      
        
          
          

        

        
          A-I-8

          
            

          

        

        
          
          

        

      

       

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

       

      "Special
        Redemption Price" means, with respect to the redemption of any Debentures
        following a Special Event, an amount in cash equal to 103.525% of the principal
        amount of Debentures to be redeemed prior to September 15, 2007 and thereafter
        equal to the percentage of the principal amount of the Debentures that is
        specified below for the Special Redemption Date plus, in each case, unpaid
        interest accrued thereon to the Special Redemption Date: 

       

      
        	
                Special
                  Redemption During the

                12-Month
                  Period Beginning September 15

              	
                Percentage
                  of Principal Amount

              
	 	 
	
                2007

              	
                103.140%

              
	
                2008

              	
                102.355%

              
	
                2009

              	
                101.570%

              
	
                2010

              	
                100.785%

              
	
                2011
                  and thereafter

              	
                100.000%

              
	 	 

      

      "Redemption
        Date" means the date fixed for the redemption of Capital Securities, which
        shall
        be any March 15, June 15, September 15 or December 15 on or after September
        15,
        2011.

       

      "Redemption
        Price" means 100% of the principal amount of the Debentures being redeemed
        plus
        accrued and unpaid interest on such Debentures to the 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).

       

      (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 quarterly 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

       

      
        
          
          

        

        
          A-I-9

          
            

          

        

        
          
          

        

      

       

      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 Registrar. 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, with respect to

      Book-Entry
        Capital Securities, on the Redemption Date, irrevocably deposit with the
        Depositary for such Book-Entry Capital Securities, to the

      extent
        available therefore, funds sufficient to pay the relevant Redemption Price
        and
        will give such Depositary irrevocable instructions and

      authority
        to pay the Redemption Price to the Owners of the Capital Securities. With
        respect to Capital Securities that are not Book-Entry Capital 

      Securities,
        the Institutional Trustee will pay, to the extent available therefore, 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).
        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 except that, if such Business
        Day
        falls in the next calendar year, such payment 

      will
        be
made
        on
        the immediately preceding Business Day, in each case with the same force
        and
        effect as if made on such date fixed for

      redemption. 
        If payment
        of the Redemption Price in respect of any Securities is improperly withheld
        or
        refused and not paid either by the Trust

      or
        by the
Debenture
        Issuer as guarantor pursuant to the Guarantee, Distributions on such Securities
        will continue to accrue at the then 

      applicable
        rate from the
        original redemption date to the actual date of payment, in which case the
        actual
        payment date will be considered the 

      date
        fixed for redemption for
        purposes of calculating the Redemption Price. In the event of any redemption
        of
        the Capital

       

      
        
          
          

        

        
          A-I-10

          
            

          

        

        
          
          

        

      

       

       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 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 anytime

       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 not less than 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, (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 not less than the proportion in liquidation amount of the Capital
        Securities outstanding which the relevant Super Majority represents of the
        aggregate principal amount of the Debentures outstanding. If the Institutional
        Trustee fails to enforce its rights under the Debentures after the Holders
        of a
        Majority or Super Majority, as the case may be, 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

       

      
        
          
          

        

        
          A-I-11

          
            

          

        

        
          
          

        

         

        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 premium, if any, on or principal of
          the
          Debentures on the date such interest, premium, if any, on 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 premium, if
          any, 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 may 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 not less than 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 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

       

      
        
          
          

        

        
          A-I-12

          
            

          

        

        
          
          

        

         

        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 6.8 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) waiving any past default and its consequences that
        are
        waivable under the Indenture, or (iii) exercising 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 not less than
        the
        proportion in liquidation amount of the Common Securities which the relevant
        Super Majority represents of the aggregate principal amount of the Debentures
        outstanding. Notwithstanding this Section 6(c), the Institutional Trustee
        shall
        not revoke any action previously authorized or approved by a vote or consent
        of
        the Holders of the Capital Securities. Other than with respect to directing
        the
        time, method and place of conducting any proceeding for any remedy available
        to
        the Institutional Trustee or the Debenture Trustee as set forth above, the
        Institutional Trustee shall not take any action described in clause (i),
        (ii) or
        (iii) above, unless the Institutional Trustee has obtained an opinion of
        tax
        counsel to the effect

       

      
        
          
          

        

        
          A-I-13

          
            

          

        

        
          
          

        

         

        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 not less than 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 not

       

      
        
          
          

        

        
          A-I-14

          
            

          

        

        
          
          

        

         

        less
          than
          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 the 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 or Special 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 or Special Redemption Price the full amount of such Redemption Price
        or
        the Special 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 or the Special
        Redemption Price of, the Capital Securities then due and payable.

       

      
        
          
          

        

        
          A-I-15

          
            

          

        

        
          
          

        

      

       

      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, and the issuance of the Securities
        is
        not subject to, 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.

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          A-I-16

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A-1

       

      FORM
        OF CAPITAL SECURITY CERTIFICATE

       

      [FORM
        OF
        FACE OF SECURITY]

       

      THIS
        CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
        DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
        DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL SECURITY
        IS
        EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
        THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
        DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER
        OF
        THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE
        OF
        DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
        CIRCUMSTANCES.

       

      UNLESS
        THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
        TO
PEBK
        CAPITAL TRUST II
        OR ITS
        AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
        SECURITY ISSUED IS REGISTERED AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
        OF
        DTC (AND ANY PAYMENT HEREON IS MADE TO SUCH OTHER ENTITY AS IS REQUESTED
        BY AN
        AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
        FOR
        VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
        OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

       

      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 THE HOLDER 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 A "NON U.S. PERSON" IN AN "OFFSHORE
        TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D)
        PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
        ACT 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

       

      
        
          
          

        

        
          A-1-1

          
            

          

        

        
          
          

        

         

        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 IN VIOLATION OF THE SECURITIES ACT, OR (E) 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 (D) OR (E) TO REQUIRE THE DELIVERY
          OF AN
          OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
          TO EACH
          OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST,
          A COPY
          OF WHICH MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER
          OF
          THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH
          THE
          FOREGOING RESTRICTIONS.

      

       

      THE
        HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS
        THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS
        SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT.

       

      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 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 OF THE CERTIFICATE WILL DELIVER
        TO THE
        REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES 

       

      
        
          
          

        

        
          A-1-2

          
            

          

        

        
          
          

        

         

        AND
          OTHER
          INFORMATION AS MAY BE REQUIRED BY THE AMENDED AND RESTATED 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.

       

       

       

       

       

       

      
 

      
        
          
          

        

        
          A-1-3

          
            

          

        

        
          
          

        

      

      

      Certificate
        Number [P-001]                                                                                                                           
        Number of Capital Securities: 20,000

       

      

       

      CUSIP
        No.____________________

       

      

       

      Certificate
        Evidencing Capital Securities

       

      of

       

      PEBK
        Capital Trust II

       

      TP
        Securities

       

      (liquidation
        amount $1,000 per Capital Security)

       

      PEBK
        Capital Trust II, a statutory trust created under the laws of the State of
        Delaware (the "Trust"), hereby certifies that Cede & Co., as nominee on
        behalf of the Depository Trust Company (the "Holder"), is the registered
        owner
        of 20,000 capital securities of the Trust representing undivided beneficial
        interests in the assets of the Trust, designated the TP Securities (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
        Capital Securities represented hereby are issued pursuant to, and the
        designation, rights, privileges, restrictions, preferences and other terms
        and
        provisions of the Capital Securities shall in all respects be subject to,
        the
        provisions of the Amended and Restated Declaration of Trust of the Trust,
        dated
        as of June 28, 2006, among Tony W. Wolfe and A. Joseph Lampron, as
        Administrators, Christiana Bank & Trust Company, as Delaware Trustee,
        LaSalle Bank National Association, as Institutional Trustee, Peoples Bancorp
        of
        North Carolina, Inc., 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 Sponsor at its principal place of business.

       

      By
        acceptance 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 shall be construed in accordance with,
        the
        laws of the State of Delaware, without regard to principles of conflict of
        laws.

       

      
        
          
          

        

        
          A-1-4

          
            

          

        

        
          
          

        

      

       

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

       

      

        
          	 	
                  PEBK
                    Capital Trust II

                
	 	
                   

                	 	 
	 	 	 	 
	 	
                  By:

                	 
	 	 	
                  Name:

                	 
	 	 	
                  Title:

                	Administrator
	 	Dated:	 

        

        
           

        

      

      CERTIFICATE
        OF AUTHENTICATION

       

      This
        represents Capital Securities referred to in the within-mentioned
        Declaration.

       

      

        
          	 	
                  LASALLE
                    BANK NATIONAL

                
	 	
                  ASSOCIATION,
                    not in its individual capacity

                
	 	but
                  solely as Institutional Trustee
	 	
                   

                	 
	 	 	
                   

                
	 	By:	 
	 	 	Authorized
                  Signatory
	 	 	
                   

                
	 	Dated:	 

        

      

       

       

       

       

       

       

         

      
        
          
          

        

        
          A-1-5

          
            

          

        

        
          
          

        

         

      

      [FORM
        OF
        REVERSE OF SECURITY]

       

      Distributions
        payable on each Capital Security will be payable at a variable per annum
        rate of
        interest, reset quarterly, equal to LIBOR (as defined in the Declaration)
        plus
        1.63% (the "Coupon Rate") of the stated liquidation amount of $1,000 per
        Capital
        Security (provided, however, that the Coupon Rate for any Distribution Payment
        Period may not exceed the highest rate permitted by New York law, as the
        same
        may be modified by United States law of general applicability), such Coupon
        Rate
        being the rate of interest payable on the Debentures to be held by the
        Institutional Trustee. Distributions in arrears for more than one quarterly
        period will bear interest thereon compounded quarterly at the then applicable
        Coupon Rate for each such quarterly period (to the extent permitted by
        applicable law). The term "Distributions" as used herein includes cash
        distributions, any such compounded distributions 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
        legally available in the Property Account therefor. The amount of Distributions
        payable for any period will be computed for any full quarterly Distribution
        period on the basis of a 360-day year and the actual number of days elapsed
        in
        the relevant Distribution Payment 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
        quarterly in arrears on March 15, June 15, September 15 and December 15 of
        each
        year, commencing on September 15, 2006 (each, a "Distribution Payment Date").
        Upon submission of Notice, and so long as no Event of Default pursuant to
        paragraphs (c), (e) or (f) of Section 5.01 of the Indenture has occurred
        and is continuing the Debenture Issuer has the right under the Indenture
        to
        defer payments of interest on the Debentures by extending the interest
        distribution period for up to 20 consecutive quarterly 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). During any Extension Period, interest will 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 quarterly from the date such Deferred Interest would have been
        payable were it not for the Extension Period, 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, Redemption Date (to
        the
        extent redeemed) or Special Redemption 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 20 consecutive quarterly periods, or extend beyond
        the
        Maturity Date, Redemption Date (to the extent redeemed) or Special Redemption
        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 (except
        any Additional Amounts that may be due and payable) shall be due and payable
        during an Extension Period, except at the end thereof, but Deferred Interest
        shall accrue upon each installment of interest that would otherwise have
        been
        due and payable during such Extension

       

      
        
          
          

        

        
          A-1-6

          
            

          

        

        
          
          

        

         

        Period
          until such installment is paid. If Distributions are deferred, the Distributions
          due shall be paid on the date that the related Extension Period terminates
          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 legally available
          for
          the payment of such distributions in the Property Account of the Trust.
          The
          Trust's funds available for Distribution to the Holders of the Securities
          will
          be limited to payments received from the Debenture Issuer. The payment
          of
          Distributions out of moneys held by the Trust is guaranteed by the Guarantor
          pursuant to the Guarantee.

      

       

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

       

       

       

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          A-1-7

          
            

          

        

        
          
          

        

      

      
 

      

      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 it, him or her.

       

      Date:
        ________________________________     

       

      Signature:
        ____________________________    

       

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

       

      Signature
        Guarantee:1 _________________________     

       

      

      

      

        

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

        

      

    

     

     

    
      
        
        

      

      
        A-1-8

        
          

        

      

      
        
        

      

    

     

    
      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.

       

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          A-2-1

          
            

          

        

        
          
          

        

      

      
Certificate
        Number [C-001]                                                                                                        
        Number
        of
        Common Securities: 619

       

      Certificate
        Evidencing Common Securities

      of

      PEBK
        Capital Trust II

       

      PEBK
        Capital Trust II, a statutory trust created under the laws of the State of
        Delaware (the "Trust"), hereby certifies that Peoples Bancorp of North Carolina,
        Inc. (the "Holder") is the registered owner of 619 common securities of the
        Trust representing undivided beneficial interests in the assets of the Trust
        (liquidation amount $1,000 per Common Security) (the "Common Securities").
        The
        Common Securities represented hereby are issued pursuant to, and the
        designation, rights, privileges, restrictions, preferences and other terms
        and
        provisions of the Common Securities shall in all respects be subject to,
        the
        provisions of the Amended and Restated Declaration of Trust of the Trust,
        dated
        as of June 28, 2006, among Tony W. Wolfe and A. Joseph Lampron, as
        Administrators, Christiana Bank & Trust Company, as Delaware Trustee,
        LaSalle Bank National Association, as Institutional Trustee, the Holder,
        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 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 Sponsor
        will provide a copy of the Declaration 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, when an Event of Default has occurred and is
        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.

       

      By
        acceptance 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 shall be construed in accordance with,
        the
        laws of the State of Delaware, without regard to principles of conflict of
        laws.

       

       

       

       

       

       

       

      
        
          
          

        

        
          A-2-2

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the Trust has executed this certificate as of this ______
        day
        of ____________________, 2006.

       

       

      

        
          	 	
                  PEBK
                    Capital Trust II

                
	 	
                   

                	 
	 	 	 
	 	
                  By:

                	 ____________________________________________
	 	 	
                  Name:
                    ______________________________________________

                
	 	 	
                  Title:
                    Administrator

                

        

         

      

       

       

       

       

       

       

       

      
        
          
          

        

        
          A-2-3

          
            

          

        

        
          
          

        

      

      
         

      

      [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 quarterly, equal to LIBOR (as defined in the Declaration)
        plus
        1.63% (the "Coupon Rate") of the stated liquidation amount of $1,000 per
        Capital
        Security (provided, however, that the Coupon Rate for any Distribution Payment
        Period may not exceed the highest rate permitted by New York law, as the
        same
        may be modified by United States law of general applicability), such Coupon
        Rate
        being the rate of interest payable on the Debentures to be held by the
        Institutional Trustee. Distributions in arrears for more than one quarterly
        period will bear interest thereon compounded quarterly at the then applicable
        Coupon Rate for each such quarterly period (to the extent permitted by
        applicable law). The term "Distributions" as used herein includes cash
        distributions, any such compounded distributions 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
        legally available in the Property Account therefor. The amount of Distributions
        payable for any period will be computed for any full quarterly Distribution
        period on the basis of a 360-day year and the actual number of days elapsed
        in
        the relevant Distribution Payment 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
        quarterly in arrears on March 15, June 15, September 15 and December 15 of
        each
        year, commencing on September 15, 2006 (each, a "Distribution Payment Date").
        Upon submission of Notice, and so long as no Event of Default pursuant to
        paragraphs (c), (e) or (f) of Section 5.01 of the Indenture has occurred
        and is
        continuing, the Debenture Issuer has the right under the Indenture to defer
        payments of interest on the Debentures by extending the interest distribution
        period for up to 20 consecutive quarterly 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). During
        any
        Extension Period, interest will 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
        quarterly from the date such Deferred Interest would have been payable were
        it
        not for the Extension Period, 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, Redemption Date (to the extent
        redeemed) or Special Redemption 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 20 consecutive quarterly periods, or extend beyond
        the
        Maturity Date, Redemption Date (to the extent redeemed) or Special Redemption
        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 (except
        any Additional Interest that may be due and payable) shall be due and payable
        during an Extension Period, except at the end thereof, but Deferred Interest
        shall accrue upon each

       

      
        
          
          

        

        
          A-2-4

          
            

          

        

        
          
          

        

         

        installment
          of interest that would otherwise have been due and payable during such
          Extension
          Period until such installment is paid. If Distributions are deferred, the
          Distributions due shall be paid on the date that the related Extension
          Period
          terminates 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 legally available
        for
        the payment of such distributions in the Property Account of the Trust. The
        Trust's funds legally 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.

      

       

       

       

       

       

      
 

      
        
          
          

        

        
          A-2-5

          
            

          

        

        
          
          

        

      

       

      

      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 Agents Medallion Program ("STAMP")
            or
            such other "signature guarantee program" as may be determined by the
            Security
            registrar in addition to, or in substitution for, STAMP, all in accordance
            with
            the Securities Exchange Act of 1934, as amended.

        

      

       

       

      
        
          
          

        

        
          A-2-6

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