Document:

<PAGE>

                                                                    EXHIBIT 4.3

                            CERTIFICATE OF TRUST

                                       OF

                          INTERWEST CAPITAL TRUST I

       This Certificate of Trust of InterWest Capital Trust I (the "Trust"),
is being duly executed and filed by the undersigned trustee to form a
business trust under the Delaware Business Trust Act (12 DEL. C. Section 3801
ET SEQ.)(the "Act").

       (a) NAME. The name of the business trust formed hereby is InterWest
Capital Trust I.

       (b) DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 N. Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.

       IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Trust in accordance with Section 3811 of the Act.

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

                                      By:  /s/ Patricia A. Evans
                                         --------------------------------------
                                         Name: Patricia A. Evans
                                         Title: Financial Services Officer<PAGE>

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

                              AMENDED AND RESTATED

                              DECLARATION OF TRUST

                                       OF

                            INTERWEST CAPITAL TRUST I

                          Dated as of November 15, 1999

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

<PAGE>

                                   TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                  Page

                                   ARTICLE I
                        INTERPRETATION AND DEFINITIONS
<S>           <C>                                                                                  <C>
SECTION 1.1   DEFINITIONS............................................................................2

                                  ARTICLE II
                             TRUST INDENTURE ACT

SECTION 2.1   TRUST INDENTURE ACT; APPLICATION......................................................10
SECTION 2.2   LISTS OF HOLDERS OF SECURITIES........................................................10
SECTION 2.3   REPORTS BY THE PROPERTY TRUSTEE.......................................................11
SECTION 2.4   PERIODIC REPORTS TO PROPERTY TRUSTEE..................................................11
SECTION 2.5   EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT......................................11
SECTION 2.6   EVENTS OF DEFAULT; WAIVER.............................................................11
SECTION 2.7   DEFAULT; NOTICE.......................................................................13

                                 ARTICLE III
                                 ORGANIZATION

SECTION 3.1   NAME..................................................................................13
SECTION 3.2   OFFICE................................................................................14
SECTION 3.3   PURPOSE...............................................................................14
SECTION 3.4   AUTHORITY.............................................................................14
SECTION 3.5   TITLE TO PROPERTY OF THE TRUST........................................................14
SECTION 3.6   POWERS AND DUTIES OF THE ADMINISTRATIVE TRUSTEES......................................14
SECTION 3.7   PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES..................................17
SECTION 3.8   POWERS AND DUTIES OF THE PROPERTY TRUSTEE.............................................18
SECTION 3.9   CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE...........................20
SECTION 3.10  CERTAIN RIGHTS OF PROPERTY TRUSTEE....................................................22
SECTION 3.11  DELAWARE TRUSTEE......................................................................24
SECTION 3.12  EXECUTION OF DOCUMENTS................................................................25
SECTION 3.13  NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES................................25
SECTION 3.14  DURATION OF TRUST.....................................................................25
SECTION 3.15  MERGERS...............................................................................25

                                   ARTICLE IV
                                    SPONSOR

SECTION 4.1   SPONSOR'S PURCHASE OF COMMON SECURITIES...............................................27
SECTION 4.2   RESPONSIBILITIES OF THE SPONSOR.......................................................27
SECTION 4.3   RIGHT TO PROCEED......................................................................28
SECTION 4.4   RIGHT TO DISSOLVE TRUST...............................................................28

                                      i

<PAGE>

                                   ARTICLE V
                                   TRUSTEES

SECTION 5.1   NUMBER OF TRUSTEES; APPOINTMENT OF CO-TRUSTEE.........................................28
SECTION 5.2   DELAWARE TRUSTEE......................................................................29
SECTION 5.3   PROPERTY TRUSTEE; ELIGIBILITY.........................................................29
SECTION 5.4   CERTAIN QUALIFICATIONS OF ADMINISTRATIVE TRUSTEES AND DELAWARE TRUSTEE GENERALLY......30
SECTION 5.5   ADMINISTRATIVE TRUSTEES...............................................................31
SECTION 5.6   APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES......................................31
SECTION 5.7   VACANCIES AMONG TRUSTEES..............................................................33
SECTION 5.8   EFFECT OF VACANCIES...................................................................33
SECTION 5.9   MEETINGS..............................................................................33
SECTION 5.10  DELEGATION OF POWER...................................................................34
SECTION 5.11  MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS...........................34

                                     ARTICLE VI
                                   DISTRIBUTIONS

SECTION 6.1   DISTRIBUTIONS.........................................................................34

                                     ARTICLE VII
                               ISSUANCE OF SECURITIES

SECTION 7.1   GENERAL PROVISIONS REGARDING SECURITIES...............................................35
SECTION 7.2   EXECUTION AND AUTHENTICATION..........................................................35
SECTION 7.3   FORM AND DATING.......................................................................36
SECTION 7.4   REGISTRAR, PAYING AGENT AND EXCHANGE AGENT............................................38
SECTION 7.5   PAYING AGENT TO HOLD MONEY IN TRUST...................................................38
SECTION 7.6   REPLACEMENT SECURITIES................................................................38
SECTION 7.7   OUTSTANDING CAPITAL SECURITIES........................................................39
SECTION 7.8   CAPITAL SECURITIES IN TREASURY........................................................39
SECTION 7.9   TEMPORARY SECURITIES..................................................................39
SECTION 7.10  CANCELLATION..........................................................................40
SECTION 7.11  CUSIP NUMBERS.........................................................................40

                                       ARTICLE VIII
                                   DISSOLUTION OF TRUST

SECTION 8.1   DISSOLUTION OF TRUST..................................................................41

                                          ii

<PAGE>

                                             ARTICLE IX
                                       TRANSFER OF INTERESTS

SECTION 9.1   TRANSFER OF SECURITIES................................................................42
SECTION 9.2   TRANSFER PROCEDURES AND RESTRICTIONS..................................................43
SECTION 9.3   DEEMED SECURITY HOLDERS...............................................................52
SECTION 9.4   BOOK-ENTRY INTERESTS..................................................................52
SECTION 9.5   NOTICES TO CLEARING AGENCY............................................................53
SECTION 9.6   APPOINTMENT OF SUCCESSOR CLEARING AGENCY..............................................53

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

SECTION 10.1  LIABILITY.............................................................................53
SECTION 10.2  EXCULPATION...........................................................................54
SECTION 10.3  FIDUCIARY DUTY........................................................................54
SECTION 10.4  INDEMNIFICATION.......................................................................55
SECTION 10.5  OUTSIDE BUSINESSES....................................................................58

                                           ARTICLE XI
                                           ACCOUNTING

SECTION 11.1  FISCAL YEAR...........................................................................58
SECTION 11.2  CERTAIN ACCOUNTING MATTERS............................................................58
SECTION 11.3  BANKING...............................................................................59
SECTION 11.4  WITHHOLDING...........................................................................59

                                           ARTICLE XII
                                     AMENDMENTS AND MEETINGS

SECTION 12.1  AMENDMENTS............................................................................59
SECITON 12.2  MEETINGS OF THE HOLDERS; ACTION BY WRITTEN CONSENT....................................61

                                          ARTICLE XIII
                              REPRESENTATIONS OF PROPERTY TRUSTEE
                                      AND DELAWARE TRUSTEE

SECTION 13.1  REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE....................................63
SECTION 13.2  REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE....................................63

                                            iii

<PAGE>

                                          ARTICLE XIV
                                      REGISTRATION RIGHTS

SECTION 14.1  REGISTRATION RIGHTS AGREEMENT; LIQUIDATED DAMAGES.....................................64

                                          ARCTICLE XV
                                         MISCELLANEOUS

SECTION 15.1  NOTICES...............................................................................64
SECTION 15.2  GOVERNING LAW.........................................................................66
SECTION 15.3  INTENTION OF THE PARTIES..............................................................66
SECTION 15.4  HEADINGS..............................................................................66
SECTION 15.5  SUCCESSORS AND ASSIGNS................................................................66
SECTION 15.6  PARTIAL ENFORCEABILITY................................................................66
SECTION 15.7  COUNTERPARTS..........................................................................66

TERMS OF
              9.875% CAPITAL SECURITIES, SERIES A/SERIES B
              9.875% COMMON SECURITIES.............................................................I-1

EXHIBIT A-1

              FORM OF CAPITAL SECURITY CERTIFICATE................................................A1-1

EXHIBIT A-2

              FORM OF COMMON SECURITY CERTIFICATE.................................................A2-1

</TABLE>

                                              iv

<PAGE>

                                      CROSS-REFERENCE TABLE*

<TABLE>
<CAPTION>

Section of
Trust Indenture
Act of 1939, as                                                                    Section of
amended                                                                           Declaration
----------------                                                               ----------------
<S>                                                                            <C>
310(a)................................................................................ 5.3
310(b)........................................................................... 5.3(c); 5.3(d)
311(a)................................................................................ 2.2(b)
311(b)................................................................................ 2.2(b)
312(a)................................................................................ 2.2(a)
312(b)................................................................................ 2.2(b)
313................................................................................... 2.3
314(a)........................................................................... 2.4, 2.7(c);
                                                                                       3.6(j)
314(c)................................................................................ 2.5
315(a)........................................................................... 3.6(j); 3.9
315(b)................................................................................ 2.7(a)
315(c)................................................................................ 3.9(a)
315(d)................................................................................ 3.9(b)
316(a)................................................................................ 2.6
316(c)................................................................................ 3.6(e)
317(a)........................................................................... 3.8(e); 3.8(h)
317(b)........................................................................... 3.8(i); 7.5
</TABLE>
--------------------------------

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

                                        v

<PAGE>

                              AMENDED AND RESTATED
                              DECLARATION OF TRUST
                                       OF
                            INTERWEST CAPITAL TRUST I

                          Dated as of November 15, 1999

       AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of November 15, 1999, by and among the Trustees (as defined
herein), the Sponsor (as defined herein) and the Holders (as defined herein),
from time to time, of undivided beneficial interests in the assets of the
Trust to be issued pursuant to this Declaration;

       WHEREAS, the Delaware Trustee (as defined herein) and the Sponsor
established InterWest Capital Trust I (the "Trust"), a trust created under
the Delaware Business Trust Act pursuant to a Declaration dated as of
November 3, 1999 (the "Original Declaration"), and a Certificate of Trust
filed with the Secretary of State of the State of Delaware on November 3,
1999, for the sole purpose of issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust,
investing the proceeds thereof in certain Debentures of the Debenture Issuer
(each as hereinafter defined), and engaging in only those activities
necessary, advisable or incidental thereto; and

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

       WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
ratify the actions of each Trustee taken prior to the date hereof;

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

<PAGE>

                                    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;

            (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 and each Annex and Exhibit hereto, as modified, supplemented or
amended from time to time;

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

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

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

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

            "ADMINISTRATIVE TRUSTEE" has the meaning set forth in Section 5.1.

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

            "AGENT" means any Paying Agent, Registrar or Exchange Agent.

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

            "BOOK-ENTRY INTEREST" means a beneficial interest in the Global
Capital Security registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.

                                       2
<PAGE>

            "BUSINESS DAY" means any day other than a Saturday or a Sunday or a
day on which banking institutions in Wilmington, Delaware or New York, New York,
are authorized or required by law or executive order to remain closed.

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

            "CAPITAL SECURITIES" means, collectively, the Series A Capital
Securities and the Series B Capital Securities.

            "CAPITAL SECURITIES GUARANTEE" means, collectively, the Series A
Capital Securities Guarantee and the Series B Capital Securities Guarantee.

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

            "CAPITAL SECURITY CERTIFICATE" has the meaning set forth in Section
9.4.

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

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

            "CLOSING TIME" means the "Closing Time" as defined in the Purchase
Agreement.

            "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 as from time to time constituted, or if at any time after the
execution of this Declaration such Commission is not existing and performing the
duties now assigned to it under applicable federal securities laws, then the
body performing such duties at such time.

            "COMMON SECURITIES" has the meaning specified in Section 7.1(a).

            "COMMON SECURITY CERTIFICATE" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit
A-2.

                                       3
<PAGE>

            "COMMON SECURITIES GUARANTEE" means the Common Securities Guarantee
Agreement, dated as of the Closing Time, entered into by InterWest Bancorp,
Inc., with respect to the Common Securities.

            "COMMON SECURITIES SUBSCRIPTION AGREEMENT" means the Common
Securities Subscription Agreement, dated as of the Closing Time, between the
Trust and InterWest Bancorp, Inc. relating to the Common Securities.

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

            "CORPORATE TRUST OFFICE" means the office of the Property Trustee at
which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.

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

            "DEBENTURE ISSUER" means InterWest Bancorp, Inc., a Washington
corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.

            "DEBENTURE SUBSCRIPTION AGREEMENT" means the Debenture Subscription
Agreement, dated as of the Closing Time, between the Debenture Issuer and the
Trust in respect of the Series A Debentures.

            "DEBENTURE TRUSTEE" means Wilmington Trust Company, a Delaware
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.

            "DEBENTURES" means, collectively, the Series A Debentures and the
Series B Debentures.

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

            "DEFINITIVE CAPITAL SECURITIES" has the meaning set forth in Section
7.3(c).

            "DELAWARE TRUSTEE" has the meaning set forth in Section 5.1.

            "DIRECT ACTION" has the meaning set forth in Section 3.8(e).

                                       4
<PAGE>

            "DISTRIBUTION" means a distribution payable to Holders in accordance
with Section 6.1.

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

            "EVENT OF DEFAULT" with respect to the Securities means an Event of
Default (as defined in the Indenture) that has occurred and is continuing with
respect to the Debentures.

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

            "EXCHANGE AGENT" has the meaning set forth in Section 7.4.

            "EXCHANGE OFFER" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Trust to exchange Series B Capital
Securities for Series A Capital Securities and (ii) by the Debenture Issuer to
exchange Series B Debentures for Series A Debentures and to execute the Series B
Capital Securities Guarantee in respect of the Series B Capital Securities.

            "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System.

            "FIDUCIARY INDEMNIFIED PERSON" has the meaning set forth in Section
10.4(b).

            "FISCAL YEAR" has the meaning set forth in Section 11.1.

            "GLOBAL CAPITAL SECURITY" has the meaning set forth in Section
7.3(a).

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

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

            "INDENTURE" means the Indenture, dated as of the Closing Time,
between the Debenture Issuer and the Debenture Trustee, as amended from time to
time.

            "INITIAL OPTIONAL REDEMPTION DATE" has the meaning set forth in
Section 4(b) of Annex I hereto.

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

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

                                       5
<PAGE>

            "INVESTMENT COMPANY EVENT" has the meaning set forth in Section 4(c)
of Annex I hereto.

            "LEGAL ACTION" has the meaning set forth in Section 3.6(g).

            "LIKE AMOUNT" has the meaning set forth in Section 3 of Annex I
hereto.

            "LIQUIDATED DAMAGES AGREEMENT" means the Liquidated Damages
Agreement, dated as of November 9, 1999, by and among the Debenture Issuer, the
Trust and the Initial Purchaser named therein, as amended from time to time.

            "LIST OF HOLDERS" has the meaning set forth in Section 2.2(a).

            "MAJORITY IN LIQUIDATION AMOUNT" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holders of outstanding Trust 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, excluding the Trust and the Debenture Issuer and any Affiliate thereof,
who are the record owners of more than 50% of the aggregate liquidation amount
(including the amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.

            "OFFERING MEMORANDUM" has the meaning set forth in Section
3.6(b)(i).

            "OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officers'
Certificate delivered by the Trust shall be signed by at least one
Administrative Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Declaration shall
include:

            (a) a statement that each officer signing the Certificate has read
     the covenants or conditions and the definitions relating thereto;

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

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

            (d) a statement as to whether or not, in the opinion of each such
     officer, such condition or covenant has been complied with.

            "OPINION OF COUNSEL" means a written opinion of counsel, who may be
an employee of the Sponsor, and who shall be acceptable to the Property Trustee.

                                       6
<PAGE>

            "PARTICIPANTS" has the meaning specified in Section 7.3(b).

            "PAYING AGENT" has the meaning specified in Section 7.4.

            "PAYMENT AMOUNT" has the meaning specified in Section 6.1.

            "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.

            "PROPERTY TRUSTEE" has the meaning set forth in Section 5.3(a).

            "PROPERTY TRUSTEE ACCOUNT" has the meaning set forth in Section
3.8(c)(i).

            "PURCHASE AGREEMENT" means the Purchase Agreement relating to the
Series A Capital Securities, dated November 9, 1999, by and among the Trust, the
Debenture Issuer and the Initial Purchaser named therein.

            "QIBs" shall mean qualified institutional buyers as defined in Rule
144A.

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

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

            "REGISTRAR" has the meaning set forth in Section 7.4.

            "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of November 9, 1999, by and among the Trust, the Debenture
Issuer and the Initial Purchaser named therein, as amended from time to time.

            "REGISTRATION STATEMENT" has the meaning set forth in the
Registration Rights Agreement.

            "REGULATORY CAPITAL EVENT" has the meaning set forth in Section 4(c)
of Annex I hereto.

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

            "RESPONSIBLE OFFICER" means any officer within the Corporate Trust
Office of the Property Trustee with direct responsibility for the administration
of this Declaration and also means, with respect to a particular corporate trust
matter, any other officer of the Property Trustee to whom

                                       7
<PAGE>

such matter is referred because of such officer's knowledge of and familiarity
with the particular subject.

            "RESTRICTED CAPITAL SECURITY" means a Capital Security required by
Section 9.2 to contain a Restricted Securities Legend.

            "RESTRICTED DEFINITIVE CAPITAL SECURITIES" has the meaning set forth
in Section 7.3(c).

            "RESTRICTED SECURITIES LEGEND" has the meaning set forth in Section
9.2(i).

            "RULE 3a-5" means Rule 3a-5 under the Investment Company Act, or any
successor rule or regulation.

            "RULE 144" means Rule 144 under the Securities Act, as such rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.

            "RULE 144A" means Rule 144A under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.

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

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

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

            "SERIES A CAPITAL SECURITIES" has the meaning specified in Section
7.1(a).

            "SERIES A CAPITAL SECURITIES GUARANTEE" means the Series A Capital
Securities Guarantee Agreement, dated as of the Closing Time, by, InterWest
Bancorp, Inc. in respect of the Series A Capital Securities.

            "SERIES A DEBENTURES" means the 9.875% Junior Subordinated
Deferrable Interest Debentures due November 15, 2029, Series A, of the Debenture
Issuer issued pursuant to the Indenture.

            "SERIES B CAPITAL SECURITIES" has the meaning specified in Section
7.1(a).

            "SERIES B CAPITAL SECURITIES GUARANTEE" means the Series B Capital
Securities Guarantee Agreement to be entered into in connection with the
Exchange Offer by InterWest Bancorp, Inc., in respect of the Series B Capital
Securities.

                                       8
<PAGE>

            "SERIES B DEBENTURES" means the 9.875% Junior Subordinated
Deferrable Interest Debentures due November 15, 2029, Series B, of the Debenture
Issuer to be issued pursuant to the Indenture in connection with the Exchange
Offer.

            "SPECIAL EVENT" has the meaning set forth in Section 4(c) of Annex I
hereto.

            "SPECIAL EVENT REDEMPTION PRICE" has the meaning set forth in
Section 4(c) of Annex I hereto.

            "SPONSOR" means InterWest Bancorp, Inc., a Washington corporation,
or any successor entity resulting from any merger, consolidation, amalgamation
or other business combination, in its capacity as sponsor of the Trust.

            "SUCCESSOR DELAWARE TRUSTEE" has the meaning set forth in Section
5.6(b)(ii).

            "SUCCESSOR ENTITY" has the meaning set forth in Section 3.15(b)(i).

            "SUCCESSOR PROPERTY TRUSTEE" has the meaning set forth in Section
3.8(f)(ii).

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

            "SUPER MAJORITY" has the meaning set forth in Section 2.6(a)(ii).

            "TAX EVENT" has the meaning set forth in Section 4(c) of Annex I
hereto.

            "10% IN LIQUIDATION AMOUNT" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holders of outstanding Trust 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, excluding the Trust and the Debenture Issuer and any Affiliate thereof,
who are the record owners of 10% or more of the aggregate liquidation amount
(including the amount that would be paid on redemption, liquidation or
otherwise, plus accumulated and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.

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

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

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

                                       9
<PAGE>

            "TRUSTEE" or "TRUSTEES" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue as a trustee of
the Trust 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.

            "UNRESTRICTED GLOBAL CAPITAL SECURITY" has the meaning set forth in
Section 9.2(b).

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.

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

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

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

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

SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.

            (a) Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i) within 14 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such record date, PROVIDED THAT, neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time that the List of Holders does not differ from
the most recent List of Holders given to the Property Trustee by the Sponsor and
the Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity), PROVIDED THAT the Property Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.

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

                                      10
<PAGE>

SECTION 2.3 REPORTS BY THE PROPERTY TRUSTEE.

            Within 60 days after the date hereof, and no later than the
anniversary date hereof in each succeeding year, the Property Trustee shall
provide to the Holders of the Capital Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Property Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.

SECTION 2.4 PERIODIC REPORTS TO PROPERTY TRUSTEE.

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

SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

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

SECTION 2.6 EVENTS OF DEFAULT; WAIVER.

            (a) The Holders of a Majority in Liquidation Amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital
Securities and its consequences, PROVIDED THAT, if the underlying Event of
Default under the Indenture:

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

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

The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
Default shall cease to exist, and any Event of Default with respect to the
Capital Securities

                                      11

<PAGE>

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 an Event of Default with respect to the Capital Securities or
impair any right consequent thereon. Any waiver by the Holders of the Capital
Securities of an Event of Default with respect to the Capital Securities
shall also be deemed to constitute a waiver by the Holders of the Common
Securities of any such Event of Default with respect to the Common Securities
for all purposes of this Declaration without any further act, vote, or
consent of the Holders of the Common Securities.

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

                  (i) is not waivable under the Indenture, except where the
         Holders of the Common Securities are deemed to have waived such Event
         of Default under the Declaration as provided below in this Section
         2.6(b), the Event of Default under the Declaration shall also not be
         waivable; or

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

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

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

                                      12

<PAGE>

is hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act.

SECTION 2.7 DEFAULT; NOTICE.

            (a) The Property Trustee shall, within 90 days after a
Responsible Officer has actual knowledge of the occurrence of a Default with
respect to the Securities, transmit by mail, first class postage prepaid, to
the Holders, notices of all such Defaults, unless such Defaults have been
cured before the giving of such notice or previously waived; PROVIDED,
HOWEVER, that except in the case of a Default arising from the nonpayment of
principal of (or premium, if any) or interest (including Compounded Interest
and Additional Sums (as such terms are defined in the Indenture), if any) or
Liquidated Damages, if any (as defined in the Registration Rights Agreement),
on any of the Debentures, the Property Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer in good faith
determines that the withholding of such notice is in the interests of the
Holders.

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

                  (i)  a Default or Event of Default under Sections 5.01(a)
         (other than the payment or nonpayment of Compounded Interest,
         Additional Sums and Liquidated Damages) and 5.01(b) of the Indenture;
         or

                  (ii) any Default or Event of Default as to which the Property
         Trustee shall have received written notice or of which a Responsible
         Officer charged with the administration of the Declaration shall have
         actual knowledge.

                  (c) Within ten Business Days after a Responsible Officer has
actual knowledge of the occurrence of any Event of Default, the Property
Trustee shall transmit notice of such Event of Default to the Holders of the
Capital Securities, the Administrative Trustees and the Sponsor, unless such
Event of Default shall have been cured or waived. The Sponsor and the
Administrative Trustees shall file annually with the Property Trustee a
certification as to whether or not they are in compliance with all the
conditions and covenants applicable to them under this Declaration.

                                   ARTICLE III
                                  ORGANIZATION

SECTION 3.1 NAME.

            The Trust is named InterWest Capital Trust I as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Delaware Trustee, the Property Trustee and the Holders. The
Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrative Trustees.

                                      13

<PAGE>

SECTION 3.2 OFFICE.

            The address of the principal office of the Trust is c/o InterWest
Bancorp, Inc., 275 Southeast Pioneer Way, Oak Harbor, Washington 98277. On
ten Business Days' prior written notice to the Delaware Trustee, the Property
Trustee and the Holders of Securities, the Administrative Trustees may
designate another principal office.

SECTION 3.3 PURPOSE.

            The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities, (b) use the proceeds from the sale of the
Securities to acquire the Debentures, and (c) except as otherwise limited
herein, to engage in only those other activities necessary, advisable or
incidental thereto, including without limitation, those activities specified
in Sections 3.6, 3.8, 3.9, 3.10, 3.11 and/or 3.12. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, mortgage or
pledge any of its assets, or otherwise undertake (or permit to be undertaken)
any activity that would cause the Trust not to be classified for United
States federal income tax purposes as a grantor trust.

SECTION 3.4 AUTHORITY.

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

SECTION 3.5 TITLE TO PROPERTY OF THE TRUST.

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

SECTION 3.6 POWERS AND DUTIES OF THE ADMINISTRATIVE TRUSTEES.

            Subject to Section 5.5, the Administrative Trustees acting
individually or together shall have the exclusive right, power, duty and
authority, and are hereby authorized and directed, to cause the Trust to
engage in the following activities:

            (a) to execute, enter into and deliver the Common Securities
Subscription Agreement and to execute, deliver, issue and sell the Securities
in accordance with this Declaration; PROVIDED, HOWEVER, that except as
contemplated in Section 7.1(a), (i) the Trust may issue no more

                                      14

<PAGE>

than one series of Capital Securities and no more than one series of Common
Securities, (ii) there shall be no interests in the Trust other than the
Securities, and (iii) the issuance of Securities shall be limited to a
simultaneous issuance of both Capital Securities and Common Securities at the
Closing Time;

            (b) in connection with the issue and sale of the Capital
Securities and the consummation of the Exchange Offer, at the direction of
the Sponsor, to:

                  (i) prepare and execute, if necessary, an offering memorandum
         (the "Offering Memorandum") in preliminary and final form prepared by
         the Sponsor, in relation to the offering and sale of Series A Capital
         Securities to QIBs in reliance on Rule 144A and to institutional
         "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
         under the Securities Act), and to execute and file with the Commission,
         at such time as is determined by the Sponsor, any Registration
         Statement, including any amendments thereto, as contemplated by the
         Registration Rights Agreement;

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

                  (iii) execute and file an application, prepared by the
         Sponsor, to permit the Capital Securities to trade or be quoted or
         listed in or on any securities exchange, quotation system or the Nasdaq
         Stock Market's National Market;

                  (iv) execute, enter into, deliver and perform the Common
         Securities Subscription Agreement, the Purchase Agreement, the
         Registration Rights Agreement, the Liquidated Damages Agreement and
         letters, documents or instruments with DTC and other Clearing Agencies
         relating to the Capital Securities; and

                  (v) if required, execute and file with the Commission a
         registration statement on Form 8-A, including any amendments thereto,
         prepared by the Sponsor, relating to the registration of the Capital
         Securities under Section 12(b) or 12(g) of the Exchange Act, as the
         case may be.

            (c) to execute, enter into and deliver the Debenture Subscription
Agreement, to acquire the Series A Debentures with the proceeds of the sale
of the Series A Capital Securities and the Common Securities and to exchange
the Series A Debentures for a like principal amount of Series B Debentures,
pursuant to the Exchange Offer; PROVIDED, HOWEVER, that the Administrative
Trustees shall cause legal title to the Debentures to be held of record in
the name of the Property Trustee for the benefit of the Holders;

            (d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event;

                                      15

<PAGE>

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

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

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

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

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

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

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

            (l) to act as, or appoint another Person to act as, Registrar and
Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.4 except for such time as such power to
appoint a Paying Agent is vested in the Property Trustee;

            (m) to give prompt written notice to the Property Trustee and to
the Holders 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;

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

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

                                      16

<PAGE>

                  (i) causing the Trust not to be deemed to be an Investment
            Company required to be registered under the Investment Company Act;

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

                  (iii) cooperating with the Debenture Issuer to ensure that the
            Debentures will be treated as indebtedness of the Debenture Issuer
            for United States federal income tax purposes;

            (p) to take all action necessary to consummate the Exchange Offer
or otherwise cause the Capital Securities to be registered pursuant to an
effective registration statement in accordance with the provisions of the
Registration Rights Agreement;

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

            (r) to execute and deliver all documents, agreements,
certificates and instruments, exercise all rights and powers, perform all
duties and do all things for and on behalf of the Trust in all matters
necessary, advisable or incidental to the foregoing or the transactions
contemplated thereby.

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

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

            Any expenses incurred by the Administrative Trustees pursuant to
this Section 3.6 shall be reimbursed by the Debenture Issuer.

SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.

            The Trust shall not, and the Trustees (including the Property
Trustee and the Delaware Trustee) shall not, and the Administrative Trustees
shall cause the Trust not to, engage in any activity other than as required
or authorized by this Declaration. Notwithstanding any provision in this
Declaration to the contrary, the Trust shall not:

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

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

                                      17

<PAGE>

                  (iii) possess Trust Property for other than a Trust purpose
            or execute any mortgage in respect of, or pledge, any Trust
            Property;

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

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

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

                  (vii) other than as provided in this Declaration or Annex I
            hereto, (A) direct the time, method and place of conducting any
            proceeding with respect to any remedy available to the Debenture
            Trustee, or exercising any trust or power conferred upon the
            Debenture Trustee with respect to the Debentures, (B) waive any
            past default that is waivable under the Indenture, or (C) exercise
            any right to rescind or annul any declaration that the principal
            of all the Debentures shall be due and payable; or

                  (viii) consent to any amendment, modification or termination
            of the Indenture or the Debentures where such consent shall be
            required unless the Trust shall have received an opinion of
            independent tax counsel experienced in such matters to the effect
            that such amendment, modification or termination will not cause
            more than an insubstantial risk that the Trust will not be
            classified as a grantor trust for United States federal income tax
            purposes.

SECTION 3.8 POWERS AND DUTIES OF THE PROPERTY TRUSTEE.

            (a) The legal title to the Debentures shall be owned by and held
of record in the name of the Property Trustee in trust for the benefit of the
Trust and the Holders. The right, title and interest of the Property Trustee
to the Debentures shall vest automatically in each Person who may hereafter
be appointed as Property Trustee in accordance with Section 5.6. 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 Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).

            (c) The Property Trustee shall:

                  (i) establish and maintain a segregated non-interest bearing
            trust account (the "Property Trustee Account") in the name of and
            under the exclusive control of the Property Trustee on behalf of
            the Holders and, upon the receipt of

                                      18

<PAGE>

            payments of funds made in respect of the Debentures held by the
            Property Trustee, deposit such funds into the Property Trustee
            Account and make payments or cause the Paying Agent to make
            payments to the Holders from the Property Trustee Account in
            accordance with Section 6.1; funds in the Property Trustee Account
            shall be held uninvested until disbursed in accordance with this
            Declaration; and the Property Trustee Account shall be an account
            that is maintained with a banking institution the rating on whose
            long-term unsecured indebtedness by a "nationally recognized
            statistical rating organization," as that term is defined for
            purposes of Rule 436(g)(2) under the Securities Act, is at least
            equal to the rating assigned to the Capital Securities, unless the
            Capital Securities are not rated, in which case the banking
            institution's long-term unsecured indebtedness shall be rated at
            least investment grade by a "nationally recognized statistical
            rating organization";

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

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

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

            (e) Subject to Section 3.9(a), the Property Trustee shall take
any Legal Action which arises out of or in connection with an Event of
Default of which a Responsible Officer has actual knowledge or the Property
Trustee's duties and obligations under this Declaration or the Trust
Indenture Act; and if the Property Trustee shall have failed to take such
Legal Action following a written request from the Holders, the Holders of the
Capital Securities may, to the fullest extent permitted by law, take such
Legal Action, to the same extent as if such Holders of Capital Securities
held an aggregate principal amount of Debentures equal to the aggregate
liquidation amount of such Capital Securities, without first proceeding
against the Property Trustee or the Trust; 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 the principal of
or premium, if any, or interest (including Compounded Interest and Additional
Sums, if any) or Liquidated Damages, if any, on the Debentures on the date
such principal, premium, if any, or interest (including Compounded Interest
and Additional Sums, if any) or Liquidated Damages, if any, is otherwise
payable (or in the case of redemption, on the redemption date), then a Holder
of Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or premium, if any, or interest
(including Compounded Interest and Additional Sums, if any) or Liquidated
Damages, if any, 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 Holders of the Common
Securities will

                                      19

<PAGE>

be subrogated to the rights of such Holder of Capital Securities to the
extent of any payment made by the Debenture Issuer to such Holder of Capital
Securities in such Direct Action. Except as provided in the preceding
sentences, the Holders of Capital Securities will not be able to exercise
directly any other remedy available to the holders of the Debentures.

            (f) The Property 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 pursuant to the terms
            of the Securities and this Declaration; or

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

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

            (h) The Property Trustee shall be authorized to undertake any
actions set forth in Section 317(a) of the Trust Indenture Act.

            (i) For such time as the Property Trustee is the Paying Agent,
the Property Trustee may authorize one or more Persons to act as additional
Paying Agents and to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all Securities and any such
Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any
such additional Paying Agent may be removed by the Property Trustee at any
time the Property Trustee remains as Paying Agent and a successor Paying
Agent or additional Paying Agents may be (but are not required to be)
appointed at any time by the Property Trustee while the Property Trustee is
acting as Paying Agent.

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

            Notwithstanding anything expressed or implied to the contrary in
this Declaration or any Annex or Exhibit hereto, (i) the Property Trustee
must exercise the powers set forth in this Section 3.8 in a manner that is
consistent with the purposes and functions of the Trust set out in Section 3.3,
and (ii) the Property Trustee shall not take any action that is inconsistent
with the purposes and functions of the Trust set out in Section 3.3.

SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY TRUSTEE.

            (a) The Property Trustee, before the occurrence of any Event of
Default (of which, other than in the case of Events of Default under Sections
5.01(a) and 5.01(b) of the Indenture, which the Property Trustee is deemed to
have knowledge of as provided in Section 2.7(b)

                                      20

<PAGE>

hereof, a Responsible Officer of the Property Trustee has actual knowledge)
and after the curing or waiving of all such Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and in the Securities and no implied covenants
shall be read into this Declaration against the Property Trustee. In case an
Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) of which a Responsible Officer has actual knowledge, the
Property Trustee shall exercise such of the rights and powers vested in it by
this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs.

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

                  (i) prior to the occurrence of an Event of Default (of which,
            other than in the case of Events of Default under Sections 5.01(a)
            and 5.01(b) of the Indenture, which the Property Trustee is deemed
            to have knowledge of as provided in Section 2.7(b) hereof, a
            Responsible Officer of the Property Trustee has actual knowledge)
            and after the curing or waiving of all such Events of Default that
            may have occurred:

                  (A) the duties and obligations of the Property Trustee shall
                  be determined solely by the express provisions of this
                  Declaration and in the Securities and the Property Trustee
                  shall not be liable except for the performance of such duties
                  and obligations as are specifically set forth in this
                  Declaration and in the Securities, and no implied covenants or
                  obligations shall be read into this Declaration against the
                  Property Trustee; and

                  (B) in the absence of bad faith on the part of the Property
                  Trustee, the Property Trustee may conclusively rely, as to the
                  truth of the statements and the correctness of the opinions
                  expressed therein, upon any certificates or opinions furnished
                  to the Property Trustee and conforming to the requirements of
                  this Declaration; PROVIDED, HOWEVER, that in the case of any
                  such certificates or opinions that by any provision hereof are
                  specifically required to be furnished to the Property Trustee,
                  the Property Trustee shall be under a duty to examine the same
                  to determine whether or not on their face they conform to the
                  requirements of this Declaration;

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

                  (iii) the Property Trustee shall not be liable with respect
            to any action taken or omitted to be taken by it in good faith in
            accordance with the direction of the Holders of a Majority in
            Liquidation Amount of the Securities relating to the time, method
            and place of conducting any proceeding for any remedy

                                      21

<PAGE>

         available to the Property Trustee, or exercising any trust or power
         conferred upon the Property Trustee under this Declaration;

                  (iv) no provision of this Declaration shall require the
         Property Trustee to expend or risk its own funds or otherwise incur
         personal financial liability in the performance of any of its duties
         or in the exercise of any of its rights or powers;

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

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

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

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

SECTION 3.10 CERTAIN RIGHTS OF PROPERTY TRUSTEE.

         (a) Subject to the provisions of Section 3.9:

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

                  (ii) any direction or act of the Sponsor or the Administrative
         Trustees contemplated by this Declaration may be sufficiently evidenced
         by an Officers' Certificate;

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<PAGE>

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

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

                  (v) the Property Trustee may consult with counsel or other
         experts of its selection, and the advice or opinion of such counsel and
         experts with respect to legal matters or advice within the scope of
         such experts' area of expertise shall be full and complete
         authorization and protection in respect of any action taken, suffered
         or omitted by it hereunder in good faith and in accordance with such
         advice or opinion; such counsel may be counsel to the Sponsor or any of
         its Affiliates, and may include any of its employees; and the Property
         Trustee shall have the right at any time to seek instructions
         concerning the administration of this Declaration from any court of
         competent jurisdiction;

                  (vi) the Property Trustee shall be under no obligation to
         exercise any of the rights or powers vested in it by this Declaration
         at the request or direction of any Holder, unless such Holder shall
         have provided to the Property Trustee security and indemnity,
         reasonably satisfactory to the Property Trustee, against the costs,
         expenses (including reasonable attorneys' fees and expenses and the
         expenses of the Property Trustee's agents, nominees or custodians) and
         liabilities that might be incurred by it in complying with such request
         or direction, including such reasonable advances as may be requested by
         the Property Trustee; PROVIDED, HOWEVER, that, nothing contained in
         this Section 3.10(a)(vi) shall be taken to relieve the Property
         Trustee, upon the occurrence of an Event of Default (of which, other
         than in the case of Events of Default under Sections 5.01(a) and
         5.01(b) of the Indenture, which the Property Trustee is deemed to have
         knowledge of as provided in Section 2.7(b) hereof, a Responsible
         Officer of the Property Trustee has actual knowledge), of its
         obligation to exercise the rights and powers vested in it by this
         Declaration;

                  (vii) the Property Trustee shall not be bound to make any
         investigation into the facts or matters stated in any resolution,
         certificate, statement, instrument, opinion, report, notice, request,
         direction, consent, order, bond, debenture, note, other evidence of
         indebtedness or other paper or document, but the Property Trustee, in
         its discretion, may make such further inquiry or investigation into
         such facts or matters as it may see fit;

                                      23

<PAGE>

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

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

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

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

                  (xii) the Property Trustee shall not be liable for any action
         taken, suffered, or omitted to be taken by it in good faith, without
         negligence or willful misconduct, and reasonably believed by it to be
         authorized or within the discretion or rights or powers conferred upon
         it by this Declaration.

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

SECTION 3.11 DELAWARE TRUSTEE.

         Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee

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<PAGE>

have any of the duties and responsibilities of the Trustees described in this
Declaration (except as required under the Business Trust Act). Except as set
forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole
and limited purpose of fulfilling the requirements of Section 3807 of the
Business Trust Act. In the event the Delaware Trustee shall at any time be
required to take any action or perform any duty hereunder, the Delaware
Trustee shall be entitled to the benefits of Section 3.9(b)(ii) to (viii),
inclusive, and Section 3.10. No implied covenants or obligations shall be
read into this Declaration against the Delaware Trustee.

SECTION 3.12 EXECUTION OF DOCUMENTS.

         Unless otherwise required by applicable law, each Administrative
Trustee, individually, is authorized to execute and deliver on behalf of the
Trust any documents, agreements, instruments or certificates that the
Administrative Trustees have the power and authority to execute pursuant to
Section 3.6.

SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

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

SECTION 3.14 DURATION OF TRUST.

         The Trust, unless earlier dissolved pursuant to the provisions of
Article VIII hereof, shall dissolve on November 15, 2034.

SECTION 3.15 MERGERS.

         (a) The Trust may not merge with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets as
an entirety or substantially as an entirety to any Person, except as
described in Section 3.15(b) and (c) and except with respect to the
distribution of Debentures to Holders pursuant to Section 8.1 (a)(iii) of
this Declaration or Section 3 of Annex I.

         (b) The Trust may, at the request of the Sponsor, with the consent
of the Administrative Trustees or, if there are more than two, a majority of
the Administrative Trustees and without the consent of the Holders, the
Delaware Trustee or the Property Trustee, merge with or into, consolidate,
amalgamate, 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:

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

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

                                      25

<PAGE>

                  (B) substitutes for the Securities other securities having
                  substantially the same terms as the Securities (the "Successor
                  Securities") so long as the Successor Securities rank the same
                  as the Securities rank in priority 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
         Property Trustee with respect to the Debentures;

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

                  (iv) such merger, consolidation, amalgamation, replacement,
         conveyance, transfer or lease does not cause the Capital Securities
         (including any Successor Securities) or the Debentures to be downgraded
         by any nationally recognized statistical rating organization that
         publishes a rating on the Capital Securities or the Debentures;

                  (v) such merger, consolidation, amalgamation, replacement,
         conveyance, transfer or lease does not adversely affect the rights,
         preferences and privileges of the Holders (including the holders of any
         Successor Securities) in any material respect (other than with respect
         to any dilution of the interests of such Holders or holders, as the
         case may be, in the Successor Entity);

                  (vi) the 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 Sponsor has received an
         opinion of 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 (including
                  the holders of any Successor Securities) in any material
                  respect (other than with respect to any dilution of the
                  interests of such Holders or holders, as the case may be, in
                  the Successor Entity);

                  (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

                                      26

<PAGE>

                  (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 or any permitted successor or assignee of
         the Sponsor owns all of the common securities of the Successor Entity
         and guarantees the obligations of the Successor Entity under the
         Successor Securities at least to the extent provided by the Securities
         Guarantees; and

                  (ix) there shall have been furnished to the Property Trustee
         an Officers' Certificate and an Opinion of Counsel, each to the effect
         that all conditions precedent in this Declaration to such transaction
         have been satisfied.

         (c) Notwithstanding Section 3.15(b), the Trust shall not, except
with the consent of Holders of 100% in aggregate 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 the Successor Entity not to be classified as a
grantor trust for United States federal income tax purposes.

                                   ARTICLE IV
                                     SPONSOR

SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES.

         At the Closing Time, pursuant to the Common Securities Subscription
Agreement, the Sponsor will purchase all of the Common Securities then issued
by the Trust, in an amount equal to at least 3% of the total capital of the
Trust, at the same time as the Series A Capital Securities are issued and
sold.

SECTION 4.2 RESPONSIBILITIES OF THE SPONSOR.

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

         (a) to prepare the Offering Memorandum, in preliminary and final
form, and to prepare for filing by the Trust with the Commission any
Registration Statement, including any amendments thereto, as contemplated by
the Registration Rights Agreement;

         (b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do
any and all such acts, other than actions which must be taken by the Trust,
and advise the Trust of actions it must take, and prepare for

                                      27

<PAGE>

execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems necessary or advisable in order to comply with the
applicable laws of any such States;

         (c) if deemed necessary or advisable by the Sponsor, to prepare for
filing by the Trust an application to permit the Capital Securities to trade
or be quoted or listed in or on any securities exchange, quotation system or
the Nasdaq Stock Market's National Market;

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

         (e) to negotiate the terms of, execute, enter into and deliver the
Purchase Agreement, the Registration Rights Agreement and the Liquidated
Damages Agreement.

SECTION 4.3 RIGHT TO PROCEED.

         The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on
the Capital Securities is attributable to the failure of the Debenture Issuer
to pay the principal of or premium (if any) or interest on the Debentures, to
institute a proceeding directly against the Debenture Issuer for enforcement
of its payment obligations in respect of the Debentures.

SECTION 4.4 RIGHT TO DISSOLVE TRUST.

         The Sponsor will have the right at any time to dissolve the Trust
and, after satisfaction of liabilities to creditors of the Trust as required
by applicable law, to cause the Debentures to be distributed to the Holders
in liquidation of the Trust. Such right is subject to the Sponsor's having
received (i) an Opinion of Counsel to the effect that such distribution will
not cause the Holders of Capital Securities to recognize gain or loss for
United States federal income tax purposes and (ii) all required regulatory
approvals.

                                    ARTICLE V
                                    TRUSTEES

SECTION 5.1 NUMBER OF TRUSTEES; APPOINTMENT OF CO-TRUSTEE.

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

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

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

                                      28

<PAGE>

PROVIDED, HOWEVER, that, the number of Trustees shall in no event be less than
two (2); PROVIDED FURTHER that (1) one Trustee, in the case of a natural person,
shall be a person who is a resident of the State of Delaware or that, if not a
natural person, is an entity which has its principal place of business in the
State of Delaware (the "Delaware Trustee"); (2) there shall be at least one
Trustee who is an employee or officer of, or is affiliated with, the Sponsor (an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee
for so long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements. Notwithstanding the above, unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be located,
the Holders of a Majority in Liquidation Amount of the Common Securities acting
as a class at a meeting of the Holders of the Common Securities, and the
Administrative Trustees shall have power to appoint one or more Persons either
to act as a co-trustee, jointly with the Property Trustee, of all or any part of
the Trust Property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of this Declaration. In case an Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make any such
appointment of a co-trustee.

SECTION 5.2 DELAWARE TRUSTEE.

         For so long as required by the Business Trust Act, the Delaware
Trustee shall be:

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

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

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

         The initial Delaware Trustee shall be:

         Wilmington Trust Company
         Rodney Square North
         1100 North Market Street
         Wilmington, Delaware 19890-0001
         Telephone: (302) 651-1000
         Telecopier: (302) 651-8882

SECTION 5.3 PROPERTY TRUSTEE: ELIGIBILITY.

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

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<PAGE>

                  (i) not be an Affiliate of the Sponsor; and

                  (ii) be a corporation organized and doing business under the
         laws of the United States of America or any State or Territory thereof
         or of the District of Columbia, or a corporation or Person permitted by
         the Commission to act as an indenture trustee under the Trust Indenture
         Act, 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, territorial or District of Columbia authority. If such
         corporation publishes reports of condition at least annually, pursuant
         to law or to the requirements of the supervising or examining authority
         referred to above, then for the purposes of this Section 5.3(a)(ii),
         the combined capital and surplus of such corporation 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 Property Trustee shall cease to be eligible
to so act under Section 5.3(a), the Property Trustee shall immediately
resign in the manner and with the effect set forth in Section 5.6(c).

         (c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 330(b) of the Trust Indenture Act,
the Property Trustee and the Holder of the Common Securities (as if it were
the obligor referred to in Section 310(b) of the Trust Indenture Act) shall
in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.

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

         (e) The initial Property Trustee shall be:

         Wilmington Trust Company
         Rodney Square North
         1100 North Market Street
         Wilmington, Delaware 19890-0001
         Telephone: (302) 651-1000
         Telecopier: (302) 651-8882

SECTION 5.4 CERTAIN QUALIFICATIONS OF ADMINISTRATIVE TRUSTEES AND DELAWARE
TRUSTEE GENERALLY.

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

                                      30

<PAGE>

SECTION 5.5  ADMINISTRATIVE TRUSTEES.
             The initial Administrative Trustees shall be:

             H. Glenn Mouw
             Clark W. Donnell
             Kenneth G. Hulett
             c/o InterWest Bancorp, Inc.
             275 Southeast Pioneer Way
             Oak Harbor, Washington 98277
             Telephone: (360) 679-4181
             Telecopier: (360) 675-8860

         (a) Except as otherwise expressly set forth in this Declaration and
except if a meeting of the Administrative Trustees is called with respect to
any matter over which the Administrative Trustees have power to act, any
power of the Administrative Trustees may be exercised by, or with the consent
of, any one such Administrative Trustee.

         (b) Unless otherwise required by the Business Trust Act or other
applicable law, any Administrative Trustee acting alone is authorized to
execute on behalf of the Trust any documents which the Administrative
Trustees have the power and authority to cause the Trust to execute pursuant
to Section 3.6.

         (c) An Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purposes of signing any documents which the
Administrative Trustees have power and authority to cause the Trust to
execute pursuant to Section 3.6.

SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.

         (a) Subject to Section 5.6(b) hereof and to Section 6(b) of Annex I
hereto, Trustees may be appointed or removed without cause at any time:

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

                  (ii) unless an Event of Default shall have occurred and be
         continuing after the issuance of any Securities, by vote of the Holders
         of a Majority in Liquidation Amount of the Common Securities voting as
         a class at a meeting of the Holders of the Common Securities; and

                  (iii) if an Event of Default shall have occurred and be
         continuing after the issuance of the Securities, with respect to the
         Property Trustee or the Delaware Trustee, by vote of Holders of a
         Majority in Liquidation Amount of the Capital Securities voting as a
         class at a meeting of Holders of the Capital Securities, and with
         respect to the Administrative Trustees, in the manner set forth in
         Section 5.6(a)(ii) hereof.

                                      31

<PAGE>

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

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

         (c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or
resignation. Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing signed by the Trustee and
delivered to the other Trustees, the Sponsor and the Trust, which resignation
shall take effect upon such delivery or upon such later date as is specified
therein; PROVIDED, HOWEVER, that:

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

                  (A) until a Successor Property Trustee has been appointed and
                  has accepted such appointment by instrument executed by such
                  Successor Property Trustee and delivered to the Trust, the
                  Sponsor, the Delaware Trustee (if the resigning Property
                  Trustee is not also the Delaware Trustee) and the resigning
                  Property Trustee; or

                  (B) until the assets of the Trust have been completely
                  liquidated and the proceeds thereof distributed to the
                  Holders; and

                  (ii) no such resignation of the Trustee that acts as the
         Delaware Trustee shall be effective until a Successor Delaware
         Trustee has been appointed and has accepted such appointment by
         instrument executed by such Successor Delaware Trustee and delivered
         to the Trust, the Property Trustee (if the resigning Delaware
         Trustee is not also the Property Trustee), the Sponsor and the
         resigning Delaware Trustee.

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

         (e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee

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resigning or being removed, as applicable, may petition any court of
competent jurisdiction for appointment of a Successor Property Trustee or
Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper to prescribe, appoint a Successor
Property Trustee or Successor Delaware Trustee, as the case may be.

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

         (g) At the time of resignation or removal of the Property Trustee or
the Delaware Trustee, the Sponsor shall pay to such Trustee any amounts that
may be owed to such Trustee pursuant to Section 10.4.

         (h) 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 Successor
Delaware Trustee in the State of Delaware.

SECTION 5.7 VACANCIES AMONG TRUSTEES.

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

SECTION 5.8 EFFECT OF VACANCIES

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

SECTION 5.9 MEETINGS.

         If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may
be held at a time and place fixed by resolution of the Administrative
Trustees. Notice of any in-person meetings of the Administrative Trustees
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours
before such meeting. Notice of any telephonic meetings of the Administrative
Trustees or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours

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<PAGE>

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 an Administrative Trustee at a meeting shall constitute a
waiver of notice of such meeting except where an Administrative Trustee
attends a meeting for the express purpose of objecting to the transaction of
any activity on the ground that the meeting has not been lawfully called or
convened. Unless provided otherwise in this Declaration, any action of the
Administrative Trustees may be taken at a meeting by vote of a majority of
the Administrative Trustees present (whether in person or by telephone) and
eligible to vote with respect to such matter, PROVIDED THAT, a Quorum is
present, or without a meeting by the unanimous written consent of the
Administrative Trustees. In the event there is only one Administrative
Trustee, any and all action of such Administrative Trustee shall be evidenced
by a written consent of such Administrative Trustee.

SECTION 5.10 DELEGATION OF POWER.

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

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

SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

         Any Person into which the Property Trustee or the Delaware Trustee
or any Administrative Trustee that is not a natural person, as the case may
be, may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which the
Property 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 Property Trustee or the Delaware Trustee, as the case
may be, shall be the successor of the Property 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 under this
Article and provided further that such Person shall file an amendment to the
Certificate of Trust with the Delaware Secretary of State as contemplated in
Section 5.6(h).

                                   ARTICLE VI
                                  DISTRIBUTIONS

SECTION 6.1 DISTRIBUTIONS.

         Holders shall receive Distributions in accordance with the applicable
terms of the relevant Holder's Securities. If and to the extent that the
Debenture Issuer makes a payment of

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<PAGE>

interest (including Compounded Interest and Additional Sums), premium and/or
principal on the Debentures held by the Property Trustee or Liquidated
Damages or any other payments pursuant to the Registration Rights Agreement
or Liquidated Damages Agreement with respect to the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"),
the Property Trustee shall and is directed, to the extent funds are available
for that purpose, to make a distribution (a "Distribution") of the Payment
Amount to Holders in accordance with the terms of the Securities.

                                   ARTICLE VII
                             ISSUANCE OF SECURITIES

SECTION 7.1 GENERAL PROVISIONS REGARDING SECURITIES.

         (a) The Administrative Trustees shall, on behalf of the Trust, issue
one class of capital securities representing undivided preferred beneficial
interests in the assets of the Trust having such terms as are set forth in
Annex I (the "Series A Capital Securities") and one class of common
securities representing undivided common beneficial interests in the assets
of the Trust having such terms as are set forth in Annex I (the "Common
Securities"). The Administrative Trustees shall, on behalf of the Trust,
issue one class of capital securities representing undivided preferred
beneficial interests in the assets of the Trust having such terms as set
forth in Annex I (the "Series B Capital Securities") in exchange for the
Series A Capital Securities accepted for exchange in the Exchange Offer,
which Series B Capital Securities shall not bear the legends required by
Section 9.2(i) unless the Holder of such Series A Capital Securities is
either (A) a broker-dealer who purchased such Series A Capital Securities
directly from the Trust for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (B) a Person participating in
the distribution of the Series A Capital Securities or (C) a Person who is an
Affiliate of the Sponsor or the Trust. The Trust shall issue no securities or
other interests in the assets of the Trust other than the Capital Securities
and the Common Securities.

         (b) 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.

         (c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued and, subject to
the terms of this Declaration, fully paid and nonassessable undivided
beneficial interests in the assets of the Trust and entitled to the benefits
of this Declaration, and the Holders thereof shall be entitled to the
benefits of this Declaration.

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

SECTION 7.2 EXECUTION AND AUTHENTICATION.

         (a) The Securities shall be signed on behalf of the Trust by an
Administrative Trustee. In case any Administrative Trustee of the Trust who
shall have signed any of the Securities

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<PAGE>

shall cease to be such Administrative Trustee before the Securities so signed
shall be delivered by the Trust, such Securities nevertheless may be
delivered as though the Person who signed such Securities had not ceased to
be such Administrative Trustee; and any Securities may be signed on behalf of
the Trust by such persons who, at the actual date of execution of such
Security, shall be the Administrative Trustees of the Trust, although at the
date of the execution and delivery of this Declaration any such person was
not an Administrative Trustee.

         (b) One Administrative Trustee shall sign the Capital Securities for
the Trust by manual or facsimile signature. Unless otherwise determined by an
Administrative Trustee on behalf of the Trust, an Administrative Trustee
shall sign the Common Securities for the Trust by manual signature.

         A Capital Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Capital Security has been
authenticated under this Declaration. A Common Security shall be valid upon
execution by an Administrative Trustee without any act of the Property
Trustee.

         Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Capital Securities for
original issue. The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in Annex I hereto except as
provided in Section 7.6.

         The Property Trustee may appoint an authenticating agent acceptable
to the Trust to authenticate Capital Securities. An authenticating agent may
authenticate Capital Securities whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee
includes authentication by such agent. An authenticating agent has the same
rights as the Property Trustee hereunder with respect to the Sponsor or an
Affiliate.

SECTION 7.3 FORM AND DATING.

         The Capital Securities shall be evidenced by one or more
certificates substantially in the form of Exhibit A-1, and the Common
Securities shall be evidenced by one or more certificates substantially in
the form of Exhibit A-2. The Property Trustee's certificate of authentication
shall be substantially in the form set forth in Exhibit A-1. Certificates
representing the Securities may be printed, lithographed or engraved or may
be produced in any other manner as is reasonably acceptable to an
Administrative Trustee, as evidenced by the execution thereof. The Securities
may have letters, "CUSIP" or other 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 Administrative Trustees, as evidenced by their execution
thereof. The Trust at the direction of the Sponsor, shall furnish any such
legend not contained in Exhibit A-1 to the Property 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 Property Trustee and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby.

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<PAGE>

         (a) GLOBAL CAPITAL SECURITY. Capital Securities offered and sold to
QIBs in reliance on Rule 144A, as provided in the Purchase Agreement, shall
be issued in the form of a single permanent global Capital Security in
definitive, fully registered form without distribution coupons with the
appropriate global legends and Restricted Securities Legend set forth in
Exhibit A-1 hereto (the "Global Capital Security"), which shall be deposited
on behalf of the purchasers of the Capital Securities represented thereby
with the Property Trustee, at its Corporate Trust Office, as custodian for
the Clearing Agency, and registered in the name of the Clearing Agency or a
nominee of the Clearing Agency, duly executed by the Trust and authenticated
by the Property Trustee as hereinafter provided. The number of Capital
Securities represented by the Global Capital Security may from time to time
be increased or decreased by adjustments made on the records of the Property
Trustee and the Clearing Agency or its nominee as hereinafter provided.

         (b) BOOK-ENTRY PROVISIONS. This Section 7.3(b) shall apply only to
the Global Capital Security and such other Capital Securities in global form
as may be authorized by the Trust to be deposited with or on behalf of the
Clearing Agency.

         An Administrative Trustee shall execute and the Property Trustee
shall, in accordance with this Section 7.3, authenticate and make available
for delivery initially a single Global Capital Security that (i) shall be
registered in the name of Cede & Co. or other nominee of such Clearing
Agency, and (ii) shall be delivered by the Property Trustee to such Clearing
Agency or pursuant to such Clearing Agency's written instructions or, if no
such written instructions are received by the Property Trustee, held by the
Property Trustee as custodian for the Clearing Agency.

         Members of, or participants in, the Clearing Agency ("Participants")
shall have no rights under this Declaration with respect to the Global
Capital Security held on their behalf by the Clearing Agency or by the
Property Trustee as the custodian of the Clearing Agency or under such Global
Capital Security, and the Clearing Agency may be treated by the Trust, the
Property Trustee and any agent of the Trust or the Property Trustee as the
absolute owner of such Global Capital Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust, the
Property Trustee or any agent of the Trust or the Property Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Clearing Agency or impair, as between the Clearing Agency
and its Participants, the operation of customary practices of such Clearing
Agency governing the exercise of the rights of a holder of a beneficial
interest in the Global Capital Security.

         (c) DEFINITIVE CAPITAL SECURITIES. Except as provided in Section 7.9
or 9.2(f)(i), owners of beneficial interests in the Global Capital Security
will not be entitled to receive physical delivery of certificated Capital
Securities ("Definitive Capital Securities"). Purchasers of Securities who
are "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) and who are not QIBs will receive Capital
Securities in the form of individual certificates in definitive, fully
registered form without distribution coupons and with the Restricted
Securities Legend set forth in Exhibit A-1 hereto ("Restricted Definitive
Capital Securities"); PROVIDED, HOWEVER, that upon registration of transfer
of such Restricted Definitive Capital Securities to a QIB, such Restricted
Definitive Capital Securities will, unless the Global Capital Security has
previously been exchanged, be exchanged for an interest in the Global Capital
Security pursuant to the

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<PAGE>

provisions of Section 9.2. Restricted Definitive Capital Securities will bear
the Restricted Securities Legend set forth on Exhibit A-1 unless removed in
accordance with this Section 7.3 or Section 9.2.

SECTION 7.4  REGISTRAR, PAYING AGENT AND EXCHANGE AGENT.

         The Trust shall maintain in Wilmington, Delaware (i) an office or
agency where Capital Securities may be presented for registration of transfer
("Registrar"), (ii) an office or agency where Capital Securities may be
presented for payment ("Paying Agent") and (iii) an office or agency where
Securities may be presented for exchange ("Exchange Agent"). The Registrar
shall keep a register of the Capital Securities and of their transfer. The
Trust may appoint the Registrar, the Paying Agent and the Exchange Agent and
may appoint one or more co-registrars, one or more additional paying agents
and one or more additional Exchange Agents in such other locations as it
shall determine. The term "Registrar" includes any additional registrar, the
term "Paying Agent" includes any additional paying agent and the term
"Exchange Agent" includes any additional Exchange Agent. The Trust may change
any Paying Agent, Registrar, co-registrar or Exchange Agent without prior
notice to any Holder. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Property Trustee, the
Administrative Trustees and the Sponsor. The Trust shall notify the Property
Trustee of the name and address of any Agent not a party to this Declaration.
If the Trust fails to appoint or maintain another entity as Registrar, Paying
Agent or Exchange Agent, the Property Trustee shall act as such. The Trust or
any of its Affiliates may act as Paying Agent, Registrar, or Exchange Agent.
The Trust shall act as Paying Agent, Registrar and Exchange Agent for the
Common Securities.

         The Trust initially appoints the Property Trustee as Registrar,
Paying Agent and Exchange Agent for the Capital Securities.

SECTION 7.5  PAYING AGENT TO HOLD MONEY IN TRUST.

         The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of liquidation amounts or Distributions, and will notify the
Property Trustee if there are insufficient funds for such purpose. While any
such insufficiency continues, the Property Trustee may require a Paying Agent
to pay all money held by it to the Property Trustee. The Trust at any time
may require a Paying Agent to pay all money held by it to the Property
Trustee and to account for any money disbursed by it. Upon payment over to
the Property Trustee, the Paying Agent (if other than the Trust or an
Affiliate of the Trust) shall have no further liability for the money. If the
Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent.

SECTION 7.6  REPLACEMENT SECURITIES.

         If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, an Adminstrative Trustee shall execute and the Property
Trustee shall authenticate and make available for delivery a replacement
Security if the Property

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<PAGE>

Trustee's requirements are met. An indemnity bond must be provided by the
Holder which, in the judgment of the Property Trustee, is sufficient to
protect the Trustees, the Sponsor, the Trust or any authenticating agent from
any loss which any of them may suffer if a Security is replaced. The Trust
may charge such Holder for its expenses in replacing a Security.

SECTION 7.7 OUTSTANDING CAPITAL SECURITIES.

         The Capital Securities outstanding at any time are all the Capital
Securities authenticated by the Property Trustee except for those canceled by
it, those delivered to it for cancellation, and those described in this
Section as not outstanding.

         If a Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased
Capital Security is held by a bona fide purchaser.

         If Capital Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.

         A Capital Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.

SECTION 7.8 CAPITAL SECURITIES IN TREASURY.

         In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding,
except that for the purposes of determining whether the Property Trustee
shall be fully protected in relying on any such direction, waiver or consent,
only Securities which the Property Trustee actually knows are so owned shall
be so disregarded.

SECTION 7.9 TEMPORARY SECURITIES.

         (a) Until Definitive Capital Securities are ready for delivery, the
Trust may prepare and, in the case of the Capital Securities, the Property
Trustee shall authenticate temporary Securities. Temporary Securities shall
be substantially in the form of Definitive Capital Securities but may have
variations that the Trust considers appropriate for temporary Securities.
Without unreasonable delay, the Trust shall prepare and, in the case of the
Capital Securities, the Property Trustee shall authenticate Definitive
Capital Securities in exchange for temporary Securities.

         (b) The Global Capital Security deposited with the Clearing Agency
or with the Property Trustee as custodian for the Clearing Agency pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form
of Definitive Capital Securities only if such transfer complies with
Section 9.2 and (i) the Clearing Agency notifies the Sponsor that it is
unwilling or unable to continue as Clearing Agency for such Global Capital
Security or if at any time such Clearing Agency ceases to be a "clearing
agency" registered under the Exchange Act, and, in each case, a clearing
agency is not appointed by the Sponsor within 90 days of receipt of such
notice or

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<PAGE>

of becoming aware of such condition, (ii) a Default or an Event of Default
has occurred and is continuing, or (iii) the Trust at its sole discretion
elects to cause the issuance of Definitive Capital Securities.

         (c) Any Global Capital Security that is transferable to the
beneficial owners thereof in the form of Definitive Capital Securities
pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to
the Property Trustee to be so transferred, in whole or from time to time in
part, without charge, and the Property Trustee shall authenticate and make
available for delivery, upon such transfer of each portion of such Global
Capital Security, an equal aggregate liquidation amount of Capital Securities
of authorized denominations in the form of Definitive Capital Securities. Any
portion of the Global Capital Security transferred pursuant to this Section
shall be registered in such names as the Clearing Agency shall direct. Any
Definitive Capital Security delivered in exchange for an interest in the
Restricted Global Capital Security shall, except as otherwise provided by
Sections 7.3 and 9.1, bear the Restricted Securities Legend set forth in
Exhibit A-1 hereto.

         (d) Subject to the provisions of Section 7.9(c), the Holder of the
Global Capital Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through
Participants, to take any action which such Holder is entitled to take under
this Declaration or the Securities.

         (e) In the event of the occurrence of any of the events specified in
Section 7.9(b), the Trust will promptly make available to the Property
Trustee a reasonable supply of certificated Capital Securities in fully
registered form without distribution coupons.

SECTION 7.10 CANCELLATION.

         The Trust at any time may deliver Capital Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Exchange Agent
shall forward to the Property Trustee any Capital Securities surrendered to
them for registration of transfer, redemption, exchange or payment. The
Property Trustee shall promptly cancel all Capital Securities surrendered for
registration of transfer, redemption, exchange, payment, replacement or
cancellation and shall dispose of canceled Capital Securities in accordance
with its customary procedures unless the Trust otherwise directs. The Trust
may not issue new Capital Securities to replace Capital Securities that it
has paid or that have been delivered to the Property Trustee for cancellation
or that any Holder has exchanged.

SECTION 7.11  CUSIP NUMBERS.

         The Trust in issuing the Capital Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders of Capital
Securities; PROVIDED THAT, any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the
Capital Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on
the Capital Securities, and any such redemption shall not be

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<PAGE>

affected by any defect in or omission of such numbers. The Sponsor will
promptly notify the Property Trustee of any change in the CUSIP numbers.

                                  ARTICLE VIII
                              DISSOLUTION OF TRUST

SECTION 8.1  DISSOLUTION OF TRUST.

         (a) The Trust shall automatically dissolve:

                  (i) upon the bankruptcy of the Sponsor;

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

                  (iii) following the distribution of a Like Amount of the
         Debentures to the Holders, PROVIDED THAT, the Property Trustee has
         received written notice from the Sponsor directing the Property Trustee
         to dissolve the Trust (which direction is optional, and except as
         otherwise expressly provided below, within the discretion of the
         Sponsor), and PROVIDED, FURTHER, that such direction and such
         distribution is conditioned on (a) the receipt by the Sponsor of any
         and all required regulatory approvals, and (b) the Sponsor's receipt
         and delivery to the Administrative Trustees of an opinion of
         independent tax counsel experienced in such matters, which opinion may
         rely on public or private rulings of the Internal Revenue Service, to
         the effect that the Holders of the Capital Securities will not
         recognize any gain or loss for United States federal income tax
         purposes as a result of the dissolution of the Trust and the
         distribution of Debentures;

                  (iv) upon the entry of a decree of judicial dissolution of the
         Trust by a court of competent jurisdiction;

                  (v) 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;

                  (vi) upon the redemption or repayment of the Debentures or
         at such time as no Debentures are outstanding; or

                  (vii) the expiration of the term of the Trust provided in
         Section 3.14.

         (b) As soon as is practicable upon completion of winding up of the
Trust following the occurrence of an event referred to in Section 8.1(a) and
the satisfaction of creditors of the Trust in accordance with applicable law,
the Administrative Trustees shall terminate the Trust

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<PAGE>

by filing a certificate of cancellation with the Secretary of State of the
State of Delaware in accordance with the Business Trust Act.

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

                                   ARTICLE IX
                              TRANSFER OF INTERESTS

SECTION 9.1 TRANSFER OF SECURITIES.

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

         (b) Subject to this Article IX, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with
this Declaration shall be null and void.

         (c) For so long as the Securities remain outstanding, the Sponsor
agrees (i) not to transfer ownership of the Common Securities of the Trust,
provided that any permitted successor of the Sponsor under the Indenture
may succeed to the Sponsor's ownership of the Common Securities, (ii) not to
cause, as Sponsor of the Trust, or to permit, as Holder of the Common
Securities, the dissolution, winding-up or liquidation of the Trust, except
as provided in this Declaration and (iii) to use its best efforts to cause
the Trust (a) to remain a business trust, except in connection with the
distribution of Debentures to the Holders in liquidation of the Trust, the
redemption of all of the Securities, or certain mergers, consolidations or
amalgamations, each as permitted by this Declaration, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.

         (d) The Registrar shall provide for the registration of Capital
Securities and of the transfer of Capital 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
Capital Securities, an Administrative Trustee shall cause one or more new
Capital Securities to be issued in the name of the designated transferee or
transferees. Every Capital 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 Capital Security surrendered for registration of
transfer shall be delivered to the Registrar and canceled in accordance with
Section 7.10. A transferee of a Capital Security shall be entitled to the
rights and subject to the obligations of a Holder hereunder upon the receipt
by such transferee of a Capital Security. By acceptance of a Capital Security
or any interest therein, each transferee shall be deemed to have agreed to be
bound by this Declaration.

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<PAGE>

SECTION 9.2 TRANSFER PROCEDURES AND RESTRICTIONS.

         (a) GENERAL. Except as otherwise provided in Section 9.2(b), if
Capital Securities are issued upon the transfer, exchange or replacement of
Capital Securities bearing the Restricted Securities Legend set forth in
Exhibit A-1 hereto, or if a request is made to remove such Restricted
Securities Legend on Capital Securities, the Capital Securities so issued
shall bear the Restricted Securities Legend, or the Restricted Securities
Legend shall not be removed, as the case may be, unless there is delivered to
the Trust and the Property Trustee such satisfactory evidence, which shall
include an Opinion of Counsel, as may be reasonably required by the Trust and
the Property Trustee, that neither the Restricted Securities Legend nor the
restrictions on transfer set forth therein are required to ensure that
transfers thereof are made pursuant to an exception from the registration
requirements of the Securities Act or, with respect to Restricted Capital
Securities, that such Securities are not "restricted" within the meaning of
Rule 144. Upon provision of such satisfactory evidence, the Property Trustee,
at the written direction of an Administrative Trustee on behalf of the Trust,
shall authenticate and deliver Capital Securities that do not bear the legend.

         (b) TRANSFERS AFTER EFFECTIVENESS OF A REGISTRATION STATEMENT. After
the effectiveness of a Registration Statement with respect to any Capital
Securities, all requirements pertaining to legends on such Capital Securities
will cease to apply (other than the legend requiring that transfers of
Capital Securities be made in blocks having an aggregate liquidation amount
of not less than $100,000 (100 Capital Securities) and multiples of $1,000 in
excess thereof), and beneficial interests in the Global Capital Security
without legends will be available to transferees of such Capital Securities,
upon exchange of the transferring Holder's Restricted Definitive Capital
Security or directions to transfer such Holder's beneficial interest in the
Global Capital Security, as the case may be. No such transfer or exchange of
a Restricted Definitive Capital Security or of an interest in the Global
Capital Security shall be effective unless the transferor delivers to the
Property Trustee a certificate in a form substantially similar to that
attached hereto as the form of "Assignment" in Exhibit A-1. Except as
otherwise provided in Section 9.2(m), after the effectiveness of a
Registration Statement, an Administrative Trustee on behalf of the Trust
shall issue and the Property Trustee, upon a written order of the Trust
signed by one Administrative Trustee, shall authenticate a Global Capital
Security without the Restricted Securities Legend (the "Unrestricted Global
Capital Security") to deposit with the Clearing Agency to evidence transfers
of beneficial interests from the Global Capital Security and Restricted
Definitive Capital Securities.

         (c) TRANSFER AND EXCHANGE OF DEFINITIVE CAPITAL SECURITIES. When
Definitive Capital Securities are presented to the Registrar or co-registrar:

         (x) to register the transfer of such Definitive Capital Securities;
     or
         (y) to exchange such Definitive Capital Securities which became
     mutilated, destroyed, defaced, stolen or lost, for an equal number of
     Definitive Capital Securities, the Registrar or co-registrar shall
     register the transfer or make the exchange as requested if its reasonable
     requirements for such transaction are met;

     PROVIDED, HOWEVER, that the Definitive Capital Securities surrendered
     for registration of transfer or exchange:

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<PAGE>

                         (i) shall be duly endorsed or accompanied by a written
                    instrument of transfer in form reasonably satisfactory to
                    the Trust and the Registrar or co-registrar, duly executed
                    by the Holder thereof or his attorney duly authorized in
                    writing; and

                         (ii) in the case of Definitive Capital Securities that
                    are Restricted Definitive Capital Securities:

                         (A) if such Restricted Capital Securities are being
                         delivered to the Registrar by a Holder for
                         registration in the name of such Holder, without
                         transfer, certification(s) from such Holder to that
                         effect, or

                         (B) if such Restricted Capital Securities are being
                         transferred: (i) certification(s) in a form
                         substantially similar to that attached hereto as the
                         form of "Assignment" in Exhibit A-1, and (ii) if the
                         Trust or Registrar so requests, evidence reasonably
                         satisfactory to them as to the compliance with the
                         restrictions set forth in the Restricted Securities
                         Legend.

                    (d) RESTRICTIONS ON TRANSFER OF A DEFINITIVE CAPITAL
SECURITY FOR A BENEFICIAL INTEREST IN THE GLOBAL CAPITAL SECURITY. A
Definitive Capital Security may not be exchanged for a beneficial interest in
the Global Capital Security except upon satisfaction of the requirements set
forth below. Upon receipt by the Property Trustee of a Definitive Capital
Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Property Trustee, together with:

                         (i) if such Definitive Capital Security is a Restricted
                    Capital Security, certification(s) in a form substantially
                    similar to that attached hereto as the form of "Assignment"
                    in Exhibit A-1; and

                         (ii) whether or not such Definitive Capital Security
                    is a Restricted Capital Security, written instructions
                    directing the Property Trustee to make, or to direct the
                    Clearing Agency to make, an adjustment on its books and
                    records with respect to the Global Capital Security to
                    reflect an increase in the number of the Capital Securities
                    represented by such Global Capital Security,

then the Property Trustee shall cancel such Definitive Capital Security and
cause, or direct the Clearing Agency to cause, the aggregate number of
Capital Securities represented by the Global Capital Security to be increased
accordingly. If the Global Capital Security is not then outstanding, an
Administrative Trustee on behalf of the Trust shall issue and the Property
Trustee shall authenticate, upon written order of any Administrative Trustee,
a new Global Capital Security representing an appropriate number of Capital
Securities.

                    (e) TRANSFER AND EXCHANGE OF THE GLOBAL CAPITAL SECURITY.
Subject to Section 9.2(f), the transfer and exchange of the Global Capital
Security or beneficial interests therein shall be effected through the
Clearing Agency in accordance with this Declaration (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Clearing Agency therefor.

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<PAGE>

         (f) TRANSFER OF A BENEFICIAL INTEREST IN THE GLOBAL CAPITAL SECURITY
FOR A DEFINITIVE CAPITAL SECURITY.

                         (i) Any Person having a beneficial interest in the
                    Global Capital Security may upon request, but only upon 20
                    days prior notice to the Property Trustee, and if
                    accompanied by the information specified below, exchange
                    such beneficial interest for a Definitive Capital Security
                    representing the same number of Capital Securities. Upon
                    receipt by the Property Trustee from the Clearing Agency or
                    its nominee on behalf of any Person having a beneficial
                    interest in the Global Capital Security of written
                    instructions or such other form of instructions as is
                    customary for the Clearing Agency or the Person designated
                    by the Clearing Agency as having such a beneficial interest
                    in a Restricted Capital Security and certification(s) from
                    the transferor in a form substantially similar to that
                    attached hereto as the form of "Assignment" in Exhibit
                    A-1, which may be submitted by facsimile, then the Property
                    Trustee will cause the aggregate number of Capital
                    Securities represented by the Global Capital Security to be
                    reduced on its books and records and, following such
                    reduction, the Trust will execute and the Property Trustee
                    will authenticate and make available for delivery to the
                    transferee a Definitive Capital Security.

                         (ii) Definitive Capital Securities issued in exchange
                    for a beneficial interest in the Global Capital Security
                    pursuant to this Section 9.2(f) shall be registered in such
                    names and in such authorized denominations as the Clearing
                    Agency, pursuant to instructions from its Clearing Agency
                    Participants or indirect participants or otherwise, shall
                    instruct the Property Trustee in writing. The Property
                    Trustee shall deliver such Capital Securities to the Persons
                    in whose names such Capital Securities are so registered in
                    accordance with such instructions of the Clearing Agency.

                    (g) RESTRICTIONS ON TRANSFER AND EXCHANGE OF THE GLOBAL
CAPITAL SECURITY. Notwithstanding any other provisions of this Declaration
(other than the provisions set forth in subsection (h) of this Section 9.2),
the Global Capital Security may not be transferred as a whole except by the
Clearing Agency to a nominee of the Clearing Agency or another nominee of the
Clearing Agency or by the Clearing Agency or any such nominee to a successor
Clearing Agency or a nominee of such successor Clearing Agency.

                    (h) AUTHENTICATION OF DEFINITIVE CAPITAL SECURITIES. If
at any time:

                         (i)   a Default or an Event of Default has occurred
                    and is continuing,

                         (ii)  the Trust, in its sole discretion, notifies the
                    Property Trustee in writing that it elects to cause the
                    issuance of Definitive Capital Securities under this
                    Declaration, or

                         (iii) the Clearing Agency notifies the Sponsor that
                    it is unwilling or unable to continue as Clearing Agency
                    for such Global Capital Security or if at any time

                                       45

<PAGE>

                    such Clearing Agency ceases to be a "clearing agency"
                    registered under the Exchange Act, and, in each case, a
                    clearing agency is not appointed by the Sponsor within 90
                    days of receipt of such notice or of becoming aware of such
                    condition,

then an Administrative Trustee on behalf of the Trust will execute, and the
Property Trustee, upon receipt of a written order of the Trust signed by one
Administrative Trustee requesting the authentication and delivery of
Definitive Capital Securities to the Persons designated by the Trust, will
authenticate and make available for delivery Definitive Capital Securities,
equal in number to the number of Capital Securities represented by the Global
Capital Security, in exchange for such Global Capital Security.

                    (i) LEGEND.

                         (i) Except as permitted by the following paragraph
                    (ii), each Capital Security Certificate evidencing the
                    Global Capital Security and each Definitive Capital Security
                    (and all Capital Securities issued in exchange therefor or
                    substitution thereof) shall bear a legend (the "Restricted
                    Securities Legend") in substantially the following form:

                    THIS CAPITAL 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 LAW. NEITHER THIS CAPITAL 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,
                    REGISTRATION.

                    THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE
                    HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS
                    CAPITAL SECURITY, PRIOR TO THE DATE (THE "RESALE
                    RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER
                    THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE
                    LAST DATE ON WHICH INTERWEST BANCORP, INC. (THE
                    "CORPORATION") OR ANY "AFFILIATE" OF THE CORPORATION WAS
                    THE OWNER OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF
                    THIS CAPTIAL SECURITY) ONLY (A) TO THE CORPORATION, (B)
                    PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN

                                       46

<PAGE>

                    DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS
                    THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
                    RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
                    PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
                    BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
                    ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
                    BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
                    MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
                    "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
                    (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
                    ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN
                    ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
                    ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH
                    A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
                    DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E)
                    PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
                    REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
                    SUBJECT TO THE RIGHT OF INTERWEST CAPITAL TRUST I (THE
                    "TRUST") AND THE CORPORATION PRIOR TO ANY SUCH OFFER, SALE
                    OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE
                    THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
                    AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
                    (ii) PURSUANT TO CLAUSE (D) TO REQUIRE THAT THE TRANSFEROR
                    DELIVER TO THE TRUST A LETTER FROM THE TRANSFEREE
                    SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING
                    MEMORANDUM DATED NOVEMBER 9,1999. SUCH HOLDER FURTHER
                    AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
                    CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
                    THE EFFECT OF THIS LEGEND.

                    THE HOLDER OF THIS CAPITAL 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 EMPLOYEE
                    RETIREMENT INCOME

                                       47

<PAGE>

                    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 THE CAPITAL
                    SECURITIES 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 CAPITAL
                    SECURITIES 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 THE CAPITAL SECURITIES
                    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 all circumstances, each Capital Security Certificate bear the following
legend:

                    THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE
                    TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF
                    NOT LESS THAN $100,000 (100 CAPITAL SECURITIES) AND
                    MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED
                    TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A
                    LIQUIDATION AMOUNT OF LESS THAN $100,000 (100 CAPITAL
                    SECURITIES) SHALL BE

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<PAGE>

                    DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY
                    SUCH PURPORTED 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 PURPORTED TRANSFEREE
                    SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH
                    CAPITAL SECURITIES.

                         (ii) Upon any sale or transfer of a Restricted Capital
             Security (including any Restricted Capital Security represented
             by the Global Capital Security) pursuant to an effective
             registration statement under the Securities Act or pursuant to
             Rule 144:

                         (A) in the case of any Restricted Capital Security that
                    is a Definitive Capital Security, the Registrar shall permit
                    the Holder thereof to exchange such Restricted Capital
                    Security for a Definitive Capital Security that does not
                    bear the Restricted Securities Legend and rescind any
                    restriction on the transfer of such Restricted Capital
                    Security; and

                         (B) in the case of any Restricted Capital Security that
                    is represented by the Global Capital Security, the Registrar
                    shall permit the Holder of such Global Capital Security to
                    exchange such Global Capital Security for another Global
                    Capital Security that does not bear the Restricted
                    Securities Legend.

             (j) CANCELLATION OR ADJUSTMENT OF GLOBAL CAPITAL SECURITY. At
such time as all beneficial interests in the Global Capital Security have
either been exchanged for Definitive Capital Securities to the extent
permitted by this Declaration or redeemed, repurchased or canceled in
accordance with the terms of this Declaration, such Global Capital Security
shall be returned to the Clearing Agency for cancellation or retained and
canceled by the Property Trustee. At any time prior to such cancellation, if
any beneficial interest in the Global Capital Security is exchanged for
Definitive Capital Securities, Capital Securities represented by such Global
Capital Security shall be reduced and an adjustment shall be made on the
books and records of the Property Trustee and the Clearing Agency or its
nominee to reflect such reduction.

             (k) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
CAPITAL SECURITIES.

                    (i)  To permit registrations of transfers and exchanges,
             the Trust shall execute and the Property Trustee shall
             authenticate Definitive Capital Securities and the Global
             Capital Security at the Registrar's or co-registrar's request
             in accordance with the terms of this Declaration.

                    (ii) Registrations of transfers or exchanges will be
             effected without charge, but only upon payment (with such
             indemnity as the Trust or the Sponsor

                                      49

<PAGE>

             may require) in respect of any tax or other governmental charge
             that may be imposed in relation to it.

                    (iii) The Registrar or co-registrar shall not be required
             to register the transfer of or exchange of (a) Capital Securities
             during a period beginning at the opening of business 15 days
             before the day of mailing of a notice of redemption or any notice
             of selection of Capital Securities for redemption and ending at
             the close of business on the day of such mailing or (b) any
             Capital Security so selected for redemption in whole or in part,
             except the unredeemed portion of any Capital Security being
             redeemed in part.

                    (iv)  Prior to the due presentation for registration of
             transfer of any Capital Security, the Trust, the Property
             Trustee, the Paying Agent, the Registrar or any co-registrar
             may deem and treat the Person in whose name a Capital Security
             is registered as the absolute owner of such Capital Security
             for the purpose of receiving Distributions on such Capital
             Security and for all other purposes whatsoever, and none of the
             Trust, the Property Trustee, the Paying Agent, the Registrar or
             any co-registrar shall be affected by notice to the contrary.

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

             (l) NO OBLIGATION OF THE PROPERTY TRUSTEE.

                    (i)   The Property Trustee shall have no responsibility
             or obligation to any Capital Security Beneficial Owner, a
             Participant in the Clearing Agency or other Person with respect
             to the accuracy of the records of the Clearing Agency or its
             nominee or of any Participant thereof, with respect to any
             ownership interest in the Capital Securities or with respect to
             the delivery to any Participant, beneficial owner or other
             Person (other than the Clearing Agency) of any notice (including
             any notice of redemption) or the payment of any amount, under or
             with respect to such Capital Securities. All notices and
             communications to be given to the Holders and all payments to be
             made to Holders under the Capital Securities shall be given or
             made only to or upon the order of the registered Holders (which
             shall be the Clearing Agency or its nominee in the case of the
             Global Capital Security). The rights of Capital Security
             Beneficial Owners shall be exercised only through the Clearing
             Agency subject to the applicable rules and procedures of the
             Clearing Agency. The Property Trustee may conclusively rely and
             shall be fully protected in relying upon information furnished
             by the Clearing Agency or any agent thereof with respect to its
             Participants and any Capital Security Beneficial Owners.

                    (ii)  The Property Trustee and the Registrar shall have
             no obligation or duty to monitor, determine or inquire as to
             compliance with any restrictions on

                                       50

<PAGE>

             transfer imposed under this Declaration or under applicable law
             with respect to any transfer of any interest in any Capital
             Security (including any transfers between or among Clearing
             Agency Participants or Capital Security Beneficial Owners) other
             than to require delivery of such certificates and other
             documentation or evidence as are expressly required by, and to do
             so if and when expressly required by, the terms of this
             Declaration, and to examine the same to determine substantial
             compliance as to form with the express requirements hereof

             (m) EXCHANGE OF SERIES A CAPITAL SECURITIES FOR SERIES B CAPITAL
SECURITIES. The Series A Capital Securities shall be exchanged for Series B
Capital Securities pursuant to the terms of the Exchange Offer if the
following conditions are satisfied:

             The Sponsor shall present the Property Trustee with an Officers'
Certificate certifying the following:

                    (A) upon issuance of the Series B Capital Securities, the
                    transactions contemplated by the Exchange Offer have been
                    consummated; and

                    (B) the number of Series A Capital Securities properly
                    tendered in the Exchange Offer that are represented by the
                    Global Capital Security and the number of Series A Capital
                    Securities properly tendered in the Exchange Offer that are
                    represented by Definitive Capital Securities, the name of
                    each Holder of such Definitive Capital Securities, the
                    liquidation amount of Capital Securities properly tendered
                    in the Exchange Offer by each such Holder and the name and
                    address to which Definitive Capital Securities for Series B
                    Capital Securities shall be registered and sent for each
                    such Holder.

             The Property Trustee, upon receipt of (i) such Officers'
Certificate, (ii) an Opinion of Counsel (x) to the effect that the Series B
Capital Securities and the Series B Capital Securities Guarantee have been
registered under Section 5 of the Securities Act and that this Declaration
and the Series B Capital Securities Guarantee have been qualified under the
Trust Indenture Act and (y) with respect to the matters set forth in Section
3(q) of the Registration Rights Agreement, shall authenticate (A) the Global
Capital Security, executed and delivered by the Trust to the Property
Trustee, for Series B Capital Securities in aggregate liquidation amount
equal to the aggregate liquidation amount of Series A Capital Securities
represented by the Global Capital Security indicated in such Officers'
Certificate as having been properly tendered and (B) Definitive Capital
Securities, executed and delivered by the Trust to the Property Trustee,
representing Series B Capital Securities registered in the names and in the
liquidation amounts indicated in such Officers' Certificate.

             If, upon consummation of the Exchange Offer, less than all the
outstanding Series A Capital Securities shall have been properly tendered and
not withdrawn, the Property Trustee shall make an endorsement on the Global
Capital Security for Series A Capital Securities indicating the

                                      51

<PAGE>

reduction in the number and aggregate liquidation amount represented thereby
as a result of the Exchange Offer.

         The Trust shall deliver such authenticated Definitive Capital
Securities for Series B Capital Securities to the Holders thereof as
indicated in such Officers' Certificate.

         (n) MINIMUM TRANSFERS. Series A Capital Securities and, if and when
issued, Series B 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 Series A
Capital Securities or Series B Capital Securities in a block having an
aggregate liquidation amount of less than $100,000 shall be deemed to be
voided and of no legal effect whatsoever. Any such purported transferee shall
be deemed not to be a Holder of such Series A Capital Securities or Series B
Capital Securities for any purpose, including, but not limited to, the
receipt of Distributions on such Capital Securities, and such purported
transferee shall be deemed to have no interest whatsoever in such Capital
Securities.

SECTION 9.3 DEEMED SECURITY HOLDERS.

         The Trustees may treat the Person in whose name any Security shall
be registered on the books and records of the Trust as the sole owner and
Holder of such Security 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 Security on the part of
any Person, whether or not the Trust shall have actual or other notice
thereof.

SECTION 9.4 BOOK-ENTRY INTERESTS.

         The Global Capital Security shall initially be registered on the
books and records of the Trust in the name of Cede & Co., the nominee of the
Clearing Agency and no Capital Security Beneficial Owner will receive
physical delivery of a definitive Capital Security certificate (a "Capital
Security Certificate") representing such Capital Security Beneficial Owner's
interests in such Global Capital Security, except as provided in Section 9.2
and Section 7.9. Unless and until Definitive Capital Securities have been
issued to the Capital Security Beneficial Owners pursuant to Section 9.2 or
Section 7.9:

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

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

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

         (d) the rights of the Capital Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements

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<PAGE>

between such Capital Security Beneficial Owners and the Clearing Agency
and/or the Clearing Agency Participants, and the Clearing Agency shall
receive and transmit payments of Distributions on the Global Capital Security
to such Clearing Agency Participants; PROVIDED, HOWEVER, that solely for the
purposes of determining whether the Holders of the requisite amount of
Capital Securities have voted on any matter provided for in this Declaration,
the Trustees, with respect to the Global Capital Security, may conclusively
rely on, and shall be protected in relying on, any written instrument
(including a proxy) delivered to the Trustees by the Clearing Agency setting
forth the Capital Security Beneficial Owners' votes or assigning the right to
vote on any matter to any other Persons either in whole or in part; and the
Clearing Agency will also make book-entry transfers among the Clearing Agency
Participants.

SECTION 9.5 NOTICES TO CLEARING AGENCY.

         Whenever a notice or other communication to the Capital Security
Holders is required to be given by a Trustee under this Declaration, such
Trustee shall give all such notices and communications specified herein to be
given to the Holder of the Global Capital Security to the Clearing Agency and
shall have no notice obligations to the Capital Security Beneficial Owners.

SECTION 9.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.

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

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

SECTION 10.1 LIABILITY.

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

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

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

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

         (c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders 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.

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<PAGE>

SECTION 10.2 EXCULPATION.

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

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

SECTION 10.3 FIDUCIARY DUTY.

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

         (b) Unless otherwise expressly provided herein:

                  (i) whenever a conflict of interest exists or arises between
         any Covered Person and any Indemnified Person, or

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

the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest
of each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action

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<PAGE>

or term so made, taken or provided by the Indemnified Person shall not
constitute a breach of this Declaration or any other agreement contemplated
herein or of any duty or obligation of the Indemnified Person at law or in
equity or otherwise.

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

                  (i) in its "discretion" or under a grant of similar authority,
         the Indemnified Person shall be entitled to consider such interests and
         factors as it desires, including its own interests, and shall have no
         duty or 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 10.4 INDEMNIFICATION.

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

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

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<PAGE>

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 a Company 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 10.4(a), or in defense of any claim,
issue or matter therein, he or she shall be indemnified, to the full extent
permitted by law, against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.

             (iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(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 Company Indemnified Person is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in paragraphs (i)
and (ii). Such determination shall be made (1) by the Administrative Trustees
by a majority vote of a Quorum consisting of such Administrative Trustees who
were not parties to such action, suit or proceeding, (2) if such a Quorum is
not obtainable, or, even if obtainable, if a Quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a written
opinion, or (3) by the Common Security Holder of the Trust.

             (v) Expenses (including attorneys' fees and expenses) incurred by
a Company Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(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 Company Indemnified Person to repay such
amount if it shall ultimately be determined that he or she is not entitled to
be indemnified by the Sponsor as authorized in this Section 10.4(a).
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrative
Trustees by a majority vote of a Quorum of disinterested Administrative
Trustees, (ii) if such a Quorum is not obtainable, or, even if obtainable, if
a Quorum of disinterested Administrative Trustees so directs, by independent
legal counsel in a written opinion or (iii) by the Common Security Holder of
the Trust, that, based upon the facts known to the Administrative Trustees,
counsel or the Common Security Holder at the time such determination is made,
such Company Indemnified Person acted in bad faith or in a manner that the
Common Security Holder did not believe to be in, or believed was opposed to,
the best interests of the Trust, or, with respect to any criminal proceeding,
that such Company Indemnified Person believed or had reasonable cause to
believe his or her conduct was unlawful. In no event shall any advance be
made in instances where the Administrative Trustees, independent legal
counsel or Common Security Holder reasonably determine that a Company
Indemnified Person deliberately breached his or her duty to the Trust or its
Common or Capital Security Holders.

             (vi) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other paragraphs of this Section 10.4(a) shall not
be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Sponsor or
Capital Security Holders of the Trust or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. All rights to indemnification under this

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Section 10.4(a) shall be deemed to be provided by a contract between the
Sponsor and each Company Indemnified Person who serves in such capacity at
any time while this Section 10.4(a) is in effect. Any repeal or modification
of this Section 10.4(a) shall not affect any rights or obligations then
existing.

         (vii) The Sponsor or the Trust may purchase and maintain insurance
on behalf of any person who is or was a Company Indemnified Person against
any liability asserted against him or her and incurred by him or her in any
such capacity, or arising out of his or her status as such, whether or not
the Debenture Issuer would have the power to indemnify him or her against
such liability under the provisions of this Section 10.4(a).

         (viii) For purposes of this Section 10.4(a), 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 10.4(a) with respect to the resulting or
surviving entity as he or she would have with respect to such constituent
entity if its separate existence had continued.

         (ix) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a Person who has ceased to be a
Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a Person.

         (b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii)
the Delaware Trustee, (iii) any Affiliate of the Property Trustee or the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee or the Delaware Trustee (each of the Persons in (i) through
(iv), including the Property Trustee and the Delaware Trustee in their
respective individual capacities, being referred to as a "Fiduciary
Indemnified Person") for, and to hold each Fiduciary Indemnified Person
harmless against, any and all loss, liability, damage, action, suit, claim or
expense including taxes (other than taxes based on the income of such
Fiduciary Indemnified Person) of any kind and nature whatsoever incurred
without negligence or bad faith on the part of such Fiduciary Indemnified
Person, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending against or investigating any
claim or liability in connection with the exercise or performance of any of
the powers or duties of such Fiduciary Indemnified Person hereunder. The
obligation to indemnify as set forth in this Section 10.4(b) shall survive
the resignation or removal of the Property Trustee or the Delaware Trustee
and the satisfaction and discharge of this Declaration.

         (c) The Sponsor agrees to pay the Property Trustee and the Delaware
Trustee, from time to time, such compensation for all services rendered by
the Property Trustee and the Delaware Trustee hereunder as may be mutually
agreed upon in writing by the Sponsor and the Property Trustee or the
Delaware Trustee, as the case may be, and, except as otherwise expressly
provided

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<PAGE>

herein, to reimburse the Property Trustee and the Delaware Trustee upon its
or their request for all reasonable expenses (including legal fees and
expenses), disbursements and advances incurred or made by the Property
Trustee or the Delaware Trustee, as the case may be, in accordance with the
provisions of this Declaration, except any such expense, disbursement or
advance as may be attributable to its or their negligence or bad faith.

SECTION 10.5 OUTSIDE BUSINESSES.

         Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee (subject to Section 5.3(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 shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive
with the business of the Trust, shall not be deemed wrongful or improper. No
Covered Person, the Sponsor, the Delaware Trustee, or the Property Trustee
shall be obligated to present any particular investment or other opportunity
to the Trust even if such opportunity is of a character that, if presented to
the Trust, could be taken by the Trust, and any Covered Person, the Sponsor,
the Delaware Trustee and the Property Trustee shall have the right to take
for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or
be interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for,
or act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.

                                   ARTICLE XI
                                   ACCOUNTING

SECTION 11.1 FISCAL YEAR.

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

SECTION 11.2 CERTAIN ACCOUNTING MATTERS.

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

         (b) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders any 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

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required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the
Administrative Trustees shall endeavor to deliver all such information
statements within 30 days after the end of each Fiscal Year of the Trust.

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

SECTION 11.3 BANKING.

         The Trust may maintain one or more bank accounts 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 Property Trustee shall be made
directly to the Property Trustee Account and no other funds of the Trust
shall be deposited in the Property Trustee Account. The sole signatories for
such accounts shall be designated by the Administrative Trustees; PROVIDED,
HOWEVER, that the Property Trustee shall designate the signatories for the
Property Trustee Account.

SECTION 11.4 WITHHOLDING.

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

                                   ARTICLE XII
                             AMENDMENTS AND MEETINGS

SECTION 12.1 AMENDMENTS.

         (a) Except as otherwise provided in this Declaration (including
Section 7 of Annex I hereto) or by any applicable terms of the Securities,
this Declaration may only be amended by a written instrument approved and
executed by:

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

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

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

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

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

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

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

                  (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;

PROVIDED, HOWEVER, that the Property Trustee shall not be required to sign
any such amendment; and

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

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

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

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

         (c) At such time after the Trust has issued any Securities that
remain outstanding, any amendment that would adversely affect the rights,
privileges or preferences of any

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Holder (other than an amendment pursuant to (g) below) may be effected only
with such additional requirements as may be set forth in the terms of such
Securities;

         (d) Section 10.1 (c) and this Section 12.1 shall not be amended
without the consent of all of the Holders;

         (e) Article Four shall not be amended without the consent of the
Holders of a Majority in Liquidation Amount of the Common Securities;

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

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

                  (i) cure any ambiguity, correct or supplement any provision
         in this Declaration that may be inconsistent with any other provision
         of this Declaration or to make any other provisions with respect to
         matters or questions arising under this Declaration which shall not be
         inconsistent with the other provisions of the Declaration;

                  (ii) to modify, eliminate or add to any provisions of the
         Declaration to such extent as shall be necessary to ensure that the
         Trust will be classified for United States federal income tax purposes
         as a grantor trust at all times that any Securities are outstanding or
         to ensure that the Trust will not be required to register as an
         Investment Company under the Investment Company Act; and

                  (iii) to modify, eliminate or add any provisions of the
         Declaration to such extent as shall be necessary to enable the Trust or
         the Sponsor to conduct an Exchange Offer in the manner contemplated by
         the Registration Rights Agreement;

PROVIDED, HOWEVER, that in each clause above, such action shall not adversely
affect in any material respect the interests of the Holders, and any such
amendments of this Declaration shall become effective when notice thereof is
given to the Holders.

SECTION 12.2 MEETINGS OF THE HOLDERS; ACTION BY WRITTEN CONSENT.

         (a) Meetings of the Holders of any class of Securities may be called
at any time by the Administrative Trustees (or as provided in the terms of
the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration,
the terms of the Securities or the rules of any stock exchange on which the
Capital Securities are listed or admitted for trading. The Administrative
Trustees shall call a meeting of the Holders of such class if directed to do
so by the Holders of at least 10% in Liquidation Amount of such class of
Securities. Such direction shall be given by delivering to the Administrative
Trustees

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<PAGE>

one or more notices in writing stating that the signing Holders wish to call
a meeting and indicating the general or specific purpose for which the
meeting is to be called. Any Holders calling a meeting shall specify in
writing the Capital Security Certificates held by the Holders exercising the
right to call a meeting and only those Securities specified shall be counted
for purposes of determining whether the required percentage set forth in the
second sentence of this paragraph has been met.

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

                  (i) notice of any such meeting shall be given to all the
         Holders having a right to vote thereat at least seven days and not more
         than 60 days before the date of such meeting. Whenever a vote, consent
         or approval of the Holders 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, such vote, consent or
         approval may be given at a meeting of the Holders; any action that may
         be taken at a meeting of the Holders may be taken without a meeting if
         a consent in writing setting forth the action so taken is signed by the
         Holders owning not less than the minimum amount of Securities in
         liquidation amount that would be necessary to authorize or take such
         action at a meeting at which all Holders 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 entitled to vote who have not
         consented in writing; and the Administrative Trustees may specify that
         any written ballot submitted to the Security Holder for the purpose of
         taking any action without a meeting shall be returned to the Trust
         within the time specified by the Administrative Trustees;

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

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

                  (iv) unless the Business Trust Act, this Declaration, the
         terms of the Securities, the Trust Indenture Act or the listing
         rules of any stock exchange on which the Capital Securities are then
         listed or trading, otherwise provides, the Administrative Trustees,
         in their sole discretion, shall establish all other provisions
         relating to meetings of Holders, including notice of the time, place
         or

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<PAGE>

         purpose of any meeting at which any matter is to be voted on by any
         Holders, waiver of any such notice, action by consent without a
         meeting, the establishment of a record date, quorum requirements,
         voting in person or by proxy or any other matter with respect to the
         exercise of any such right to vote.

                                  ARTICLE XIII
                       REPRESENTATIONS OF PROPERTY TRUSTEE
                              AND DELAWARE TRUSTEE

SECTION 13.1  REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE.

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

         (a) the Property Trustee is a Delaware banking corporation, a
national banking association or a bank or trust company, duly organized,
validly existing and in good standing under the laws of the United States or
the State of Delaware as the case may be, with corporate power and authority
to execute and deliver, and to carry out and perform its obligations under
the terms of, this Declaration;

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

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

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

SECTION 13.2  REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.

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

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<PAGE>

         (a) the Delaware Trustee is a Delaware banking corporation, a
national banking association or a bank or trust company, duly organized,
validly existing and in good standing under the laws of the United States or
the State of Delaware, as the case may be, with corporate power and authority
to execute and deliver, and to carry out and perform its obligations under
the terms of, this Declaration;

         (b) the execution, delivery and performance by the Delaware Trustee
of this Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee; and 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 the enforcement of such remedies is considered in a proceeding in
equity or at law);

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

         (d) no consent, approval or authorization of, or registration with
or notice to, any federal or Delaware 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

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

                                   ARTICLE XIV
                               REGISTRATION RIGHTS

SECTION 14.1  REGISTRATION RIGHTS AGREEMENT; LIQUIDATED DAMAGES.

         The Holders of the Series A Capital Securities, the Series A
Debentures and the Series A Capital Securities Guarantee are entitled to the
benefits of the Registration Rights Agreement and the Liquidated Damages
Agreement. In certain limited circumstances set forth in the Registration
Rights Agreement and the Liquidated Damages Agreement, the Debenture Issuer
shall be required to pay liquidated damages with respect to the Series A
Debentures. Unless otherwise stated, the term "Distribution," as used in this
Declaration, includes any and all liquidated damages.

                                   ARTICLE XV
                                 MISCELLANEOUS

SECTION 15.1  NOTICES.

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

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<PAGE>

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

                           INTERWEST CAPITAL TRUST I
                           c/o InterWest Bancorp, Inc.
                           275 Southeast Pioneer Way
                           Oak Harbor, Washington 98277
                           Attention.: Chief Financial Officer
                           Telephone: (360) 679-4181
                           Telecopier: (360) 675-8860

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

                           WILMINGTON TRUST COMPANY
                           Rodney Square North
                           1100 North Market Street
                           Wilmington, Delaware 19890-0001
                           Attention: Corporate Trust Administration
                           Telephone: (302) 651-1000
                           Telecopier: (302) 651-8882

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

                           WILMINGTON TRUST COMPANY
                           Rodney Square North
                           1100 North Market Street
                           Wilmington, Delaware 19890-0001
                           Attention: Corporate Trust Administration
                           Telephone: (302) 651-1000
                           Telecopier: (302) 651-8882

         (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 to the Trust):

                           INTERWEST BANCORP, INC.
                           275 Southeast Pioneer Way
                           Oak Harbor, Washington 98277
                           Attention: Chief Financial Officer
                           Telephone: (360) 679-4181
                           Telecopier: (360) 675-8860

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

                                        65

<PAGE>

         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 15.2 GOVERNING LAW.

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

SECTION 15.3 INTENTION OF THE PARTIES.

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

SECTION 15.4 HEADINGS.

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

SECTION 15.5 SUCCESSORS AND ASSIGNS.

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

SECTION 15.6 PARTIAL ENFORCEABILITY.

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

SECTION 15.7 COUNTERPARTS.

         This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one or more 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.

                                        66

<PAGE>

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

                                          /s/ H. Glenn Mouw
                                         ------------------------------------
                                         H. Glenn Mouw
                                         as Administrative Trustee

                                          /s/ Clark W. Donnell
                                         ------------------------------------
                                         Clark W. Donnell
                                         as Administrative Trustee

                                          -----------------------------------
                                          Kenneth G. Hulett
                                          as Administrative Trustee

                                          WILMINGTON TRUST COMPANY
                                          as Delaware Trustee

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

                                          WILMINGTON TRUST COMPANY
                                          as Property Trustee

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

                                          INTERWEST BANCORP, INC.,
                                          as Sponsor and Debenture Issuer

                                          By:
                                             --------------------------------
                                             Stephen M. Walden
                                             President and Chief Executive
                                             Officer

<PAGE>

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

                                         ------------------------------------
                                         H. Glenn Mouw
                                         as Administrative Trustee

                                         ------------------------------------
                                         Clark W. Donnell
                                         as Administrative Trustee

                                          -----------------------------------
                                          Kenneth G. Hulett
                                          as Administrative Trustee

                                          WILMINGTON TRUST COMPANY
                                          as Delaware Trustee

                                          By: /s/ W. Chris Sponenberg
                                             --------------------------------
                                             Name:  W. Chris Sponenberg
                                             Title: Assistant Vice President

                                          WILMINGTON TRUST COMPANY
                                          as Property Trustee

                                          By: /s/ W. Chris Sponenberg
                                             --------------------------------
                                             Name:  W. Chris Sponenberg
                                             Title: Assistant Vice President

                                          INTERWEST BANCORP, INC.,
                                          as Sponsor and Debenture Issuer

                                          By:
                                             --------------------------------
                                             Stephen M. Walden
                                             President and Chief Executive
                                             Officer

<PAGE>

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

                                         ------------------------------------
                                         H. Glenn Mouw
                                         as Administrative Trustee

                                         ------------------------------------
                                         Clark W. Donnell
                                         as Administrative Trustee

                                           /s/ Kenneth G. Hulett
                                          -----------------------------------
                                          Kenneth G. Hulett
                                          as Administrative Trustee

                                          WILMINGTON TRUST COMPANY
                                          as Delaware Trustee

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

                                          WILMINGTON TRUST COMPANY
                                          as Property Trustee

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

                                          INTERWEST BANCORP, INC.,
                                          as Sponsor and Debenture Issuer

                                          By:
                                             --------------------------------
                                             Stephen M. Walden
                                             President and Chief Executive
                                             Officer

<PAGE>

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

                                         ------------------------------------
                                         H. Glenn Mouw
                                         as Administrative Trustee

                                         ------------------------------------
                                         Clark W. Donnell
                                         as Administrative Trustee

                                          -----------------------------------
                                          Kenneth G. Hulett
                                          as Administrative Trustee

                                          WILMINGTON TRUST COMPANY
                                          as Delaware Trustee

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

                                          WILMINGTON TRUST COMPANY
                                          as Property Trustee

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

                                          INTERWEST BANCORP, INC.,
                                          as Sponsor and Debenture Issuer

                                          By: /s/ Stephen M. Walden
                                             --------------------------------
                                             Stephen M. Walden
                                             President and Chief Executive
                                             Officer
<PAGE>

                                   ANNEX I

                                  TERMS OF
                9.875% CAPITAL SECURITIES, SERIES A/SERIES B
                          9.875% COMMON SECURITIES

         Pursuant to Section 7.1 of the Amended and Restated Declaration,
dated as of November 15, 1999 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Securities are set out
below (each capitalized term used but not defined herein has the meaning set
forth in the Declaration, the Indenture or, if not defined in such
Declaration, as defined in the Offering Memorandum referred to below in
Section 2(c) of this Annex I):

     1.  DESIGNATION AND NUMBER.

     (a) CAPITAL SECURITIES. 40,000 Series A Capital Securities of the Trust
and 40,000 Series B Capital Securities of the Trust, each series with an
aggregate liquidation amount with respect to the assets of the Trust of Forty
Million Dollars ($40,000,000) and with a liquidation amount with respect to
the assets of the Trust of One Thousand Dollars ($1,000) (the "Liquidation
Amount") per security, are hereby designated for the purposes of
identification only as "9.875% Capital Securities, Series A" and "9.875%
Capital Securities, Series B," respectively (collectively, the "Capital
Securities"). The 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 exchange
or quotation system on or in which the Capital Securities are listed, traded
or quoted.

     (b) COMMON SECURITIES. 1,237 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of One
Million Two Hundred Thirty-Seven Dollars ($1,237,000) and a liquidation
amount with respect to the assets of the Trust of $1,000 per security, are
hereby designated for the purposes of identification only as "9.875% Common
Securities" (the "Common Securities"). The certificates evidencing the Common
Securities shall be substantially in the form of Exhibit A-2 to the
Declaration, with such changes and additions thereto or deletions therefrom
as may be required by ordinary usage, custom or practice.

     2.  DISTRIBUTIONS.

     (a) Distributions on each Security will be payable at a fixed rate per
annum of 9.875% (the "Coupon Rate") of the liquidation amount of $1000 per
Security, such rate being the rate of interest payable on the Debentures to
be held by the Property Trustee. Distributions in arrears for more than one
semi-annual period will bear additional Distributions thereon compounded
semi-annually at the Coupon Rate (to the extent permitted by applicable law).
Pursuant to the Registration Rights Agreement and the Liquidated Damages
Agreement, in certain limited circumstances the Debenture Issuer will be
required to pay Liquidated Damages (as defined in the Registration Rights
Registration Rights Agreement and the Liquidated Damages Agreement) with
respect to the Debentures. The term "Distributions" as used herein, includes
distributions of any and all such

                                     I-1
<PAGE>

interest and Liquidated Damages, if any, payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made with
respect to the Debentures held by the Property Trustee and to the extent the
Property Trustee has funds legally available therefor.

     (b) Distributions on the Securities will be cumulative, will accumulate
from the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from November 15, 1999 and will be payable
semi-annually in arrears on May 15 and November 15 of each year, commencing
May 15, 2000 (each, a "Distribution Date"), except as otherwise described
below. Distributions will be computed on the basis a 360-day year of twelve
30-day months. As long as no Event of Default has occurred and is continuing
under the Indenture, the Debenture Issuer has the right under the Indenture
to defer payments of interest by extending the interest payment period at any
time and from time to time on the Debentures for a period not exceeding 10
consecutive semi-annual periods, including the first such semi-annual period
during such period (each an "Extension Period"), during which Extension
Period no interest shall be due and payable on the Debentures, PROVIDED THAT
no Extension Period shall end on a date other than an Interest Payment Date
for the Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions (other than Liquidated Damages,
if any) will also be deferred. Notwithstanding such deferral, Distributions
will continue to accumulate with additional Distributions thereon (to the
extent permitted by applicable law but not at a rate greater than the rate at
which interest is then accruing on the Debentures) at the Coupon Rate
compounded semi-annually during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further
defer payments of interest by further extending such Extension Period,
PROVIDE THAT such extension does not cause such Extension Period, together
with all such previous and further extensions within such Extension Period,
to exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extension Period, end on a date other than an Interest
Payment Date for the Debentures or extend beyond the Maturity Date of the
Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, the Debenture Issuer may commence a new Extension
Period, subject to the above requirements.

     (c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the close of
business on the first day of the month in which relevant the Distribution
Date occurs, which Distribution Dates correspond to the Interest Payment
Dates for the Debentures. Subject to any applicable laws and regulations and
the provisions of the Declaration, each such payment with respect to the
Capital Securities will be made as described under the heading "Description
of Capital Securities--Form, Denomination, Book-Entry Procedures and
Transfer" in the Offering Memorandum dated November 9, 1999 of the Debenture
Issuer and the Trust relating to the Securities and the Debentures. The
relevant record dates for the Common Securities shall be the same as the
record dates for the Capital Securities. Distributions payable on any
Securities that are not punctually paid on any Distribution Date, as a result
of the Debenture Issuer having failed to make a payment under the Debentures,
will cease to be payable to the Holder on the relevant record date, and such
defaulted Distribution will instead be payable to the Person in whose name
such Securities are registered on the special record date or other specified
date determined in accordance with the Indenture. If any date on which
Distributions are payable on the Securities is not a Business Day, then
payment of the Distributions payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that if such next succeeding
Business Day falls in the next

                                      I-2
<PAGE>

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

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

     3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION.

     In the event of any dissolution of the Trust, the Trust shall be
liquidated by the Administrative Trustees as expeditiously as the
Administrative Trustees determine to be possible by distributing to the
Holders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, a Like Amount (as defined below) of the
Debentures, unless such distribution is determined by the Property Trustee
not to be practicable, in which event such Holders will be entitled to
receive out of the assets of the Trust legally available for distribution to
Holders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, an amount equal to the aggregate of the
liquidation amount of $1,000 per Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution").

     "Like Amount" means (i) with respect to a redemption of the Securities,
Securities having a Liquidation Amount equal to the principal amount of
Debentures to be paid in accordance with their terms and (ii) with respect to
a distribution of Debentures upon the liquidation of the Trust, Debentures
having a principal amount equal to the Liquidation Amount of the Securities
of the Holder to whom such Debentures are distributed.

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

     4. REDEMPTION AND DISTRIBUTION.

     (a) Upon the repayment of the Debentures (with premium, if any) in whole
or in part, at maturity or otherwise (either at the option of the Debenture
Issuer or pursuant to a Special Event, as described below), the proceeds from
such repayment shall be simultaneously applied by the Property Trustee
(subject to the Property Trustee having received written notice no later than
45 days prior to such repayment) to redeem a Like Amount of the Securities at
a redemption price equal to (i) in the case of the repayment of the
Debentures on the Maturity Date, the Maturity Redemption Price (as defined
below), (ii) in the case of the optional prepayment of the Debentures prior
to the Initial Optional Redemption Date and upon the occurrence and
continuation of a Special Event, the Special Event Redemption Price (as
defined below) and (iii) in the case of the optional prepayment of the
Debentures on or after the Initial Optional Redemption Date, the Optional
Redemption Price (as defined below). The Maturity Redemption Price, the
Special Event Redemption Price and the Optional Redemption Price are referred
to collectively as the "Redemption Price". Holders will be given not less
than 30 nor more than 60 days prior written notice of such redemption.

                                     I-3
<PAGE>

     (b)  (i)  The "Maturity Redemption Price" shall mean an amount equal to
100% of the principal of, plus accrued and unpaid interest (including
Compounded Interest and Additional Sums, if any, thereon to the date of
redemption) on, the Debentures as of the Maturity Date thereof.

         (ii)  The Debenture Issuer shall have the right (subject to the
conditions in the Indenture) to elect to prepay the Debentures, in whole or
in part, at any time on or after [November 15, 2009] (the "Initial Optional
Redemption Date"), and, simultaneous with such prepayment, to cause a Like
Amount of the Securities to be redeemed by the Trust at the Optional
Redemption Price on a Pro Rata basis. "Optional Redemption Price" shall mean
an amount equal to the applicable redemption price set forth below plus,
accumulated and unpaid Distributions thereon, if any, to the date of such
redemption if redeemed during the 12-month period beginning [November 15],
of the years indicated below:

<TABLE>
<CAPTION>
                                                    Percentage of
                       Year                      Liquidation Amount
                -------------------              ------------------
                <S>                              <C>
                       2009                           104.938%
                       2010                           104.444%
                       2011                           103.950%
                       2012                           103.457%
                       2013                           102.963%
                       2014                           102.469%
                       2015                           101.975%
                       2016                           101.481%
                       2017                           100.988%
                       2018                           100.494%
                2019 and thereafter                   100.000%
</TABLE>

     (c) If at any time an Investment Company Event, a Regulatory Capital
Event or a Tax Event (each as defined below, and each a "Special Event")
occurs, the Debenture Issuer shall have the right (subject to the conditions
set forth in the Indenture) at any time prior to the Initial Optional
Redemption Date, to prepay the Debentures in whole, but not in part, within
the 90 days following the occurrence of such Special Event (the "90 Day
Period"), and, simultaneous with such prepayment, to cause a Like Amount of
the Securities to be redeemed by the Trust at the Special Event Redemption
Price on a Pro Rata basis.

     "Investment Company Event" shall mean the receipt by the Debenture
Issuer and the Trust of an opinion of independent securities counsel
experienced in such matters to the effect that as a result of (a) any
amendment to, or change (including any announced prospective change) in, the

                                     I-4
<PAGE>

laws or any regulations thereunder of the United States or any rules,
guidelines or policies of any applicable regulatory authority for the
Debenture Issuer or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment
or change is effective or which pronouncement or decision is announced on or
after the date of original issuance of the Securities, 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.

     "Regulatory Capital Event" shall mean the receipt by the Debenture
Issuer and the Trust of an opinion of independent bank regulatory counsel
experienced in such matters to the effect that as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws or any regulations thereunder of the United States or any rules,
guidelines or policies of an applicable regulatory authority for the
Debenture Issuer or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment
or change is effective or which pronouncement or decision is announced on or
after the date of original issuance of the Securities, the Capital Securities
do not constitute, or within 90 days of the date of such opinion will not
constitute, Tier 1 Capital (or its then equivalent if the Sponsor were
subject to such capital requirement); PROVIDED, HOWEVER, that the
distribution of the Debentures in connection with the liquidation of the
Trust by the Debenture Issuer shall not in and of itself constitute a
Regulatory Capital Event.

     "Special Event Redemption Price" shall mean, with respect to any
redemption of the Securities following a Special Event, an amount in cash
equal to the greater of (i) 100% of the principal amount of the Securities or
(ii) the sum, as determined by a Quotation Agent (as defined in the
Indenture), of the present values of the remaining scheduled payments of
principal and interest on such Securities, discounted to the redemption date
on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate (as defined in the Indenture), plus, in
the case of (i) or (ii), any accrued and unpaid interest thereon (including
Compounded Interest and Additional Sums, if any) to the date of such
redemption.

     A "Tax Event" shall occur upon receipt by the Debenture Issuer and the
Trust of an opinion of independent tax counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws or any regulations thereunder
of the United States or any political subdivision or taxing authority thereof
or therein, or (b) any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations, which amendment
or change is effective or which pronouncement or decision is announced on or
after the date of original issuance of the Securities, 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) the 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 federal income tax purposes, or (iii) the Trust is,
or will be within 90 days of the date of such opinion, subject to more than a
DE MINIMIS amount of other taxes, duties or other governmental charges.

         (d) In the case of an optional redemption, if fewer than all the
outstanding Securities are to be so redeemed, the Common Securities and the
Capital Securities shall be redeemed Pro Rata

                                      I-5
<PAGE>

and the Capital Securities to be redeemed will be determined as described in
Section 4(f)(ii) below. Upon the entry of an order for the dissolution of the
Trust by a court of competent jurisdiction, the Debentures thereafter will be
subject to optional redemption, in whole, but not in part, on or after the
Initial Optional Redemption Date.

     (e) On and from the date fixed by the Administrative Trustees for any
distribution of Debentures and liquidation of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee), as the Holder of
the Capital Securities, will receive a registered global certificate or
certificates representing the Debentures to be delivered upon such
distribution, and (iii) any certificates representing Securities not held by
the Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee) will be deemed to represent beneficial interests in a Like Amount of
Debentures until such certificates are presented to the Debenture Issuer or
its agent for transfer or reissue.

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

     (g) The procedure with respect to redemptions or distributions of
Securities shall be as follows:

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

          (ii) In the event that fewer than all the outstanding Securities are
     to be redeemed, the particular Securities to be redeemed shall be
     selected on a Pro Rata basis (based upon Liquidation Amounts) not more
     than 60 nor less than 30 days prior to the date fixed for redemption
     from the outstanding Securities not previously called for redemption;
     PROVIDED, HOWEVER, that with respect to Holders that would be required
     to hold less than 100 but more than zero Securities as a result of such
     redemption, the Trust shall redeem Securities of each such Holder so
     that after such redemption such Holder shall hold either 100 Securities
     or such Holder no longer holds any Securities, and shall use such method
     (including, without limitation, by lot) as the Trust shall deem fair and
     appropriate; PROVIDED, FURTHER, that any such redemption may be made on
     the basis of the aggregate Liquidation Amount of

                                     I-6

<PAGE>

     Securities held by each Holder thereof and may be made by making such
     adjustments as the Trust deems fair and appropriate in order that
     fractional Securities shall not thereafter remain outstanding. With
     respect to Capital Securities registered in the name of and held of
     record by the Clearing Agency or its nominee (or any successor Clearing
     Agency or its nominee) or any nominee, the distribution of the proceeds
     of such redemption will be made to the Clearing Agency and disbursed by
     such Clearing Agency in accordance with the procedures applied by such
     agency or nominee.

         (iii) If Securities are to be redeemed and the Trust gives a
     Redemption/Distribution Notice (which notice will be irrevocable), then
     (A) with respect to Capital Securities issued in book-entry form, by
     12:00 noon, New York City time, on the redemption date, PROVIDED THAT
     the Debenture Issuer has paid the Property Trustee a sufficient amount
     of cash in connection with the related redemption or maturity of the
     Debentures by 10:00 a.m., New York City time, on the Maturity Date or
     the date of redemption, as the case requires, the Property Trustee will
     deposit irrevocably with the Clearing Agency or its nominee (or
     successor Clearing Agency or its nominee) immediately available funds
     sufficient to pay the applicable Redemption Price with respect to such
     Capital Securities and will give the Clearing Agency irrevocable
     instructions and authority to pay the Redemption Price to the relevant
     Clearing Agency Participants, and (B) with respect to Capital Securities
     issued in certificated form and Common Securities, PROVIDED THAT the
     Debenture Issuer has paid the Property Trustee a sufficient amount of
     cash in connection with the related redemption or maturity of the
     Debentures, the Property Trustee will irrevocably deposit with the
     paying agent for the Capital Securities (if other than the Property
     Trustee) funds sufficient to pay the applicable Redemption Price to the
     Holders by check mailed to the address of the relevant Holder appearing
     on the books and records of the Trust on the redemption date, and
     PROVIDED FURTHER, that any such payment shall become due only upon
     surrender by the Holder of the related certificated Capital Securities.
     If a Redemption/Distribution Notice shall have been given and funds
     deposited as required, if applicable, then immediately prior to the
     close of business on the date of such deposit, or on the redemption date,
     as applicable, Distributions will cease to accumulate on the Securities so
     called for redemption and all rights of Holders so called for redemption
     will cease, except the right of the Holders of such Securities to receive
     the Redemption Price, but without interest on such Redemption Price, and
     such Securities shall cease to be outstanding.

          (iv) Payment of accumulated and unpaid Distributions on the
     Redemption Date of the Securities will be subject to the rights of
     Holders at the close of business on a regular record date in respect of
     a Distribution Date occurring on or prior to such Redemption Date.

         Neither the Administrative Trustees nor the Trust shall be required
to register or cause to be registered the transfer of (i) any Securities
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption or any notice of selection of Securities for redemption
or (ii) any Securities selected for redemption, except the unredeemed portion
of any Security being redeemed. If any date fixed for redemption of
Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay). If payment of the Redemption Price with respect to any
Securities is improperly withheld or refused and not paid either

                                     I-7
<PAGE>

by the Property Trustee or by the Sponsor as guarantor pursuant to the
relevant Securities Guarantee, Distributions on such Securities will continue
to accumulate 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.

           (v) Redemption/Distribution Notices shall be sent by -the Property
     Trustee on behalf of the Trust to (A) with respect to Capital Securities
     issued in book-entry form, the Clearing Agency or its nominee (or any
     successor Clearing Agency or its nominee), (B) with respect to Capital
     Securities issued in certificated form, to the holders thereof, and (C)
     with respect to the Common Securities, to the Holders thereof.

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

     5. VOTING RIGHTS - CAPITAL SECURITIES.

     (a) Except as provided under Sections 5(b), 6(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities
will have no voting rights.

     (b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07
of the Indenture, (iii) exercise any right to rescind or annul a declaration
of acceleration of the maturity of the principal of the Debentures or (iv)
consent to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation
Amount of all outstanding Capital Securities; PROVIDED, HOWEVER, that where a
consent under the Indenture would require the consent of each holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior approval of each Holder of the Capital Securities.
The Trustees shall not revoke any action previously authorized or approved by
a vote of the Holders of the Capital Securities except by subsequent vote of
such Holders. The Property Trustee shall notify each Holder of Capital
Securities of any notice of default with respect to the Debentures. In
addition to obtaining the foregoing approvals of such Holders of the Capital
Securities, prior to taking any of the foregoing actions, the Trustees shall
obtain an opinion of counsel experienced in such matters to the effect that
the Trust will continue to be classified as a grantor trust for United States
federal income tax purposes after taking any such action into account.

         If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium, if any, or interest on the Debentures
on the due date (or, in the case of redemption, on the redemption date), then
a Holder of Capital Securities may institute a proceeding directly against
the Debenture Issuer for enforcement of payment to such Holder of the
principal of or interest on a Like Amount of Debentures (a "Direct Action")
on or after the respective due date specified in the Debentures. In

                                     I-8
<PAGE>

connection with such Direct Action, the Common Securities Holder will be
subrogated to the rights of such Holder of Capital Securities to the extent
of any payment made by the Debenture Issuer to such Holder of Capital
Securities in such Direct Action. Except as provided in the second preceding
sentence, or except as set forth in the first sentence of Section 3.8(e) of
the Declaration, the Holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.

         Any approval or direction of Holders of Capital Securities may be
given at a separate meeting of Holders of Capital Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust
or pursuant to written consent The Property Trustee will cause a notice of
any meeting at which Holders of Capital Securities are entitled to vote to be
mailed to each Holder of record of Capital 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 consent.

         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 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 be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if they were not outstanding.

     6.  VOTING RIGHTS - COMMON SECURITIES.

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

     (b) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the Holder of the
Common Securities. If a Debenture Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed at
such time by the Holders of a Majority in Liquidation Amount of the
outstanding Capital Securities. In no event will the Holders of the Capital
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Sponsor as the Holder of the Common Securities. No resignation or removal of
a Trustee and no appointment of a successor trustee shall be effective until
the acceptance of appointment by the successor trustee in accordance with the
provisions of the Declaration.

     (c) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing
any trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07
of the Indenture, (iii) exercise any right to rescind or annul a declaration
of acceleration of the maturity of the

                                     I-9
<PAGE>

principal of the Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the Holders
of a Majority in Liquidation Amount of all outstanding Common Securities;
PROVIDED, HOWEVER, that where a consent under the Indenture would require the
consent of each holder of Debentures affected thereby, no such consent shall
be given by the Property Trustee without the prior approval of each Holder of
the Common Securities. The Trustees shall not revoke any action previously
authorized or approved by a vote of the Holders of the Common Securities
except by subsequent vote of such Holders. The Property Trustee shall notify
each Holder of Common Securities of any notice of default with respect to the
Debentures. In addition to obtaining the foregoing approvals of such Holders
of the Common Securities, prior to taking any of the foregoing actions, the
Trustees shall obtain an opinion of counsel experienced in such matters to
the effect that the Trust will continue to be classified as a grantor trust
for United States federal income tax purposes after taking any such action
into account.

         If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture
Issuer to pay principal of or premium if any, or interest on the Debentures
on the due date (or in the case of redemption, on the redemption date), then
a Holder of Common Securities may institute a Direct Action directly against
the Debenture Issuer for enforcement of payment to such Holder of the
principal of or premium, if any, or interest on a Like Amount of Debentures
on or after the respective due date specified in the Debentures. In
connection with such Direct Action, the rights of the Common Securities
Holder will be subordinated to the rights of Holders of Capital Securities in
respect of any payment from the Debenture Issuer in such Direct Action.
Except as provided in the second preceding sentence, the Holders of Common
Securities will not be able to exercise directly any other remedy available
to the holders of the Debentures.

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

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

     7.  AMENDMENTS TO DECLARATION.

         In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees without the consent of
the Holders to (i) cure any ambiguity, correct or

                                     I-10
<PAGE>

supplement any provisions in the Declaration that may be inconsistent with
any other provisions, or make any other provisions with respect to matters or
questions arising under the Declaration which shall not be inconsistent with
the other provisions of the Declaration, (ii) modify, eliminate or add to any
provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Securities are outstanding
or to ensure that the Trust will not be required to register as an Investment
Company under the Investment Company Act or (iii) modify, eliminate or add
any provisions of the Declaration to such extent as shall be necessary to
enable the Trust or the Sponsor to conduct an Exchange Offer in the manner
contemplated by the Registration Rights Agreement; PROVIDED, HOWEVER, that in
each case, such action shall not adversely affect in any material respect the
interests of any Holder, and any such amendments of the Declaration shall
become effective when notice thereof is given to the Holders. The Declaration
may also be amended by the Trustees and the Sponsor with (i) the consent of
Holders representing a Majority in Liquidation Amount of all outstanding
Securities, and (ii) receipt by the Trustees of an Opinion of Counsel to the
effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's status
as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an Investment Company under the Investment
Company Act; PROVIDED, HOWEVER, that, without the consent of each Holder of
Trust Securities, the Declaration may not be amended to (i) change the amount
or timing of any Distribution on, or the payment required to be made in
respect of, the Trust Securities as of a specified date or (ii) restrict the
right of a Holder of Trust Securities to institute suit for the enforcement
of any such payment on or after such date

     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 according to the aggregate liquidation amount of the Securities held
by such Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration 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
Capital Securities held by such Holder relative to the aggregate liquidation
amount of all Capital Securities outstanding and then, only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of Common Securities pro rata according to the aggregate
liquidation amount of Common Securities held by such Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.

     9.  RANKING.

         The Capital Securities rank PARI PASSU with the Common Securities
and payment thereon shall be made Pro Rata with the Common Securities, except
that, if an Event of Default under the Declaration occurs and is continuing,
no payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Capital Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and any other
payments to which they are entitled at such time.

                                     I-11

<PAGE>

         10.      ACCEPTANCE OF CAPITAL SECURITIES GUARANTEE, COMMON SECURITIES
                  GUARANTEE, INDENTURE AND DEBENTURES.

                  Each Holder of Capital Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Capital Securities
Guarantee, the Common Securities Guarantee, the Indenture and the Debentures,
as applicable, including the subordination provisions therein.

         11.      NO PREEMPTIVE RIGHTS.

                  Neither the issuance of Capital Securities, nor the
issuance of Common Securities is subject to preemptive or other similar
rights. The Holders shall have no preemptive or similar rights to subscribe
for any additional securities.

         12.      MISCELLANEOUS.

                  These terms constitute a part of the Declaration.

                  The Sponsor will provide a copy of the Declaration, the
Capital Securities Guarantee or the Common Securities Guarantee, as
applicable, and the Indenture (including any supplemental indenture) to a
Holder without charge upon written request to the Trust at its principal
place of business.

<PAGE>

                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

         [IF THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT: 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 (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY 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 THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING
AGENCY OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR
ANOTHER NOMINEE OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.

         UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE CLEARING AGENCY TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE CLEARING AGENCY AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

         THIS CAPITAL 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 LAW. NEITHER THIS CAPITAL 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, REGISTRATION.

         THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH
INTERWEST BANCORP, INC. (THE "CORPORATION") OR ANY "AFFILIATE" OF THE
CORPORATION WAS THE OWNER OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF
THIS CAPITAL SECURITY) ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN

                                     A1-1

<PAGE>

DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a)(1), (2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF INTERWEST CAPITAL TRUST I (THE "TRUST") AND THE
CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE
(D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO
CLAUSE (D) TO REQUIRE THAT THE TRANSFEROR DELIVER TO THE TRUST A LETTER FROM
THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING
MEMORANDUM DATED NOVEMBER 9, 1999. SUCH HOLDER FURTHER AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

         THE HOLDER OF THIS CAPITAL 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 THE CAPITAL SECURITIES 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 CAPITAL SECURITIES 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 THE CAPITAL SECURITIES 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

                                     A1-2

<PAGE>

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.

         THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL
SECURITIES) AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF
CAPITAL SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000
(100 CAPITAL SECURITIES) 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 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.

         THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
BE BOUND BY THE REGISTRATION RIGHTS AGREEMENT DATED AS OF NOVEMBER 9, 1999, BY
AND AMONG THE TRUST, THE SPONSOR AND THE INITIAL PURCHASER NAMED THEREIN, AS
AMENDED FROM TIME TO TIME.

                                     A1-3

<PAGE>

Certificate Number: [__________________]         Aggregate Liquidation Amount:
                                                 $_____________
CUSIP Number: [________________]

                    Certificate Evidencing Capital Securities

                                       of

                            InterWest Capital Trust I

                       9.875% Capital Securities, Series A
                (liquidation amount $1,000 per Capital Security)

         InterWest Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
[Cede & Co. (the "Holder") is the registered owner of $_________ in aggregate
liquidation amount of Capital Securities of the Trust](1) [_________ is the
registered owner of the aggregate liquidation amount of Capital Securities
of the Trust specified in Schedule A hereto](2) representing undivided
preferred beneficial interests in the assets of the Trust designated the
9.875% Capital Securities, Series A (liquidation amount $1,000 per Capital
Security) (the "Capital Securities"). The Capital Securities are transferable
on the books and records of the Trust, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities represented hereby
are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust dated as of November 15, 1999, as
the same may be amended from time to time (the "Declaration"), including the
designation of the terms of the Capital Securities as set forth in Annex I to
the Declaration. Capitalized terms used but not defined herein shall have the
meaning given them in the Declaration. The Sponsor will provide a copy of the
Declaration, the Capital Securities Guarantee and the Indenture (including
any supplemental indenture) to a Holder without charge upon written request
to the Trust at its principal place of business.

         Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.

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

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

     (1)   Insert in Global Capital Securities only.

     (2)   Insert in Definitive Capital Securities only.

                                     A1-4

<PAGE>

         IN WITNESS WHEREOF, the Trust has executed this certificate this 15th
day of November, 1999.

                                           INTERWEST CAPITAL TRUST I

                                           By:
                                              --------------------------------
                                              Clark W. Donnell
                                              Administrative Trustee

                PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION

         This is one of the 9.875% Capital Securities, Series A of InterWest
Capital Trust I referred to in the within-mentioned Declaration.

Dated:
      ------------------------, ---------

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

                                           By:
                                              -------------------------------
                                              Authorized Signatory

                                     A1-5

<PAGE>

                          [FORM OF REVERSE OF SECURITY]

         Distributions on each Capital Security will be payable at a fixed rate
per annum of 9.875% (the "Coupon Rate") of the liquidation amount of $ 1000 per
Capital Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
semi-annual period will bear interest thereon compounded semi-annually at the
Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement and the Liquidated Damages Agreement, in certain
limited circumstances the Debenture Issuer will be required to pay Liquidated
Damages (as defined in the Registration Rights Agreement and the Liquidated
Damages Agreement) with respect to the Debentures. The term "Distributions," as
used herein, includes such cash distributions and any and all such interest and
Liquidated Damages, if any, payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Property Trustee and to the extent the Property Trustee has funds
legally available therefor.

         Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid
or, if no Distributions have been paid, from November 15, 1999 and will be
payable semi-annually in arrears, on May 15 and November 15 of each year,
commencing May 15, 2000, except as otherwise described below. Distributions
will be computed on the basis of a 360-day year of twelve 30-day months. As
long as no Event of Default has occurred and is continuing under the
Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
semi-annual calendar periods, including the first such semi-annual period
during such extension period (each an "Extension Period"), PROVIDED THAT no
Extension Period shall end on a date other than an Interest Payment Date for
the Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions (other than Liquidated Damages,
if any) will also be deferred. Notwithstanding such deferral, semi-annual
Distributions will continue to accumulate with interest thereon (to the
extent permitted by applicable law, but not at a rate exceeding the rate of
interest then accruing on the Debentures) at the Coupon Rate compounded
semi-annually during any such Extension Period. Prior to the termination of
any Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; PROVIDED THAT such
Extension Period, together with all such previous and further extensions
within such Extension Period, may not (i) exceed 10 consecutive semi-annual
periods, including the first semi-annual period during such Extension Period,
(ii) end on a date other than an Interest Payment Date for the Debentures or
(iii) extend beyond the Maturity Date of the Debentures. Payments of
accumulated Distributions will be payable to Holders as they appear on the
books and records of the Trust on the record date immediately preceding the
end of the Extension Period. Upon the termination of any Extension Period and
the payment of all amounts then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.

         Subject to receipt by the Sponsor of any and all required regulatory
approvals and to certain other conditions set forth in the Declaration and
the Indenture, the Property Trustee may, at the direction of the Sponsor, at
any time dissolve the Trust and after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, cause the Debentures to
be distributed to the

                                     A1-6

<PAGE>

Holders of the Securities in liquidation of the Trust or, simultaneously with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.

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

                                     A1-7

<PAGE>

                                ----------------
                                   ASSIGNMENT
                                ----------------

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

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
          (Assignee's social security or tax identification number)

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
                    (Address and zip code of assignee)

and irrevocably appoints
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________ agent
to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.

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

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

Signature Guarantee:__________________________________________________________

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

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

                                     A1-8

<PAGE>

[INCLUDE THE FOLLOWING IF THE CAPITAL SECURITY BEARS A RESTRICTED SECURITIES
LEGEND]

In connection with any transfer of any of the Capital Securities evidenced by
this Certificate, the undersigned confirms that such Capital Securities are
being:

CHECK ONE BOX BELOW

         (1)  / / exchanged for the undersigned's own account without
                  transfer; or

         (2)  / / transferred pursuant to and in compliance with Rule 144A
                  under the Securities Act of 1933, as amended; or

         (3)  / / transferred to an institutional "accredited investor" within
                  the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
                  501 under the Securities Act of 1933 that is acquiring the
                  Capital Securities for its own account, or for the account of
                  such an institutional "accredited investor," for investment
                  purposes and not with a view to, or for offer or sale in
                  connection with, any distribution in violation of the
                  Securities Act of 1933, as amended; or

         (4)  / / transferred pursuant to another available exemption from
                  the registration requirements of the Securities Act of 1933,
                  as amended; or

         (5)  / / transferred pursuant to an effective registration statement.

Unless one of the boxes is checked, the Registrar will refuse to register any of
the Capital Securities evidenced by this Certificate in the name of any Person
other than the Holder hereof; PROVIDED, HOWEVER, that if box (3) or (4) is
checked, the Registrar may require, prior to registering any such transfer of
the Capital Securities, such legal opinions, certifications and other
information as the Trust has reasonably requested to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as amended, such as
the exemption provided by Rule 144 under such Act; PROVIDED, FURTHER, that (i)
if box (2) is checked, by acceptance of this Certificate, the transferee shall
be deemed to have certified that it is a "qualified institutional buyer" (as
defined in Rule 144A) ("QIB") acquiring the Capital Securities for its own
account or for the account of another QIB over which it exercises sole
investment discretion and that it is aware that the Holder is relying upon the
exemption from registration afforded by Rule 144A in respect of the Holder's
transfer of Capital Securities to it or (ii) if box (3) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in the form attached to the Offering Memorandum of the Trust
dated November 9, 1999; PROVIDED, FURTHER, that after the date that a
registration statement has been filed and so long as such Registration
Statement continues to be effective, only then may the Registrar permit
transfers for which box (5) has been checked.

                                      ----------------------------------------
                                                   Signature

                                     A1-9

<PAGE>

                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

         THIS COMMON 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 LAW. NEITHER THIS COMMON 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, REGISTRATION.

         THE HOLDER OF THIS COMMON SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER THIS COMMON SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH
INTERWEST BANCORP, INC. (THE "CORPORATION") OR ANY "AFFILIATE" OF THE
CORPORATION WAS THE OWNER OF THIS COMMON SECURITY (OR ANY PREDECESSOR OF THIS
COMMON SECURITY) ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO
LONG AS THIS COMMON SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS COMMON SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF INTERWEST CAPITAL TRUST I (THE "TRUST") AND THE
CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE
(D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO
CLAUSE (D) TO REQUIRE THAT TRANSFEROR DELIVER TO THE TRUST A LETTER FROM THE
TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM
DATED NOVEMBER 9, 1999. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS COMMON SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

                                      A2-1
<PAGE>

                    Certificate Evidencing Common Securities

                                       of

                            InterWest Capital Trust I

                            9.875% Common Securities
                 (liquidation amount $1,000 per Common Security)

         InterWest Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that
InterWest Bancorp, Inc. (the "Holder") is the registered owner of 1,237
common securities of the Trust representing undivided beneficial interests in
the assets of the Trust designated the 9.875% Common Securities (liquidation
amount $1,000 per Common Security) (the "Common Securities"). Subject to the
terms of the Declaration (as defined below), the Common Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this Certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities
represented hereby are issued and shall in all respects be subject to the
provisions of the Amended and Restated Declaration of the Trust dated as of
November 15, 1999, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common
Securities as set forth in Annex I to the Declaration. Capitalized terms used
but not defined herein shall have the meaning given them in the Declaration.
The Sponsor will provide a copy of the Declaration, the Common Securities
Guarantee and the Indenture (including any supplemental indenture) to a
Holder without charge upon written request to the Trust at its principal
place of business.

         Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.

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

         IN WITNESS WHEREOF, the Trust has executed this certificate this
15th day of November, 1999.

                                      INTERWEST CAPITAL TRUST I

                                      By:
                                         -----------------------------
                                         Clark W. Donnell
                                         Administrative Trustee

                                      A2-2
<PAGE>

                          [FORM OF REVERSE OF SECURITY]

         Distributions on each Common Security will be payable at a rate of
9.875% per annum (the "Coupon Rate") of the liquidation amount of $1000 per
Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one semi-annual period will bear interest thereon compounded
semi-annually at the Coupon Rate (to the extent permitted by applicable law).
Pursuant to the Registration Rights Agreement, in certain limited
circumstances the Debenture Issuer will be required to pay Liquidated Damages
(as defined in the Registration Rights Agreement) with respect to the
Debentures. The term "Distributions", as used herein, includes such cash
distributions and any and all such interest and Liquidated Damages, if any,
payable unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds legally available
therefor.

         Distributions on the Common Securities will be cumulative, will
accrue from the most recent date to which Distributions have been paid or, if
no Distributions have been paid, from November 15, 1999 and will be payable
semi-annually in arrears, on May 15 and November 15 of each year, commencing
May 15, 2000, except as otherwise described below. Distributions will be
computed on the basis of a 360-day year of twelve 30-day months. As long as
no Event of Default has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to defer payments of
interest by extending the interest payment period at any time and from time
to time on the Debentures for a period not exceeding 10 consecutive calendar
semi-annual periods, including the first such semi-annual period during such
extension period (each an "Extension Period"), PROVIDED THAT no Extension
Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred.
Notwithstanding such deferral, semi-annual Distributions will continue to
accumulate with interest thereon (to the extent permitted by applicable law,
but not at a rate exceeding the rate of interest then accruing on the
Debentures) at the Coupon Rate compounded semi-annually during any such
Extension Period. Prior to the termination of any Extension Period, the
Debenture Issuer may further defer payments of interest by further extending
such Extension Period; PROVIDED THAT such Extension Period, together with all
such previous and further extensions within such Extension Period, may not
(i) exceed 10 consecutive semi-annual periods, including the first
semi-annual period during such Extension Period, (ii) end on a date other
than an Interest Payment Date for the Debentures or (iii) extend beyond the
Maturity Date of the Debentures. Payments of accrued Distributions will be
payable to Holders as they appear on the books and records of the Trust on
the record date immediately preceding the end of the Extension Period. Upon
the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.

         Subject to the receipt by the Sponsor of any and all required
regulatory approvals and to certain other conditions set forth in the
Declaration and the Indenture, the Property Trustee may, at the direction of
the Sponsor, at any time dissolve the Trust and cause the Debentures to be
distributed to the Holders of the Securities in liquidation of the Trust or,
simultaneously with any redemption of the Debentures, cause a Like Amount of
the Securities to be redeemed by the Trust.

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

         Under certain circumstances, the rights of the holders of the Common
Securities shall be subordinate to the rights of the holders of the Capital
Securities, as provided in the Declaration.

                                     A2-3

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