Document:

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                                                                   Exhibit 10.21

CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been
omitted pursuant to a request for confidential treatment and, where applicable,
have been marked with an asterisk ("[****]") to denote where omissions have been
made. The confidential material has been filed separately with the Securities
and Exchange Commission.

                                SUPPLY AGREEMENT

This Supply Agreement ("Agreement") is made this 24th day of November, 2005, by
and between:

SOLAR GRADE SILICON LLC, 3322 Road, "N" N.E., Moses Lake, Washington 98837, USA
(hereinafter referred to as "SGSIL") and

EVERQ GMBH, a limited liability company (GmbH), incorporated under the laws of
the Federal Republic of Germany (hereinafter referred to as "CUSTOMER" ).

SGSIL and Customer are each sometimes referred to here in as a "Party" and are
jointly referred to sometimes as the "Parties."

                                    RECITALS

Customer desires to purchase a supply of polycrystalline solar grade silicon
from SGSIL for its own use in the production of silicon wafers for solar
application, subject to the terms and conditions set forth herein.

SGSIL manufactures and sells solar grade polycrystalline silicon products and is
willing to supply such products to Customer, subject to the terms and conditions
set forth herein.

Now, therefore, in consideration of the foregoing, SGSIL and Customer agree as
follows:

1.   DEFINITIONS

"AFFILIATE" shall have the meaning set forth in the Master Joint Venture
Agreement.

"BLANKET PURCHASE ORDER" shall mean an [****] purchase order of the amount of
Products Customer will order during a [****], setting forth delivery dates and
quantities for such Products.

"CHANGE OF CONTROL" shall have the meaning set forth in the Master Joint Venture
Agreement.

"GOVERNMENTAL AUTHORITY" shall mean any US, or German or Norwegian, federal,
national, supranational, state, provincial, municipal, local, or similar
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.

"MASTER JOINT VENTURE AGREEMENT" shall mean that certain Master Joint Venture
Agreement by and between Evergreen Solar, Inc., Q-Cells AG and Renewable Energy
Corporation, dated 24 November 2005.

"PRODUCTS" shall mean the solar grade polycrystalline silicon products to be
sold pursuant to this Agreement as listed in Attachment 1 and described in the
Specifications, as may be modified, from time to time by the Parties in a
written Amendment to this Agreement, signed by both Parties.

"SHARES" shall have the meaning set forth in the Master Joint Venture Agreement.

"SPECIFICATIONS" shall mean the Product technical specifications and the other
Product information listed, described or referred to in Attachment 1.

2.   PURCHASE OF PRODUCT.

2.1  SGSIL shall sell and deliver, and Customer shall purchase, the quantities
     of Products set forth in each Order Confirmation, based on Customer's
     [****] Blanket Purchase Order.

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     Customer acknowledges and agrees that if it desires to purchase additional
     Products in excess of its then-current Blanket Purchase Order and, in any
     event, if in excess of the maximum quantities set forth in Section 3, any
     such purchase shall be subject to SGSIL having the relevant free production
     capacity at the time of any such excess order by Customer, and subject to
     the provisions of Section 8, below.

2.2  Notwithstanding the fact that Products may be ordered only pursuant to the
     issuance of an [****] Blanket Purchase Order, for SGSIL's planning and
     forecasting purposes, Customer agrees to deliver in writing to SGSIL its
     forecasted requirements of Products for the periods and at the times as
     follows:

     (i)  The rolling [****] quantity forecast set forth in Attachment 2 shall
          be updated [****] during the Term.

     (ii) The rolling [****] quantity forecast set forth in Attachment 2 shall
          be updated [****] during the Term.

2.3  Contemporaneously with the execution of this Agreement, a Blanket Purchase
     Order for [****] in the form of Attachment 4 shall be deemed issued to
     SGSIL in the [****] quantity amount set forth therein (which amount shall
     be not less than the minimum quantity set forth in Attachment 2), and
     setting forth the [****] delivery dates, commencing in January, 2006, for
     the delivery of the [****] quantity of Products set forth therein in [****]
     quantities. For each subsequent [****] in the Term, Customer shall issue a
     Blanket Purchase Order in similar form, except the [****] quantity stated
     in such Blanket Purchase Order shall be delivered in [****] deliveries on
     the delivery dates set forth therein, by not later than [****] of the
     then-current [****]. In the event such an [****] Blanket Purchase Order is
     not timely issued hereunder for any [****] during the initial [****] Term,
     Customer shall be deemed to have issued a Blanket Purchase Order for the
     corresponding minimum [****] quantity of Products for such year set forth
     in Attachment 2, to be delivered in [****] shipments by SGSIL.

3.   QUANTITIES.

3.1  Subject to the minimum quantity of Products to be purchased by Customer
     during [****] as specified in Attachment 2, and the maximum quantities of
     Products to be purchased by Customer stated therein, the quantity of
     Products purchased by Customer under this Agreement shall be the quantities
     set forth in each [****] Blanket Purchase Order issued in accordance with
     Section 2.3. For subsequent years during the term of this agreement, the
     Parties will agree to a minimum and target amount of product to be
     delivered, but in no case will the minimum and target quantities be less
     than those listed in 2008, unless mutually agreed to by the Parties.

4.   PRODUCT PRICING & PAYMENT TERMS.

4.1  The price of the Products during the term of this Agreement will be the
     lesser of (i) [****] By [****] the Parties mean the [****] All prices set
     forth herein do not include freight, insurance, sales or value added tax,
     customs duties, or like charges which will be billed to Customer if SGSIL
     advances them.

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4.2  In the event the Parties cannot agree on [****] Product pricing by [****]
     of the immediately preceding calendar year, then Parties shall submit the
     issue to binding determination of the applicable price in accordance with
     Section 4.1, and the price determined by the arbitration shall be used for
     the Products for such [****]. The determination shall be done by an expert
     on the solar energy sector, to be appointed [****] and shall follow such
     procedural rules as the Parties agree on with the determinator.

4.3  Customer shall pay SGSIL the full price, in U.S. dollars, of all Products
     purchased under this Agreement by paying SGSIL the balance, without
     deduction, shown on each [****] invoice issued by SGSIL pursuant to Section
     5.7, by wire transfer in readily available U.S. funds, within [****] after
     the date of such invoice. Interest shall accrue on overdue invoices the
     lesser of [****] or at the maximum rate permitted by applicable law. If
     Customer fails to timely pay an invoice, SGSIL may, in its sole and
     absolute discretion, demand the balance owed on such invoice including
     accrued interest, and/or may stop future deliveries of Products to Customer
     until Customer pays such delinquent invoice. In addition, in the event of a
     dispute regarding payment of amounts due hereunder, the losing Party shall
     pay the prevailing Party's reasonable costs and expenses in such collection
     or defense as the case may be, including reasonable attorneys' fees, costs
     of expert witnesses, costs of translators and any other collection cost or
     cost of suit, whether or not an action or proceeding is commenced or
     concluded.

5.   DELIVERY; INVOICING.

5.1  Products will be purchased by Customer through the issuance of [****]
     Blanket Purchase Orders and any additional Products in excess of the
     quantities stated in such Blanket Purchase Orders will be purchased by
     Customer at the then-current pricing in effect at the time of such purchase
     order, through the issuance by Customer of a separate purchase order, which
     additional purchase order shall not be effective until the quantity and
     requested delivery date(s) set forth in such additional purchase order are
     accepted and confirmed in writing by SGSIL.

5.2  All Products to be purchased hereunder, whether pursuant to a Blanket
     Purchase Order or an additional purchase order, shall be delivered FCA from
     SGSIL's Washington Distribution Facility in Kent, Washington, USA, (the
     "Washington Distribution Facility") to Customer's facility at the location
     specified by Customer in writing, together with the correct documentation
     and adequate packing and labeling as set forth in Attachment 1.

5.3  In accordance with Section 2.3, the initial delivery of Products to be
     shipped to Customer pursuant to this Agreement shall be in January, 2006
     Product quantity amount set forth in Customer's [****] Blanket Purchase
     Order.

5.4  The Products shall be deemed delivered by SGSIL to Customer under the
     then-current Blanket Purchase Order when transferred to Customer's chosen
     carrier at SGSIL's Washington Distribution Facility in Kent, Washington, or
     such other shipping point in the United States of America designated in
     writing by SGSIL. Upon any such delivery of Products to Customer, Customer
     shall have purchased that quantity of Products and shall be obligated to
     pay SGSIL for such Products unless rejected as not conforming to the
     Product Specifications and returned by Customer within [****] of Customer's
     receipt of the Products.

5.5  Title and risk of loss to the Products shall pass to Customer when SGSIL
     delivers the Products to Customer at the Washington Distribution Facility
     in accordance with the terms set forth in Section 5.4.

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5.6  Any [****] order of Products pursuant to the then-current Blanket Purchase
     Order or any additional order of Products during a [****] in excess of the
     amounts stated therein may be confirmed or issued by Customer, as the case
     may be, on Customer's usual order acknowledgment form or purchase order;
     provided, however, the provisions of this Agreement shall govern and
     supersede all inconsistent, different, or additional terms, conditions, and
     instructions contained in Customer's order acknowledgment or purchase order
     form or in any other Customer transactional documentation provided by
     Customer to SGSIL after the effective date of this Agreement.

5.7  Upon SGSIL's shipment of any order under this Agreement, whether a [****]
     delivery under a Blanket Purchase Order or an additional delivery pursuant
     to a separate purchase order, SGSIL shall in writing, sent electronically
     or by facsimile transmission, invoice Customer for such order. All invoices
     issued by SGSIL hereunder shall list the date of each shipment, the
     quantity and type of Products shipped to Customer, the unit and extended
     prices of all Products shipped and the total price owed by Customer for
     such shipment. Upon Customer's receipt of SGSIL's invoice, Customer is
     obligated to pay the amount set forth therein in accordance with Section
     4.3.

5.8  SGSIL shall exercise its commercially reasonable efforts to manufacture and
     deliver from SGSIL's Washington Distribution Facility the Products ordered
     by Customer under this Agreement, on or before the delivery date or dates
     set forth in SGSIL's Blanket Purchase Order or additional purchase order
     confirmation. Any such additional purchase order shall be confirmed by
     SGSIL electronically or by facsimile transmission within [****] of SGSIL's
     receipt of any such additional purchase order. However, without prejudice
     to SGSIL's obligation to exercise its [****] efforts to deliver the
     Products to Customer on any date of delivery given by SGSIL to Customer,
     whether pursuant to an [****] Blanket Purchase Order or a separate
     additional purchase order, SGSIL shall immediately inform Customer in
     writing if any delay is foreseen.

6.   WARRANTY AND LIMITATION OF LIABILITY.

6.1  LIMITED WARRANTY. SGSIL warrants that, for [****] from the date of
     delivery, the Products will conform to SGSIL's published product
     description set forth in the Specifications. If Customer timely notifies
     SGSIL in writing of a nonconformity, upon verification of the
     nonconformity, SGSIL, in its sole discretion, shall provide Customer with
     one of the following remedies: (i) replacement of the Products that SGSIL
     verifies do not conform to this warranty; (ii) retreatment of the Products
     to bring them into conformity with this warranty; or (iii) issuance of a
     credit to Customer's account to reflect the decrease in value of the
     Products resulting from the non-conformance with this warranty. The
     election of remedies provided in this section shall be SGSIL's exclusive
     obligation with respect to remedying any warranty claims for Products and
     Customer's sole and exclusive remedy for all claims of defects. If the
     remedy chosen by SGSIL in its sole discretion hereunder is adjudicated to
     be insufficient, including, without limitation, any finding of failure of
     essential purpose, SGSIL shall be entitled to the alternative remedy of
     refunding the price paid by Customer for such defective Products and SGSIL
     shall have no other liability to Customer for breach of this limited
     warranty. No Products furnished by SGSIL shall be covered by this warranty
     if the claimed defect is due to Customer's failure to properly store,
     maintain, or use the Products in accordance with good industry practices or
     specific recommendations or instructions of SGSIL. ALL OTHER WARRANTIES,
     EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR
     FITNESS FOR ANY PARTICULAR PURPOSE, ARE DISCLAIMED.

6.2  The warranties set forth in Section 6.1 do not extend to any Product that:
     (i) has been subjected to misuse, neglect or abuse not caused by SGSIL,
     (ii) has a defect caused by having been modified or altered by a party
     other than SGSIL, (iii) has a defect caused by a combination with another
     product

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     not supplied or specified by SGSIL, or (iv) has been used in violation of
     the Specifications and/or other approved written instructions furnished to
     Customer by SGSIL prior to the delivery of the Product.

6.3  Customer shall ship a claimed defective Product to SGSIL's designated
     repair location FCA, Customer's location, freight collect. Within [****]
     after receipt of a defective Product, SGSIL shall ship the retreated or
     replacement Product, at SGSIL's expense to Customer's designated location
     (freight prepaid, DDU, Customer's destination). If SGSIL determines that
     the Product is not defective and conforms to the Specifications, SGSIL
     shall ship the non-defective Product to Customer at Customer's expense,
     FCA, SGSIL's designated repair location, freight collect, and Customer
     shall refund all freight, shipping, insurance, customs, duties and other
     charges previously paid by SGSIL in connection with Customer's return of
     the Product. Customer shall include the following information with the
     return of the claimed defective Product: (i) Customer's name and complete
     address, (ii) name(s) and telephone number(s) of Customer's designated
     contact if there are questions regarding the claimed defective Product,
     (iii) the "ship-to" address for the retreated or replacement Product, (iv)
     complete list of all claimed defective Product being returned, and (v)
     nature of each Product's claimed defect or failure.

6.4  LIMITATION OF LIABILITY. In no event shall SGSIL's liability for damages in
     relation to any Products sold to Customer pursuant to this Agreement exceed
     the purchase price paid by Customer for the goods directly having caused
     those damages. In no event shall SGSIL be liable for consequential,
     incidental, special, punitive or exemplary damages. Customer acknowledges
     and agrees that these limitations are reasonable and that such limitations
     have been specifically bargained for between the Parties.

7.   CONFIDENTIALITY.

7.1  "Confidential Information" means any information: (i) disclosed by one
     Party (the "Disclosing Party") to any other Party (the "Receiving Party"),
     which, if in written, graphic, machine-readable or other tangible form is
     marked as "Confidential" or "Proprietary", or which, if disclosed orally or
     by demonstration, is identified at the time of initial disclosure as
     confidential and reduced to writing and marked "Confidential" within [****]
     of such disclosure; or (ii) which is otherwise referred to as Confidential
     Information under this Agreement or any License Agreement.

7.2  Notwithstanding Section 7.1 above, Confidential Information shall exclude
     information that: (i) was independently developed by the Receiving Party
     without using any of the Disclosing Party's Confidential Information; (ii)
     becomes known to the Receiving Party, without restriction, from a source
     other than the Disclosing Party that had a right to disclose it; (iii) was
     in the public domain at the time it was disclosed or becomes in the public
     domain through no act or omission of the Receiving Party; or (iv) was
     rightfully known to the Receiving Party, without restriction, at the time
     of disclosure.

7.3  The Receiving Party shall treat as confidential all of the Disclosing
     Party's Confidential Information and shall not use such Confidential
     Information except as expressly permitted under this Agreement. Without
     limiting the foregoing, the Receiving Party shall use at least the same
     degree of care that it uses to prevent the disclosure of its own
     confidential information of like importance, but in no event with less than
     reasonable care, to prevent the disclosure of the Disclosing Party's
     Confidential Information, subject to Section 7.4 below.

7.4  Notwithstanding anything herein to the contrary, a Receiving Party has the
     right to disclose Confidential Information without the prior written
     consent of the Disclosing Party: (i) as required by

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     any court or other Governmental Authority, or any stock exchange where a
     Party's shares are listed; (ii) as otherwise required by law, or (iii) as
     advisable or required in connection with any government or regulatory
     filings. If a Receiving Party believes that it will be compelled by a court
     or other authority to disclose Confidential Information of the Disclosing
     Party, it shall give the Disclosing Party prompt written notice so that the
     Disclosing Party may take steps to oppose such disclosure.

8.   CAPACITY.

     In the event SGSIL from time to time experiences limited delivery capacity
     as a result of Force Majeure (as defined in Section 9) or as a result of
     demand for Products by Customer in excess of the maximum quantity amounts
     set out in Section 3 and Attachment 2 (a "Limited Capacity Period"), SGSIL
     shall use its [****] efforts to allocate delivery of Products to Customer
     and SGSIL's other customers in proportion to Customer's and other
     customers' relative orders for forecasted amounts of Products and their
     orders for Products in excess of forecasted amounts. Notwithstanding
     anything to the contrary in this Agreement, Customer agrees that such
     [****] efforts by SGSIL shall constitute adequate performance of SGSIL's
     obligations under this Agreement during a Limited Capacity Period.

9.   FORCE MAJEURE.

9.1  Neither party shall be considered in default in the performance of its
     obligations hereunder to the extent that the performance of these
     obligations is prevented or delayed by Force Majeure. The term "Force
     Majeure" is hereby defined as the following: acts of God; plant accidents;
     strikes; lockouts or other similar industrial disturbances; acts of public
     enemies; orders or restraints of any kind from any Governmental Authority
     (except when such governmental action results from a Party's failure or
     refusal to comply with any applicable law, rule or regulation); acts of
     terrorism; war, insurrection or riots; earthquakes, fires, storms or other
     natural disasters.

9.2  In case of Force Majeure according to Section 9.1 either party shall
     promptly notify the other party and shall use its [****] efforts to
     minimize the consequences.

9.3  For the duration and to the extent of Force Majeure, the Parties will be
     released from their obligations under this Agreement. The Term shall be
     extended for an amount of time equal to the period during which the Parties
     were released from their obligations under this Agreement.

10.  SUSPENSION OF PERFORMANCE - TERMINATION.

10.1 This Agreement may terminate in the event that the parties mutually agree
     in writing to terminate this Agreement (subject to the Master Joint Venture
     Agreement).

     Either Party may suspend its performance under this Agreement for a
     material breach or default of any of the terms, conditions or covenants of
     this Agreement by the other, provided that such suspension of performance
     may be made only following written notice of such breach with reference to
     this Section 10.1 and the expiration of a [****] period during which period
     the other party has failed to cure such breach after such notice. Such
     suspension of performance shall not affect any delivery under a Blanket
     Purchase Order for a delivery date that is prior to the date of suspension
     of performance or an additional purchase order accepted by SGSIL prior to
     the date of suspension of performance. The suspension of performance shall
     not prejudice the rights or liabilities of the Parties with respect to
     Product sold, or any indebtedness then owing by either party to the other.

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     No single instance of suspension of performance may exceed [****], nor must
     performance be suspended by one Party more than [****] in any [****] period
     under the Agreement. Should an event occur, that might otherwise give a
     Party the right to suspend performance had it not already done so [****] in
     the last [****], the Party may instead elect to terminate the Agreement
     according to the rules of article 10.2 to the extent these are applicable.

10.2 Either Party may terminate this Agreement, effective immediately, without
     liability for said termination, upon written notice to the other Party, if
     any of the following events occur:

     (i)  The other files a voluntary petition in bankruptcy or is adjudged
          bankrupt;

     (ii) A court assumes jurisdiction of the assets of the other under a
          federal reorganization act;

     (iii) A trustee or receiver is appointed by a court for all or a
          substantial portion of the assets of the other;

     (iv) The other becomes insolvent or suspends its business;

     (v)  The other makes an assignment of its assets for the benefit of its
          creditors, except as required in the ordinary course of business; or

     Notwithstanding the generality of the foregoing, the Parties agree that in
     the event of a termination by SGSIL pursuant to this Section 10.2, such
     termination shall also automatically terminate the then-current Blanket
     Purchase Order, and any deliveries thereunder, and any additional purchase
     orders received from Customer, and SGSIL shall have no obligation to
     deliver Products pursuant to any such terminated Blanket Purchase Order or
     additional purchase order.

11.  MISCELLANEOUS.

11.1 Other than as expressly otherwise provided herein, this Agreement shall not
     be assignable or otherwise transferable by any Party hereto without the
     prior written consent of all the other parties hereto, and any purported
     assignment or other transfer without such consent shall be void and
     unenforceable; provided, however, that any Party may assign this Agreement:

     (a)  to any of its Affiliates so long as it will be made at the same time
          as a transfer of its Shares to such Affiliate specifically permitted
          by the Master Joint Venture Agreement;

     (b)  in connection with the sale by a Party of all of the Shares
          beneficially owned by such Party as specifically provided by the
          Master Joint Venture Agreement, including by way of the Change of
          Control of such Party.

     (c)  For the avoidance of doubt, neither Party shall be obligated to obtain
          the consent of the other Party (under this Section 11.1) solely by
          virtue of a Change of Control of such Party.

11.2 In the event any provision of this Agreement shall be declared
     unenforceable or invalid by a legal authority having jurisdiction over the
     Agreement and the Parties, the validity of the remaining provisions shall
     not in any way be affected or impaired thereby. The Parties shall in good
     faith work together toward replacing the ineffective or invalid provisions
     with valid provisions, which fulfill the economic purpose of the
     ineffective or invalid provision.

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11.3 Any amendment, addition, deletion, alteration or change of this Agreement
     shall only be valid if in writing and executed by each of the Parties. The
     following listed documents shall be the only documents attached to this
     Supply Agreement:

     [ ]  Attachment 1 - Specifications

     [ ]  Attachment 2 - Supply Forecasts, Minimum and Maximum [****]
          Quantities, Pricing and Product Mix

     [ ]  Attachment 3 - Addresses and Contact Persons

     [ ]  Attachment 4 - Blanket Purchase Order

11.4 This Agreement shall be null and void, and SGIL shall have no obligations
     whatsoever hereunder, unless the parties thereto sign and execute the
     Master Joint Venture Agreement, on the date indicated, in such a way as to
     give it full legal effect under German law, including, but not limited to,
     notarising it. Furthermore, no obligations shall be binding for SGIL until
     such a time as the initial share transfer regulated by the Master Joint
     Venture Agreement article 2.2 (a) and (b) have been completed according to
     the further regulation of the Master Joint Venture Agreement article 2.2
     (d).

12.  TERM.

     Except as otherwise extended pursuant to a force majeure under Section 9.3,
     or earlier terminated pursuant to Section 4.2 or Section 10, this Agreement
     will be effective on the date executed by both of the Parties and will
     endure for an initial period of seven (7) years and, thereafter, shall be
     automatically extended for consecutive periods of one year, unless either
     Party provides to the other Party written notice of its intent to terminate
     this Agreement as of the next occurring expiration date, which notice shall
     be given not less than [****] prior to such expiration date. The initial
     seven (7) year term of this Agreement, and any extensions thereof pursuant
     to this Section 12 shall be referred to herein as the "Term."

13.  APPLICABLE LAW.

     The law applicable to this Agreement is set forth in Section 16.

14.  NOTICES.

     All notices called for under this Agreement shall be in writing. Notice
     shall be deemed effective if sent registered mail to the address listed in
     Attachment 3 or to such other address as either party may, from time to
     time, by written notice provide to the other Party. Notice shall also be
     effective if actually received by any method that produces a hard copy
     record, including facsimile transmissions and e-mail with confirmation of
     receipt.

15.  GOVERNING LANGUAGE.

     The parties hereby confirm that they have agreed that all written documents
     between them shall be prepared in the English language only and such
     language shall be the governing language.

16.  DISPUTE RESOLUTION.

     All disputes arising in connection with this Agreement or its validity or
     any agreement provided herein which cannot be resolved by mutual agreement
     of the Parties shall be finally settled in accordance with the Arbitration
     Rules of the German Institution of Arbitration e.V. (DIS) without recourse
     to the ordinary courts of law (except for challenges to the validity of
     shareholder resolutions

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<PAGE>

     which shall be submitted to the competent courts). The place of arbitration
     is Berlin, Germany. The arbitral tribunal consists of three arbitrators.
     The arbitrators must be capable of being appointed a judge in accordance
     with the relevant German legal rules. The substantive law of the Federal
     Republic of Germany is applicable to the dispute. The language of the
     arbitral proceedings is English.

17.  PATENT INDEMNITY.

     SGSIL warrants that the sale or use of the Products does not infringe or
     misappropriate any third party's patents, trademarks, trade secrets or
     other proprietary rights (collectively, "PROPRIETARY RIGHTS"). SGSIL will
     hold Customer harmless from all costs, losses, damages and liability which
     may be awarded against Customer on account of the infringement of such
     third party's Proprietary Rights by the Products, provided SGSIL is given
     prompt notice by Customer of any pending or threatened infringement claim
     and is allowed to control the defense and settlement of any such claim.
     SGSIL shall have the right to settle any such infringement claim on the
     terms and conditions it deems advisable. SGSIL shall not be liable for any
     infringement claims or costs or damages incurred as a result of any suit or
     proceeding based upon a claim that: (i) the infringement was caused by a
     combination of the PRODUCT with another product not supplied by SGSIL or
     which other product was specified by Customer and not otherwise provided by
     SGSIL, where the Product otherwise does not infringe or (ii) if the PRODUCT
     was modified after delivery to Customer, where the unmodified Product does
     not infringe.

18.  COMPLIANCE WITH FOREIGN LAWS.

     Customer shall obtain all licenses, permits and approvals required by any
     United States law or regulation with respect to the export of the Products
     to Customer's facility in Germany under this Agreement. Subject to Section
     19, Customer agrees that, after the Products arrive at Customer's facility,
     Customer will not re-export the Products except in compliance with United
     States export laws and regulations. Customer shall be responsible for
     formal compliance with those export laws and regulations. In addition,
     Customer expressly assumes responsibility for determining the need for and
     obtaining import licenses, currency exchange approvals and any other
     governmental approvals that may be necessary to permit the import of the
     Products into Germany. Customer is responsible for full compliance with all
     applicable laws or regulations in countries other than the United States
     concerning the export, sales or use of the Customer products incorporating
     the Products sold hereunder. Customer will indemnify and hold SGSIL
     harmless from any costs, liabilities or damages that result from any
     failure by Customer to comply with such laws.

19.  USE OF PRODUCTS.

     Customer agrees that the Products sold and delivered to Customer hereunder
     are to be used solely for use in Customer's own photovoltaic products and
     are not to be resold or used by Customer for any other purpose or in any
     other manner whatsoever.

20.  QUESTIONABLE PAYMENTS.

     Customer shall at all times comply, and shall cause its directors,
     officers, employees and agents to abide by and comply, in all respects,
     with the United States Foreign Corrupt Practices Act (15 U.S.C. Sections
     78dd-1, 78dd 2, 78dd-3 and 78m, as amended) and all United States
     governmental agency regulations applying or interpreting said Act and, to
     the extent applicable in any non-U.S. jurisdiction, with the Convention on
     Combating Bribery of Foreign Public Officials in International Business
     Transactions (Dec. 18, 1997, 37 I.L.M 1 (1998), and/or the European Union
     Convention on the Fight Against Corruption Involving Officials of the
     European Communities or Officials of the

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     Member States of the European Union (O.J. No. C195, 25.06.1997, May 26,
     1997), or any similar treaty, convention, law or regulation applicable in
     the jurisdiction in question.

IN WITNESS WHEREOF, SGSIL and Customer have caused this Agreement to be executed
by their duly authorized officer or representative, as of the date and year set
forth below.

SOLAR GRADE SILICON LLC                 EVERQ GMBH

BY:                                     BY:
    ---------------------------------       ------------------------------------
PRINT NAME:                             PRINT NAME:
           --------------------------               ----------------------------
ITS:                                    ITS:
     --------------------------------        -----------------------------------
DATE:                                   DATE:
      -------------------------------         ----------------------------------

                                      -10-

<PAGE>

ATTACHMENT 1 - SPECIFICATIONS

                 TO SUPPLY AGREEMENT BETWEEN SGSIL AND CUSTOMER

See attached Specifications of each Product listed below, as previously sent to
Customer electronically in PDF Format, and as hereafter amended, from time to
time, by mutual agreement of the Parties in accordance with the Agreement:

PRODUCTS:

Either:

[****]

                                      -11-

<PAGE>

           ATTACHMENT 2 - SUPPLY FORECASTS, MINIMUM AND MAXIMUM [****]
                       QUANTITIES, PRICING AND PRODUCT MIX
                 TO SUPPLY AGREEMENT BETWEEN SGSIL AND CUSTOMER

[****]

                                      -12-

<PAGE>

                  ATTACHMENT 3 - ADDRESSES AND CONTACT PERSONS
                 TO SUPPLY AGREEMENT BETWEEN SGSIL AND CUSTOMER

<TABLE>
<CAPTION>
                   SGSIL                                      CUSTOMER
-------------------------------------------   ----------------------------------------
<S>                                           <C>
CONTRACT HOLDER:                              CONTRACT HOLDER:
Goran Bye, CEO                                Shall be provided by Customer in Writing
Solar Grade Silicon LLC
3322 Road, "N" N.E.,
Moses Lake, Washington 98837, USA

CONTRACT MANAGER:                             CONTRACT MANAGER:
Kurt Levens, Director of Sales & Marketing    Shall be provided by Customer in Writing

CONTRACT ADMINISTRATOR:                       CONTRACT ADMINISTRATOR:
Ms. Sharon Palmerton                          Shall be provided by Customer in Writing
</TABLE>

                                      -13-

<PAGE>

                      ATTACHMENT 4 - BLANKET PURCHASE ORDER

                                      -14-<PAGE>

                                                                     Exhibit 4.6

                                                                  EXECUTION COPY

                        AMENDED AND RESTATED DECLARATION

                                    OF TRUST

                           HANOVER STATUTORY TRUST II

                          Dated as of November 4, 2005

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

Section 1.1.  Definitions................................................     1

                                   ARTICLE II
                                  ORGANIZATION

Section 2.1.  Name.......................................................     8
Section 2.2.  Office.....................................................     8
Section 2.3.  Purpose....................................................     8
Section 2.4.  Authority..................................................     8
Section 2.5.  Title to Property of the Trust.............................     8
Section 2.6.  Powers and Duties of the Trustees and the Administrators...     8
Section 2.7.  Prohibition of Actions by the Trust and the Trustees.......    12
Section 2.8.  Powers and Duties of the Institutional Trustee.............    13
Section 2.9.  Certain Duties and Responsibilities of the
              Trustees and the Administrators............................    15
Section 2.10. Certain Rights of Institutional Trustee....................    16
Section 2.11. Delaware Trustee...........................................    18
Section 2.12. Execution of Documents.....................................    18
Section 2.13. Not Responsible for Recitals or Issuance of Securities.....    18
Section 2.14. Duration of Trust..........................................    19
Section 2.15. Mergers....................................................    19

                                   ARTICLE III
                                     SPONSOR

Section 3.1.  Sponsor's Purchase of Common Securities....................    20
Section 3.2.  Responsibilities of the Sponsor............................    20

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

Section 4.1.  Number of Trustees.........................................    21
Section 4.2.  Delaware Trustee...........................................    21
Section 4.3.  Institutional Trustee; Eligibility.........................    21
Section 4.4.  Certain Qualifications of the Delaware Trustee Generally...    22
Section 4.5.  Administrators.............................................    22
Section 4.6.  Initial Delaware Trustee...................................    22
Section 4.7.  Appointment, Removal and Resignation of the
              Trustees and the Administrators............................    22
Section 4.8.  Vacancies Among Trustees...................................    24
Section 4.9.  Effect of Vacancies........................................    24
Section 4.10. Meetings of the Trustees and the Administrators............    24
Section 4.11. Delegation of Power........................................    24
Section 4.12. Merger, Conversion, Consolidation or
              Succession to Business.....................................    25
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                         <C>
                                    ARTICLE V
                                  DISTRIBUTIONS

Section 5.1.  Distributions..............................................    25

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

Section 6.1.  General Provisions Regarding Securities....................    25
Section 6.2.  Paying Agent, Transfer Agent, Calculation Agent and
              Registrar..................................................    26
Section 6.3.  Form and Dating............................................    26
Section 6.4.  Mutilated, Destroyed, Lost or Stolen Certificates..........    27
Section 6.5.  Temporary Securities.......................................    27
Section 6.6.  Cancellation...............................................    27
Section 6.7.  Rights of Holders; Waivers of Past Defaults................    27

                                   ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

Section 7.1.  Dissolution and Termination of Trust.......................    29

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

Section 8.1.  General....................................................    30
Section 8.2.  Transfer Procedures and Restrictions.......................    31
Section 8.3.  Deemed Security Holders....................................    35
Section 8.4.  Initial Transfer of Capital Securities.....................    35

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

Section 9.1.  Liability..................................................    35
Section 9.2.  Exculpation................................................    36
Section 9.3.  Fiduciary Duty.............................................    36
Section 9.4.  Indemnification............................................    37
Section 9.5.  Outside Businesses.........................................    39
Section 9.6.  Compensation; Fee..........................................    39

                                    ARTICLE X
                                   ACCOUNTING

Section 10.1. Fiscal Year................................................    40
Section 10.2. Certain Accounting Matters.................................    40
Section 10.3. Banking....................................................    40
Section 10.4. Withholding................................................    41

                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

Section 11.1. Amendments.................................................    41
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                         <C>
Section 11.2. Meetings of the Holders of the Securities;
              Action by Written Consent..................................    43

                                   ARTICLE XII
          REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE

Section 12.1. Representations and Warranties of Institutional Trustee....    44
Section 12.2. Representations and Warranties of Delaware Trustee.........    45

                                  ARTICLE XIII
                                  MISCELLANEOUS

Section 13.1. Notices....................................................    45
Section 13.2. Governing Law..............................................    46
Section 13.3. Submission to Jurisdiction.................................    46
Section 13.4. Intention of the Parties...................................    47
Section 13.5. Headings...................................................    47
Section 13.6. Successors and Assigns.....................................    47
Section 13.7. Partial Enforceability.....................................    47
Section 13.8. Counterparts...............................................    47
</TABLE>

                              ANNEXES AND EXHIBITS

<TABLE>
<S>         <C>
ANNEX I     Terms of Fixed/Floating Rate TRUPS(R) and Fixed/Floating Rate Common
            Securities

EXHIBIT A-1 Form of Capital Security Certificate

EXHIBIT A-2 Form of Common Security Certificate

EXHIBIT B   Form of Transferee Certificate to be Executed by Transferees Other
            than QIBs
EXHIBIT C   Form of Transferor Certificate to be Executed for QIBs
</TABLE>

                                       iii
<PAGE>

                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                           Hanover Statutory Trust II

                                November 4, 2005

     AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration"), dated and
effective as of November 4, 2005, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and the
holders from time to time of undivided beneficial interests in the assets of the
Trust (as defined herein) to be issued pursuant to this Declaration.

     WHEREAS, certain of the Trustees and the Sponsor established Hanover
Statutory Trust II (the "Trust"), a statutory trust under the Statutory Trust
Act (as defined herein), pursuant to a Declaration of Trust, dated as of October
11, 2005 (the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on October 11, 2005, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in certain debentures of the Debenture Issuer (as defined herein) and
participating in a pooled real estate investment trust securities program (the
"REIT Program");

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

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

     NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a statutory trust under the Statutory Trust Act and that this
Declaration constitutes the governing instrument of such statutory trust, and
that all assets contributed to the Trust will be held in trust for the benefit
of the holders, from time to time, of the securities representing undivided
beneficial interests in the assets of the Trust issued hereunder, subject to the
provisions of this Declaration, and, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties, intending to be legally bound hereby, amend
and restate in its entirety the Original Declaration and agree as follows:

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

     SECTION 1.1. Definitions. Unless the context otherwise requires:

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

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

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

                                       1

<PAGE>

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

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

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

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

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

     "Administrators": means each of John A. Burchett and Irma N. Tavares,
solely in such Person's capacity as Administrator of the Trust continued
hereunder and not in such Person's individual capacity, or such Administrator's
successor in interest in such capacity, or any successor appointed as herein
provided.

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

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

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

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

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

     "Business Day": means any day other than Saturday, Sunday or any other day
on which banking institutions in Wilmington, Delaware, New York City or Edison,
New Jersey are permitted or required by any applicable law or executive order to
close.

     "Calculation Agent": has the meaning set forth in Section 1.01 of the
Indenture.

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

     "Capital Security Certificate": means a definitive Certificate registered
in the name of the Holder representing a Capital Security substantially in the
form of Exhibit A-1.

                                       2

<PAGE>

     "Certificate": means any certificate evidencing Securities.

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

     "Clearstream": means Citibank, N.A., as operator of Clearstream Banking,
societe anonyme.

     "Closing Date": has the meaning set forth 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.

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

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

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

     "Corporate Trust Office": means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office shall at all times be
located in the United States and at the date of execution of this Declaration is
located at Rodney Square North 1100 North Market Street, Wilmington, DE
19890-0001, Attention: Corporate Trust Administrator.

     "Coupon Rate": has the meaning set forth in paragraph 2(a) of Annex I.

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

     "Debenture Issuer": means Hanover Capital Mortgage Holdings, Inc., a
Maryland corporation, in its capacity as issuer of the Debentures under the
Indenture.

     "Debenture Trustee" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as trustee under the
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.

     "Debentures": means the Fixed/Floating Rate Junior Subordinated Debt
Securities due 2035 to be issued by the Debenture Issuer under the Indenture.

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

                                       3

<PAGE>

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

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

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

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

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

     "Distribution Period": has the meaning set forth in paragraph 2(a) of Annex
I.

     "Euroclear": Euroclear Bank S.A./N.V. as operator and depository of the
Euroclear system.

     "Event of Default": means the occurrence of an Indenture Event of Default.

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

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

     "Fiduciary Indemnified Person": shall mean each of the Institutional
Trustee (including in its individual capacity), the Delaware Trustee (including
in its individual capacity), any Affiliate of the Institutional Trustee or the
Delaware Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee or the Delaware Trustee.

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

     "Guarantee": means the Guarantee Agreement, dated as of November 4, 2005,
of the Sponsor in respect of the Capital Securities.

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

     "Holders of 10% in liquidation amount of the Securities": means Holders of
outstanding Securities voting together as a single class who are the record
owners of 10% or more of the aggregate liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class and, "Holders of
not less than 10% in liquidation amount of the Securities" and "Holders of not
less than 10% in liquidation amount of the Capital Securities" shall have
meaning correlative to the foregoing.

     "Holders of a Majority in liquidation amount of the Securities": means
Holders of outstanding Securities voting together as a single class who are the
record owners of more than 50% of the aggregate liquidation amount (including
the stated amount that would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant class,
and "Holders of a Majority in liquidation

                                       4

<PAGE>

amount of the Capital Securities," "Holders of a Majority in liquidation amount
of the Common Securities" and "Holders of not less than a Majority in
liquidation amount of the Securities" shall have meanings correlative to the
foregoing.

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

     "Indenture": means the Indenture, dated as of November 4, 2005, among the
Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.

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

     "Initial Purchaser": has the meaning set forth in the Purchase Agreement.

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

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

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

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

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

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

     "LIBOR Banking Day": has the meaning set forth in paragraph 2(b)(i) of
Annex I.

     "LIBOR Business Day": has the meaning set forth in paragraph 2(b)(i) of
Annex I.

     "LIBOR Determination Date": has the meaning set forth in paragraph 2(b)(i)
of Annex I.

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

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

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

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

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

                                       5

<PAGE>

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

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

     "Paying Agent": has the meaning set forth in Section 6.2.

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

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

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

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

     "Pro Rata": has the meaning set forth in paragraph 8 of Annex I.

     "Purchase Agreement": means the Purchase Agreement relating to the offering
and sale of Capital Securities.

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

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

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

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

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

     "Regulation S Transferee": means a non-U.S. Person acquiring Capital
Securities in accordance with Regulation S under the Securities Act.

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

     "REIT Program": has the meaning set forth in the preamble.

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

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

                                       6

<PAGE>

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

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

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

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

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

     "Sponsor": means Hanover Capital Mortgage Holdings, Inc., a corporation
that is a U.S. Person incorporated in Maryland, or any successor entity in a
merger, consolidation or amalgamation that is a U.S. Person, in its capacity as
sponsor of the Trust.

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       7

<PAGE>

                                   ARTICLE II
                                  ORGANIZATION

     SECTION 2.1. Name. The Trust is named "Hanover Statutory Trust II," as such
name may be modified from time to time by the Administrators following written
notice to the Institutional Trustee and the Holders of the Securities. The
Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrators.

     SECTION 2.2. Office. The address of the principal office of the Trust,
which shall be in a state of the United States or the District of Columbia, is
200 Metroplex Drive, Suite 100, Edison, New Jersey 08817. On ten Business Days'
written notice to the Institutional Trustee and the Holders of the Securities,
the Administrators may designate another principal office, which shall be in a
state of the United States or the District of Columbia.

     SECTION 2.3. Purpose. The exclusive purposes and functions of the Trust are
(a) to issue and sell the Securities representing undivided beneficial interests
in the assets of the Trust, (b) to invest the gross proceeds from such sale in
the Debentures and (c) except as otherwise limited herein, to engage in only
those other activities incidental thereto that are deemed necessary or advisable
by the Institutional Trustee, including, without limitation, those activities
specified in this Declaration. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, pledge any of its assets, or
otherwise undertake (or permit to be undertaken) any activity that would cause
the Trust not to be classified for United States federal income tax purposes as
a grantor trust.

     SECTION 2.4. Authority. Except as specifically provided in this
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
on behalf of the Trust and in accordance with such Trustee's powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration. The Administrators shall have only those ministerial
duties set forth herein with respect to accomplishing the purposes of the Trust
and are not intended to be trustees or fiduciaries with respect to the Trust or
the Holders. The Institutional Trustee shall have the right, but shall not be
obligated except as provided in Section 2.6, to perform those duties assigned to
the Administrators.

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

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

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

                                       8

<PAGE>

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

               (A) the issuance and sale of the Securities;

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

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

               (D) assisting with providing book-entry clearance for the Capital
          Securities pursuant to Section 8.2(e) and if and at such time
          determined solely by the Sponsor at the request of the Holders,
          assisting in the designation of the Capital Securities for trading in
          the Private Offering, Resales and Trading through the Automatic
          Linkages ("PORTAL") system if available;

               (E) the sending of notices (other than notices of default) and
          other information regarding the Securities and the Debentures to the
          Holders in accordance with this Declaration, including notice of any
          notice received from the Debenture Issuer of its election to defer
          payments of interest on the Debentures by extending the interest
          payment period under the Indenture;

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

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

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

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

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

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

                                       9

<PAGE>

          Securities and Holders of Common Securities as to such actions and
          applicable record dates;

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

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

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

               (O) to give the certificate required by Section 314(a)(4) of the
          Trust Indenture Act to the Institutional Trustee, which certificate
          may be executed by an Administrator; and

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

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

               (A) the establishment of the Property Account;

               (B) the receipt of the Debentures;

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

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

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

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

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

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

                                       10

<PAGE>

               (I) after any Event of Default (of which the Institutional
          Trustee has knowledge (as provided in Section 2.10(m) hereof))
          (provided, that such Event of Default is not by or with respect to the
          Institutional Trustee), the taking of any action incidental to the
          foregoing as the Institutional Trustee may from time to time determine
          is necessary or advisable to give effect to the terms of this
          Declaration and protect and conserve the Trust Property for the
          benefit of the Holders (without consideration of the effect of any
          such action on any particular Holder);

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

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

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

     (b) So long as this Declaration remains in effect, the Trust (or the
Trustees or Administrators acting on behalf of the Trust) shall not undertake
any business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, neither the Trustees nor the Administrators
may cause the Trust to (i) acquire any investments or engage in any activities
not authorized by this Declaration; (ii) sell, assign, transfer, exchange,
mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or
interests therein, including to Holders, except as expressly provided herein;
(iii) take any action that would cause (or in the case of the Institutional
Trustee, to the actual knowledge of a Responsible Officer would cause) the Trust
to fail or cease to qualify as a "grantor trust" for United States federal
income tax purposes; (iv) incur any indebtedness for borrowed money or issue any
other debt; or (v) take or consent to any action that would result in the
placement of a lien on any of the Trust Property. The Institutional Trustee
shall, at the sole cost and expense of the Trust subject to reimbursement under
Section 9.6(a), defend all claims and demands of all Persons at any time
claiming any lien on any of the Trust Property adverse to the interest of the
Trust or the Holders in their capacity as Holders.

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

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

                                       11

<PAGE>

          (ii) the negotiation of the terms of, and the execution and delivery
     of, the Purchase Agreement and any subscription agreements or other
     agreements providing for the sale of the Capital Securities or resale by
     the Initial Purchaser and other related agreements;

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

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

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

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

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

     (g) The Trust Property shall be held and administered by the Institutional
Trustee for the benefit of the Trust in accordance with this Declaration.

     (h) If the Institutional Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.

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

                                       12

<PAGE>

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

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

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

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

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

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

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

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

     SECTION 2.8. Powers and Duties of the Institutional Trustee.

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

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

     (c) The Institutional Trustee shall:

          (i) establish and maintain a segregated non-interest bearing trust
     account (the "Property Account") in the United States (as defined in
     Treasury Regulations Section 301.7701-7), in the name of and under the
     exclusive control of the Institutional Trustee, and maintained in the
     Institutional Trustee's trust department, on behalf of the Holders of the
     Securities and, upon the receipt of payments of funds made in respect of
     the Debentures held by the Institutional Trustee, deposit such funds into
     the Property Account and make payments to the Holders of the Capital

                                       13

<PAGE>

     Securities and Holders of the Common Securities from the Property Account
     in accordance with Section 5.1. Funds in the Property Account shall be held
     uninvested until disbursed in accordance with this Declaration;

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

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

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

     (e) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust (a "Legal Action") which arise
out of or in connection with an Event of Default of which a Responsible Officer
of the Institutional Trustee has actual knowledge or the Institutional Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
provided, however, that if an Event of Default has occurred and is continuing
and such event is attributable to the failure of the Debenture Issuer to pay
interest or principal on the Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then a Holder of the Capital Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Capital Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such Direct
Action, the rights of the Holders of the Common Securities will be subrogated to
the rights of such Holder of the Capital Securities to the extent of any payment
made by the Debenture Issuer to such Holder of the Capital Securities in such
Direct Action; provided, however, that a Holder of the Common Securities may
exercise such right of subrogation only if no Event of Default with respect to
the Capital Securities has occurred and is continuing.

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

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

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

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

     (h) The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the

                                       14

<PAGE>

Institutional Trustee shall not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 2.3.

     SECTION 2.9. Certain Duties and Responsibilities of the Trustees and the
Administrators.

     (a) The Institutional Trustee, before the occurrence of any Event of
Default (of which the Institutional Trustee has knowledge (as provided in
Section 2.10(m) hereof)) and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default (of
which the Institutional Trustee has knowledge (as provided in Section 2.10(m)
hereof)) has occurred (that has not been cured or waived pursuant to Section
6.7), the Institutional Trustee shall exercise such of the rights and powers
vested in it by this Declaration, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

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

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

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

                                       15

<PAGE>

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

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

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

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

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

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

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

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

                                       16

<PAGE>

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

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

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

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

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

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

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

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

                                       17

<PAGE>

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

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

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

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

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

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

     SECTION 2.12. Execution of Documents. Unless otherwise determined in
writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute and deliver on
behalf of the Trust any documents, agreements, instruments or certificates that
the Trustees or the Administrators, as the case may be, have the power and
authority to execute pursuant to Section 2.6.

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

                                       18

<PAGE>

     SECTION 2.14. Duration of Trust. The Trust, unless dissolved pursuant to
the provisions of Article VII hereof, shall have existence for thirty-five (35)
years from the Closing Date.

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

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

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

                                   ARTICLE III
                                     SPONSOR

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

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

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

     (b) preparing for filing and requesting the Administrators to cause the
filing by the Trust, as may be appropriate, of an application to the PORTAL
system, for listing or quotation upon notice of

                                       20
<PAGE>

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

     (c) negotiating the terms of, and the execution and delivery, on behalf of
the Trust, of the Purchase Agreement and any subscription agreements or other
agreements providing for the sale of the Capital Securities or resale by the
Initial Purchaser and other related agreements.

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

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

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

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

     SECTION 4.2. Delaware Trustee. If required by the Statutory Trust Act, one
Trustee (the "Delaware Trustee") shall be:

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

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

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

          (i) not be an Affiliate of the Sponsor;

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

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

                                       21

<PAGE>

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

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

     (d) The initial Institutional Trustee shall be Wilmington Trust Company.

     SECTION 4.4. Certain Qualifications of the Delaware Trustee Generally. The
Delaware Trustee shall be a U.S. Person and either a natural person who is at
least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.

     SECTION 4.5. Administrators. Each Administrator shall be a U.S. Person.
There shall at all times be at least one Administrator. Except where a
requirement for action by a specific number of Administrators is expressly set
forth in this Declaration and except with respect to any action the taking of
which is the subject of a meeting of the Administrators, any action required or
permitted to be taken by the Administrators may be taken by, and any power of
the Administrators may be exercised by, or with the consent of, any one such
Administrator acting alone.

     SECTION 4.6. Initial Delaware Trustee. The initial Delaware Trustee shall
be Wilmington Trust Company.

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

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

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

     (c) Unless an Event of Default shall have occurred and be continuing, any
Trustee may be removed at any time by an act of the Holders of a Majority in
liquidation amount of the Common Securities. If any Trustee shall be so removed,
the Holders of the Common Securities, by act of the Holders of a Majority in
liquidation amount of the Common Securities delivered to the Relevant Trustee,
shall promptly appoint a successor Relevant Trustee, and such successor Trustee
shall comply with the

                                       22

<PAGE>

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

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

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

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

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

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

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<PAGE>

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

     SECTION 4.8. Vacancies Among Trustees. If a Trustee ceases to hold office
for any reason and the number of Trustees is not reduced pursuant to Section
4.1, or if the number of Trustees is increased pursuant to Section 4.1, a
vacancy shall occur. A resolution certifying the existence of such vacancy by
the Trustees or, if there are more than two, a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 4.7.

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

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

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

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

                                       24

<PAGE>

     SECTION 4.12. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Institutional Trustee or the Delaware Trustee, as the
case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided such Person shall be otherwise qualified and eligible under this
Article and, provided, further, that such Person shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware as
contemplated in Section 4.7(i).

                                    ARTICLE V
                                  DISTRIBUTIONS

     SECTION 5.1. Distributions. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of interest (including
any Additional Amounts or Deferred Interest) and/or principal on the Debentures
held by the Institutional Trustee (the amount of any such payment being a
"Payment Amount"), the Institutional Trustee shall and is directed, to the
extent funds are available in the Property Account for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders. For the
avoidance of doubt, funds in the Property Account shall not be distributed to
Holders to the extent of any taxes payable by the Trust, in the case of
withholding taxes, as determined by the Institutional Trustee or any Paying
Agent and, in the case of taxes other than withholding taxes, as determined by
the Administrators in a written notice to the Institutional Trustee.

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

     SECTION 6.1. General Provisions Regarding Securities. (a) The
Administrators shall on behalf of the Trust issue one series of capital
securities, subject to Section 8.2, evidenced by a certificate substantially in
the form of Exhibit A-1, representing undivided beneficial interests in the
assets of the Trust and having such terms as are set forth in Annex I (the
"Capital Securities"), and one series of common securities, evidenced by a
certificate substantially in the form of Exhibit A-2, representing undivided
beneficial interests in the assets of the Trust and having such terms as are set
forth in Annex I (the "Common Securities"). The Trust shall issue no securities
or other interests in the assets of the Trust other than the Capital Securities
and the Common Securities. The Capital Securities rank pari passu and payment
thereon shall be made Pro Rata with the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Capital Securities.

     (b) The Certificates shall be signed on behalf of the Trust by one or more
Administrators. Such signature shall be the facsimile or manual signature of any
Administrator. In case any Administrator of the Trust who shall have signed any
of the Securities shall cease to be such Administrator before the Certificates
so signed shall be delivered by the Trust, such Certificates nevertheless may be
delivered as though the person who signed such Certificates had not ceased to be
such Administrator. Any Certificate may be signed on behalf of the Trust by such
person who, at the actual date of execution of such Security, shall be an
Administrator of the Trust, although at the date of

                                       25

<PAGE>

the execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
manual signature of an Authorized Officer of the Institutional Trustee. Such
signature shall be conclusive evidence that the Capital Security has been
authenticated under this Declaration. Upon written order of the Trust signed by
one Administrator, the Institutional Trustee shall authenticate the Capital
Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated and shall be valid upon execution by one or more Administrators.

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

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

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

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

     (b) The Trust shall also appoint a Calculation Agent, which shall determine
the Coupon Rate in accordance with the terms of the Securities. The Trust
initially appoints the Institutional Trustee as Calculation Agent.

     SECTION 6.3. Form and Dating. (a) Subject to Section 8.2, the Capital
Securities and the Institutional Trustee's certificate of authentication thereon
shall be substantially in the form of Exhibit A-1, and the Common Securities
shall be substantially in the form of Exhibit A-2, each of which is hereby
incorporated in and expressly made a part of this Declaration. Certificates may
be typed, printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Administrators, as conclusively
evidenced by their execution thereof. The Securities may have letters, numbers,
notations or other marks of identification or designation and such legends or
endorsements required by law, stock exchange rule, agreements to which the Trust
is subject, if any, or usage (provided, that any such notation, legend or
endorsement is in a form acceptable to the Sponsor). The Trust at the

                                       26

<PAGE>

direction of the Sponsor shall furnish any such legend not contained in Exhibit
A-1 to the Institutional Trustee in writing. Each Capital Security shall be
dated the date of its authentication. The terms and provisions of the Securities
set forth in Annex I and, subject to Section 8.2, the forms of Securities set
forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to
the extent applicable, the Institutional Trustee, the Delaware Trustee, the
Administrators and the Sponsor, by their execution and delivery of this
Declaration, expressly agree to such terms and provisions and to be bound
thereby. Capital Securities will be issued only in blocks having a stated
liquidation amount of not less than $100,000.

     (b) Subject to Section 8.2, the Capital Securities are being offered and
sold by the Trust pursuant to the Purchase Agreement in definitive form,
registered in the name of the Holder thereof, without coupons and with the
Restricted Securities Legend.

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

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

     (b) there shall be delivered to the Registrar, the Administrators and the
Institutional Trustee such security or indemnity as may be required by them to
keep each of them harmless;

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

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

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

     SECTION 6.7. Rights of Holders; Waivers of Past Defaults. (a) The legal
title to the Trust Property is vested exclusively in the Institutional Trustee
(in its capacity as such) in accordance with Section 2.5, and the Holders shall
not have any right or title therein other than the undivided beneficial interest
in the assets of the Trust conferred by their Securities and they shall have no
right to call for any partition or division of property, profits or rights of
the Trust except as described below. The Securities

                                       27

<PAGE>

shall be personal property giving only the rights specifically set forth therein
and in this Declaration. The Securities shall have no, and the issuance of the
Securities shall not be subject to, preemptive or other similar rights and when
issued and delivered to Holders against payment of the purchase price therefor,
the Securities will be fully paid and nonassessable by the Trust.

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

     (c) At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee, subject to the provisions hereof, fails
to annul any such declaration and waive such default, the Holders of not less
than a Majority in liquidation amount of the Capital Securities, by written
notice to the Institutional Trustee, the Sponsor and the Debenture Trustee, may
rescind and annul such declaration and its consequences if:

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

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

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

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

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

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

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

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<PAGE>

canceled pursuant to the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of this Section 6.7.

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

     (f) Except as otherwise provided in this Section 6.7, the Holders of not
less than a Majority in liquidation amount of the Capital Securities may, on
behalf of the Holders of all the Capital Securities, waive any past default or
Event of Default and its consequences. Upon such waiver, any such default or
Event of Default shall cease to exist, and any default or Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default or impair any right consequent thereon.

                                   ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

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

          (i) unless earlier dissolved, on July 30, 2040, the expiration of the
     term of the Trust;

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

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

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

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

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

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

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<PAGE>

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

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

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

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

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

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

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

     (e) Neither the Trust nor the Registrar shall be required (i) to issue,
register the transfer of, or exchange any Securities during a period beginning
at the opening of business 15 days before the day of

                                       30

<PAGE>

any selection of Securities for redemption and ending at the close of business
on the earliest date on which the relevant notice of redemption is deemed to
have been given to all Holders of the Securities to be redeemed, or (ii) to
register the transfer or exchange of any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.

     SECTION 8.2. Transfer Procedures and Restrictions. (a) The Capital
Securities shall bear the Restricted Securities Legend (as defined below), which
shall not be removed unless there is delivered to the Trust such satisfactory
evidence, which may include an opinion of counsel, as may be reasonably required
by the Trust, that neither the legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof comply with the provisions
of the Securities Act or that such Securities are not "restricted" within the
meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Institutional Trustee, at the written direction of
the Trust, shall authenticate and deliver Capital Securities that do not bear
the Restricted Securities Legend.

     (b) When Capital Securities are presented to the Registrar (x) to register
the transfer of such Capital Securities, or (y) to exchange such Capital
Securities for an equal number of Capital Securities represented by different
Certificates, the Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met; provided,
however, that the Capital Securities surrendered for registration of transfer or
exchange, other than in connection with the initial transfer by the Initial
Purchaser, pursuant to Section 8.4, shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the Trust and
the Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing and (i) if such Capital Securities are being transferred
to a QIB or a Regulation S Transferee, accompanied by a certificate of the
transferor substantially in the form set forth as Exhibit C hereto or (ii) if
such Capital Securities are being transferred otherwise than to a QIB or a
Regulation S Transferee, accompanied by a certificate of the transferee
substantially in the form set forth as Exhibit B hereto.

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

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY
(A) TO THE DEBENTURE ISSUER OR THE TRUST, (B) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A
"NON-U.S. PERSON" IN AN "OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER
THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT TO AN "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR

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<PAGE>

FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE
ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY OF WHICH
MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

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

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND
WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR
OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (EACH A "PLAN"), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT
IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR
HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS
ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO
SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY
INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF
SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT
PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

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

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

                                       32

<PAGE>

BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH
PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS
SECURITY.

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

     (e) The Trust, upon the request of the Initial Purchaser, shall provide for
some or all of the Capital Securities to be transferred and held through the
facilities of The Depository Trust Company, the Euroclear, Clearstream or
similar book-entry system for holders and transferees who are QIBs or Regulation
S Transferees or, consistent with an opinion of counsel, other holders or
transferees. The Administrators on behalf of the Trust shall cause appropriate
revisions to the form of Capital Securities necessary to facilitate book-entry
transfers and holding.

     Any person acquiring an interest in a Capital Security through a book-entry
facility will be deemed to represent the following:

     1. We are:

          (ii) a "qualified institutional buyer" as defined in Rule 144A under
     the United States Securities Act of 1933, as amended (the "Securities Act")
     and are acquiring the Capital Securities in reliance on Rule 144A; or

          (iii) a person that is not a "U.S. person" as defined in Regulation S
     under the Securities Act, and are acquiring the Fixed/Floating Rate
     TRUPS(R) (the "Capital Securities") of Hanover Statutory Trust II (the
     "Trust") in reliance on the exemption from registration provided by
     Regulation S thereunder.

     2. We understand that the Capital Securities (including the guarantee (the
"Guarantee") of Hanover Capital Mortgage Holdings, Inc. (the "Company") executed
in connection therewith) and the Fixed/Floating Rate Junior Subordinated Debt
Securities due 2035 of the Company (the "Subordinated Debt Securities") (the
Capital Securities, the Guarantee and the Subordinated Debt Securities together
being referred to herein as the "Offered Securities"), have not been registered
under the Securities Act, and may not be offered or sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing the Capital Securities that, if we decide to
offer, sell or otherwise transfer any such Capital Securities, such offer, sale
or transfer will be made only (a) to the Company or the Trust, (b) pursuant to
Rule 144A under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (c) pursuant to Regulation S
under the Securities Act, (d) pursuant to an exemption from registration, to an
"accredited investor" within the meaning of subparagraph (a) (1), (2), (3) or
(7) of Rule 501 under the Securities Act that is acquiring Capital Securities
for its own account or for the account of such an accredited investor for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution thereof in violation of the Securities Act, or (e)
pursuant to another available exemption from the registration requirements of
the Securities Act, and in each of the foregoing cases in accordance with any
applicable state securities laws and any requirements of law that

                                       33

<PAGE>

govern the disposition of our property. The foregoing restrictions on resale
will not apply subsequent to the date on which, in the written opinion of
counsel, the Capital Securities are not "restricted securities" within the
meaning of Rule 144 under the Securities Act. If any resale or other transfer of
the Capital Securities is proposed to be made pursuant to clause (d) or (e)
above, the transferor shall deliver a letter from the transferee substantially
in the form of Exhibit B hereto to the Institutional Trustee as Transfer Agent,
which shall provide as applicable, among other things, that the transferee is an
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is acquiring such Securities for
investment purposes and not for distribution in violation of the Securities Act.
We acknowledge on our behalf and on behalf of any investor account for which we
are purchasing Capital Securities that the Trust and the Company reserve the
right prior to any offer, sale or other transfer pursuant to clause (d) or (e)
to require the delivery of any opinion of counsel, certifications and/or other
information satisfactory to the Trust and the Company. We understand that the
certificates for the Capital Securities will bear a legend substantially to the
effect of the foregoing.

     3. We are acquiring the Capital Securities for investment purposes and not
with view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Capital Securities, and we and any account for
which we are acting are each able to bear the economic risks of our or its
investment.

     4. We are a sophisticated institutional investor, have knowledge and
experience in financial matters and are capable of independently evaluating the
merits and risks of our investment decision with respect to the Capital
Securities, and we have conducted, to the extent we deemed necessary, an
independent investigation of such matters, as, in our judgment, is necessary for
us to make an informed investment decision with respect to the acquisition of an
interest in the Capital Securities.

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

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

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

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

                                       34

<PAGE>

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

     The above deemed representations may be modified consistent with an opinion
of counsel.

     SECTION 8.3. Deemed Security Holders. The Trust, the Administrators, the
Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat the
Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators, the Trustees, the
Paying Agent, the Transfer Agent or the Registrar shall have actual or other
notice thereof.

     SECTION 8.4. Initial Transfer of Capital Securities. Notwithstanding the
foregoing provisions of this Article VIII or any other provision of this
Declaration (including all Annexes and Exhibits hereto) to the contrary, any or
all of the Capital Securities issued to the Initial Purchaser on the date of
this Declaration (the "Initial Securities") may be transferred by the Initial
Purchaser to the REIT Program or such other transferees as the Initial Purchaser
may select, and such transfer of the Initial Securities shall be accomplished as
follows and no other conditions, restrictions or other provisions of this
Declaration or any other document shall apply to such transfer: (i) the
Certificate(s) evidencing the Initial Securities issued to the Initial Purchaser
to be transferred shall be surrendered to the Registrar for registration of
transfer and shall be accompanied by an assignment, executed by the Initial
Purchaser, in the form attached to Exhibit A-1 hereof, except that no signature
guarantee shall be required, and (ii) in the case of the transfer to the REIT
Program designated by the Initial Purchaser, such surrendered Certificate shall
be cancelled by the Institutional Trustee pursuant to Section 6.6 and a new
Certificate, registered in the name of the trustee (with appropriate language
indicating the status of such trustee as a trustee and any beneficiaries) for
such pooled vehicle as directed by such trustee, in accordance with an indenture
under which such pooled vehicle will pledge such Certificate or as directed by
the Initial Purchaser, and if directed by the Initial Purchaser such Certificate
shall be designated as Certificate No. P-1, evidencing the number of Capital
Securities to be transferred to such pooled vehicle and, if applicable, another
new Certificate, registered as directed by the Initial Purchaser, evidencing any
remaining Capital Securities represented by such cancelled Certificate, shall be
executed by an Administrator on behalf of the Trust and, upon receipt of such
executed Certificate(s), the Institutional Trustee is hereby authorized and
directed to execute the certificate of authentication thereon and deliver such
new Certificate(s) to the Holder(s) thereof.

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

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

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

                                       35

<PAGE>

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

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

     (c) Pursuant to Section 3803(a) of the Statutory Trust Act, the Holders of
the Securities shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware, except as otherwise
specifically set forth herein.

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

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

     SECTION 9.3. Fiduciary Duty. (a) To the extent that, at law or in equity,
an Indemnified Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to any other Covered Person, an Indemnified
Person acting under this Declaration shall not be liable to the Trust or to any
other Covered Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity (other than the duties imposed on the Institutional Trustee
under the Trust Indenture Act), are agreed by the parties hereto to replace such
other duties and liabilities of the Indemnified Person.

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

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

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<PAGE>

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

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

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

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

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

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<PAGE>

          (v) To the fullest extent permitted by law, expenses (including
     attorneys' fees and expenses) incurred by an Indemnified Person in
     defending a civil, criminal, administrative or investigative action, suit
     or proceeding referred to in paragraphs (i) and (ii) of this Section 9.4(a)
     shall be paid by the Sponsor in advance of the final disposition of such
     action, suit or proceeding upon receipt of an undertaking by or on behalf
     of such Indemnified Person to repay such amount if it shall ultimately be
     determined that such Person is not entitled to be indemnified by the
     Sponsor as authorized in this Section 9.4(a). Notwithstanding the
     foregoing, no advance shall be made by the Sponsor if a determination is
     reasonably and promptly made (1) in the case of a Company Indemnified
     Person (A) by the Administrators by a majority vote of a Quorum of
     disinterested Administrators, (B) if such a Quorum is not obtainable, or,
     even if obtainable, if a Quorum of disinterested Administrators so directs,
     by independent legal counsel in a written opinion or (C) by the Common
     Security Holder of the Trust, that, based upon the facts known to the
     Administrators, counsel or the Common Security Holder at the time such
     determination is made, such Indemnified Person acted in bad faith or in a
     manner that such Person either believed to be opposed to or did not believe
     to be in the best interests of the Trust, or, with respect to any criminal
     proceeding, that such Indemnified Person believed or had reasonable cause
     to believe such conduct was unlawful, or (2) in the case of a Fiduciary
     Indemnified Person, by independent legal counsel in a written opinion that,
     based upon the facts known to the counsel at the time such determination is
     made, such Indemnified Person acted in bad faith or in a manner that such
     Indemnified Person either believed to be opposed to or did not believe to
     be in the best interests of the Trust, or, with respect to any criminal
     proceeding, that such Indemnified Person believed or had reasonable cause
     to believe such conduct was unlawful. In no event shall any advance be made
     (i) to a Company Indemnified Person in instances where the Administrators,
     independent legal counsel or the Common Security Holder reasonably
     determine that such Person deliberately breached such Person's duty to the
     Trust or its Common or Capital Security Holders or (ii) to a Fiduciary
     Indemnified Person in instances where independent legal counsel promptly
     and reasonably determines in a written opinion that such Person
     deliberately breached such Person's duty to the Trust or its Common or
     Capital Security Holders.

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

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

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<PAGE>

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

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

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

     (g) The provisions of this Section 9.4 shall survive the termination of
this Declaration or the earlier resignation or removal of the Institutional
Trustee. The obligations of the Sponsor under this Section 9.4 to compensate and
indemnify the Trustees and to pay or reimburse the Trustees for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Trustees as
such, except funds held in trust for the benefit of the holders of particular
Capital Securities, provided, that the Sponsor is the holder of the Common
Securities.

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

     SECTION 9.6. Compensation; Fee. (a) The Sponsor agrees:

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

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<PAGE>

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

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

                                    ARTICLE X
                                   ACCOUNTING

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

     SECTION 10.2. Certain Accounting Matters. (a) At all times during the
existence of the Trust, the Administrators shall keep, or cause to be kept at
the principal office of the Trust in the United States, as defined for purposes
of Treasury Regulations Section 301.7701-7, full books of account, records and
supporting documents, which shall reflect in reasonable detail each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied.

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

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

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

     SECTION 10.3. Banking. The Trust shall maintain one or more bank accounts
in the United States, as defined for purposes of Treasury Regulations Section
301.7701-7, in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Debentures held by the
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall

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<PAGE>

be deposited in the Property Account. The sole signatories for such accounts
(including the Property Account) shall be designated by the Institutional
Trustee.

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

                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

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

          (i)  the Institutional Trustee,

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

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

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

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

          (i)  unless the Institutional Trustee shall have first received

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

               (B) an opinion of counsel (who may be counsel to the Sponsor or
          the Trust) that such amendment is permitted by, and conforms to, the
          terms of this Declaration (including the terms of the Securities) and
          that all conditions precedent to the execution and delivery of such
          amendment have been satisfied; or

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<PAGE>

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

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

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

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

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

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

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

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

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

          (i)  cure any ambiguity;

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

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

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

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<PAGE>

          (v) facilitate the clearance of the Capital Securities through the
     facilities of The Depository Trust Company or other book-entry system.

provided, however, that no such modification, elimination or addition referred
to in clause (i), (ii), (iii) or (v) shall adversely affect the powers,
preferences or rights of Holders of Capital Securities (it being understood, for
purposes of this proviso, that providing for transfer of the Capital Securities
in global or book-entry form shall not be deemed to adversely affect the powers,
preferences or rights of Holders of the Capital Securities).

     SECTION 11.2. Meetings of the Holders of the Securities; Action by Written
Consent. (a) Meetings of the Holders of any class of Securities may be called at
any time by the Administrators (or as provided in the terms of the Securities)
to consider and act on any matter on which Holders of such class of Securities
are entitled to act under the terms of this Declaration, the terms of the
Securities or the rules of any stock exchange on which the Capital Securities
are listed or admitted for trading, if any. The Administrators shall call a
meeting of the Holders of such class if directed to do so by the Holders of not
less than 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Administrators one or more calls in a
writing stating that the signing Holders of the Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of the Securities calling a meeting shall specify in
writing the Certificates held by the Holders of the Securities exercising the
right to call a meeting and only those Securities represented by such
Certificates shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.

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

          (i) notice of any such meeting shall be given to all the Holders of
     the Securities having a right to vote thereat at least 7 days and not more
     than 60 days before the date of such meeting. Whenever a vote, consent or
     approval of the Holders of the Securities is permitted or required under
     this Declaration or the rules of any stock exchange on which the Capital
     Securities are listed or admitted for trading, if any, such vote, consent
     or approval may be given at a meeting of the Holders of the Securities. Any
     action that may be taken at a meeting of the Holders of the Securities may
     be taken without a meeting if a consent in writing setting forth the action
     so taken is signed by the Holders of the Securities owning not less than
     the minimum amount of Securities that would be necessary to authorize or
     take such action at a meeting at which all Holders of the Securities having
     a right to vote thereon were present and voting. Prompt notice of the
     taking of action without a meeting shall be given to the Holders of the
     Securities entitled to vote who have not consented in writing. The
     Administrators may specify that any written ballot submitted to the Holders
     of the Securities for the purpose of taking any action without a meeting
     shall be returned to the Trust within the time specified by the
     Administrators;

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

                                       43

<PAGE>

     Securities shall be conducted by the Administrators or by such other Person
     that the Administrators may designate; and

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

                                   ARTICLE XII
                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
                              AND DELAWARE TRUSTEE

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

                                  ARTICLE XIII
                                  MISCELLANEOUS

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

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

         Hanover Statutory Trust II
         c/o Hanover Capital Mortgage Holdings, Inc.
         200 Metroplex Drive, Suite 100
         Edison, New Jersey 08817
         Attention: Irma N. Tavares
         Telecopy: 732-548-0286
         Telephone: 732-548-0101

                                       45

<PAGE>

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

         Wilmington Trust Company
         Rodney Square North
         1100 North Market Street
         Wilmington, DE 19890-0001
         Attention: Corporate Trust Administrator
         Telecopy: 302-636-4140
         Telephone: 302-636-6410

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

         Wilmington Trust Company
         Rodney Square North
         1100 North Market Street
         Wilmington, DE 19890-0001
         Attention: Corporate Trust Administrator
         Telecopy: 302-636-4140
         Telephone: 302-636-6410

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

         Hanover Capital Mortgage Holdings, Inc.
         200 Metroplex Drive, Suite 100
         Edison, New Jersey 08817
         Attention: Irma N. Tavares
         Telecopy: 732-548-0286
         Telephone: 732-548-0101

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

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

     SECTION 13.2. Governing Law. This Declaration and the rights and
obligations of the parties hereunder shall be governed by and interpreted in
accordance with the law of the State of Delaware and all rights, obligations and
remedies shall be governed by such laws without regard to the principles of
conflict of laws of the State of Delaware or any other jurisdiction that would
call for the application of the law of any jurisdiction other than the State of
Delaware.

     SECTION 13.3. Submission to Jurisdiction. (a) Each of the parties hereto
agrees that any suit, action or proceeding arising out of or based upon this
Declaration, or the transactions contemplated

                                       46

<PAGE>

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

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

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

     SECTION 13.4. Intention of the Parties. It is the intention of the parties
hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.

     SECTION 13.5. Headings. Headings contained in this Declaration are inserted
for convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.

     SECTION 13.6. Successors and Assigns. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements in this
Declaration by the Sponsor and the Trustees shall bind and inure to the benefit
of their respective successors and assigns, whether or not so expressed.

     SECTION 13.7. Partial Enforceability. If any provision of this Declaration,
or the application of such provision to any Person or circumstance, shall be
held invalid, the remainder of this Declaration, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.

     SECTION 13.8. Counterparts. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and Administrators to any of
such counterpart signature pages. All of such counterpart signature pages shall
be read as though one, and they shall have the same force and effect as though
all of the signers had signed a single signature page.

                                       47

<PAGE>

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

                                        WILMINGTON TRUST COMPANY,
                                        as Delaware Trustee

                                        By: /s/ Tira L. Johnson
                                            ------------------------------------
                                            Name: Tira L. Johnson
                                            Title: Financial Services Officer

                                        WILMINGTON TRUST COMPANY,
                                        as Institutional Trustee

                                        By: /s/ Tira L. Johnson
                                            ------------------------------------
                                            Name: Tira L. Johnson
                                            Title: Financial Services Officer

                                        HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
                                        as Sponsor

                                        By: /s/ John A. Burchett
                                            ------------------------------------
                                            Name: John A. Burchett
                                            Title: Chief Executive Officer

                                        /s/ Irma N. Tavares
                                        ----------------------------------------
                                        Administrator

                                        /s/ John A. Burchett
                                        ----------------------------------------
                                        Administrator

                                       48

<PAGE>

                                     ANNEX I

                                    TERMS OF
                        FIXED/FLOATING RATE TRUPS(R) AND
                      FIXED/FLOATING RATE COMMON SECURITIES

     Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust,
dated as of November 4, 2005 (as amended from time to time, the "Declaration"),
the designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Capital Securities and the Common Securities are set out
below (each capitalized term used but not defined herein has the meaning set
forth in the Declaration):

     1. Designation and Number. (a) Capital Securities. 20,000 Capital
Securities of Hanover Statutory Trust II (the "Trust"), with an aggregate stated
liquidation amount with respect to the assets of the Trust of Twenty Million
Dollars ($20,000,000) and a stated liquidation amount with respect to the assets
of the Trust of $1,000 per Capital Security, are hereby designated for the
purposes of identification only as the "Fixed/Floating Rate TRUPS(R)" (the
"Capital Securities"). Subject to Section 8.2 of the Declaration, the Capital
Security Certificates evidencing the Capital Securities shall be substantially
in the form of Exhibit A-1 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice or to conform to the rules of any stock exchange on which the Capital
Securities are listed, if any.

     (b) Common Securities. 620 Common Securities of the Trust (the "Common
Securities") will be evidenced by Common Security Certificates substantially in
the form of Exhibit A-2 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice. In the absence of an Event of Default, the Common Securities will have
an aggregate stated liquidation amount with respect to the assets of the Trust
of Six Hundred Twenty Thousand Dollars ($620,000) and a stated liquidation
amount with respect to the assets of the Trust of $1,000 per Common Security.

     2. Distributions. (a) Distributions payable on each Security will be
payable (i) until July 30, 2010, at a fixed rate per annum equal to 9.209% and
(ii) from and including July 30, 2010, at a floating rate of interest per annum,
reset quarterly, equal to LIBOR, as determined on the LIBOR Determination Date
for such Distribution Period (as defined herein), plus 4.25% (the "Coupon Rate")
of the stated liquidation amount of $1,000 per Security, such rate being the
rate of interest payable on the Debentures to be held by the Institutional
Trustee. Except as set forth below in respect of an Extension Period,
Distributions in arrears for more than one quarterly period will bear interest
thereon compounded quarterly at the applicable Coupon Rate for each such
quarterly period (to the extent permitted by applicable law). The term
"Distributions" as used herein includes cash distributions, any such compounded
distributions and any Additional Amounts payable on the Debentures unless
otherwise stated. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the Institutional Trustee and to the
extent the Institutional Trustee has funds legally available in the Property
Account therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of (i) until
July 30, 2010, a 360-day year consisting of twelve 30-day months and (ii) from
and including July 30, 2010, a 360-day year and the actual number of days
elapsed in the relevant Distribution Period.

     The term "Distribution Period" means the period from and including the
immediately preceding Distribution Payment Date or in the case of the first
Distribution Period, the date of the original issuance of the securities to, but
excluding, the next applicable Distribution Payment Date or in the case of the
last Distribution Period, the date of redemption.

                                      A-I-1

<PAGE>

     (b) LIBOR for a given Distribution Period shall be determined by the
Calculation Agent in accordance with the following provisions:

          (i) On the second LIBOR Business Day (provided, that on such day
     commercial banks are open for business (including dealings in foreign
     currency deposits) in London (a "LIBOR Banking Day"), and otherwise the
     next preceding LIBOR Business Day that is also a LIBOR Banking Day) prior
     to April 30, July 30, October 30 and January 30, as the case may be,
     immediately prior to the commencement of such Distribution Period (each
     such day, a "LIBOR Determination Date"), LIBOR shall equal the rate, as
     obtained by the Calculation Agent, for three-month U.S. Dollar deposits in
     Europe which appears on Telerate Page 3750 (as defined in the International
     Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency
     Exchange Definitions) or such other page as may replace such Telerate Page
     3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date, as
     reported by Bloomberg Financial Markets Commodities News. "LIBOR Business
     Day" means any day that is not a Saturday, Sunday or other day on which
     commercial banking institutions in New York, New York or Wilmington,
     Delaware are authorized or obligated by law or executive order to be
     closed. If such rate is superseded on Telerate Page 3750 by a corrected
     rate before 12:00 noon (London time) on the same LIBOR Determination Date,
     the corrected rate as so substituted will be the applicable LIBOR for that
     LIBOR Determination Date.

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

          (iii) If the Calculation Agent is required but is unable to determine
     a rate in accordance with at least one of the procedures provided above,
     LIBOR for such Distribution Period shall be LIBOR in effect during the
     immediately preceding Distribution Period.

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

     (d) On each LIBOR Determination Date, the Calculation Agent shall notify,
in writing, the Sponsor and the Paying Agent of the applicable Coupon Rate in
effect for the related Distribution payment period. The Calculation Agent shall,
upon the request of the Holder of any Securities, provide the Coupon Rate then
in effect. All calculations made by the Calculation Agent in the absence of

                                      A-I-2

<PAGE>

manifest error shall be conclusive for all purposes and binding on the Sponsor
and the Holders of the Securities. The Paying Agent shall be entitled to rely on
information received from the Calculation Agent or the Sponsor as to the Coupon
Rate. The Sponsor shall, from time to time, provide any necessary information to
the Paying Agent relating to any original issue discount and interest on the
Securities that is included in any payment and reportable for taxable income
calculation purposes.

     (e) Distributions on the Securities will be cumulative, will accrue from
the date of original issuance, and will be payable, subject to extension of
Distribution payment periods as described herein, quarterly in arrears on April
30, July 30, October 30, and January 30 of each year, commencing on January 30,
2006 (each, a "Distribution Payment Date"). The Debenture Issuer has the right
under the Indenture to defer payments of interest on the Debentures by extending
the interest payment period for up to four consecutive quarterly periods (each,
an "Extension Period") at any time and from time to time on the Debentures,
subject to the conditions described below, during which Extension Period no
interest shall be due and payable. During any Extension Period, interest will
continue to accrue on the Debentures, and interest on such accrued interest
(such accrued interest and interest thereon referred to herein as "Deferred
Interest") will accrue at an annual rate equal to the applicable Coupon Rate in
effect for each such Extension Period, compounded quarterly from the date such
Deferred Interest would have been payable were it not for the Extension Period,
to the extent permitted by law. No Extension Period may end on a date other than
a Distribution Payment Date. At the end of any such Extension Period, the
Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on the
Debentures; provided, however, that no Extension Period may extend beyond the
Maturity Date, Redemption Date or Special Redemption Date and provided, further,
that, during any such Extension Period, the Debenture Issuer may not (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire, or make
a liquidation payment with respect to, any of the Debenture Issuer's capital
stock or (ii) make any payment due on or repay, repurchase or redeem any debt
securities of the Debenture Issuer that rank pari passu in all respects with or
junior in interest to the Debentures (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Debenture Issuer (1) in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, (2) in connection with a dividend reinvestment or
stockholder stock purchase plan or (3) in connection with the issuance of
capital stock of the Debenture Issuer (or securities convertible into or
exercisable for such capital stock), as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Debenture
Issuer's capital stock (or any capital stock of a subsidiary of the Debenture
Issuer) for any class or series of the Debenture Issuer's capital stock or of
any class or series of the Debenture Issuer's indebtedness for any class or
series of the Debenture Issuer's capital stock, (c) the purchase of fractional
interests in shares of the Debenture Issuer's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock). Prior
to the termination of any Extension Period, the Debenture Issuer may further
extend such period, provided, that such period together with all such previous
and further consecutive extensions thereof shall not exceed four consecutive
quarterly periods, or extend beyond the Maturity Date, Redemption Date or
Special Redemption Date. Upon the termination of any Extension Period and upon
the payment of all Deferred Interest, the Debenture Issuer may commence a new
Extension Period, subject to the foregoing requirements. No interest or Deferred
Interest shall be due and payable during an Extension Period, except at the end
thereof, but Deferred Interest shall accrue upon each installment of interest
that would otherwise have been due and payable during such Extension Period
until such installment is paid. The deferral of the payment of interest during
an Extension Period shall not defer the payment of any

                                      A-I-3

<PAGE>

Additional Amounts that may be due. If Distributions are deferred, the
Distributions due shall be paid on the date that the related Extension Period
terminates, or, if such date is not a Distribution Payment Date, on the
immediately following Distribution Payment Date, to Holders of the Securities as
they appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds legally available for the payment of such distributions in the
Property Account of the Trust. The Trust's funds available for Distribution to
the Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

     (f) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of the Registrar on the relevant record
dates. The relevant record dates shall be selected by the Administrators, which
dates shall be 15 days before the relevant payment dates. Distributions payable
on any Securities that are not punctually paid on any Distribution Payment Date,
as a result of the Debenture Issuer having failed to make a payment under the
Debentures, as the case may be, when due (taking into account any Extension
Period), will cease to be payable to the Person in whose name such Securities
are registered on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Securities are registered on
the special record date or other specified date determined in accordance with
the Indenture. If any Distribution Payment Date falls on a day that is not a
Business Day, then Distributions payable on such date will be made on the next
succeeding Business Day, in each case with the same force and effect as if made
on the applicable Distribution Payment Date.

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

     3. Liquidation Distribution upon Dissolution. In the event of the voluntary
or involuntary liquidation, dissolution, winding-up or termination of the Trust
(each, a "Liquidation") other than in connection with a redemption of the
Debentures, the Holders of the Securities will be entitled to receive out of the
assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the aggregate of the
stated liquidation amount of $1,000 per Security plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless in connection with such Liquidation, the Debentures in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of such Securities, with an interest rate equal to the Coupon Rate of,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on, and having the same record date as, such Securities,
after paying or making reasonable provision to pay all claims and obligations of
the Trust in accordance with Section 3808(e) of the Statutory Trust Act, shall
be distributed on a Pro Rata basis to the Holders of the Securities in exchange
for such Securities.

     The Sponsor, as the Holder of all of the Common Securities, has the right
at any time, upon receipt of an opinion of nationally recognized tax counsel
that Holders will not recognize any gain or loss for United States Federal
income tax purposes as a result of the distribution of Debentures, to dissolve
the Trust (including without limitation upon the occurrence of a Tax Event or an
Investment Company Event), and, after satisfaction of liabilities to creditors
of the Trust, cause the Debentures to be distributed to the Holders of the
Securities on a Pro Rata basis in accordance with the aggregate stated
liquidation amount thereof.

     The Trust shall dissolve on the first to occur of (i) July 30, 2040, the
expiration of the term of the Trust, (ii) a Bankruptcy Event with respect to the
Sponsor, the Trust or the Debenture Issuer, (iii) (other

                                      A-I-4

<PAGE>

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

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

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

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

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

     4. Redemption and Distribution. (a) The Debentures will mature on July 30,
2035. The Debentures may be redeemed by the Debenture Issuer, in whole or in
part, on any Distribution Payment Date on or after July 30, 2010 at the
Redemption Price, upon not less than 30 nor more than 60 days'

                                      A-I-5

<PAGE>

notice to Holders of such Debentures. In addition, upon the occurrence and
continuation of a Tax Event or an Investment Company Event, the Debentures may
be redeemed by the Debenture Issuer in whole but not in part, at any time within
90 days following the occurrence of such Tax Event or Investment Company Event,
as the case may be (the "Special Redemption Date"), at the Special Redemption
Price, upon not less than 30 nor more than 60 days' notice to Holders of the
Debentures so long as such Tax Event or Investment Company Event, as the case
may be, is continuing.

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

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

     "Special Event" means either a Tax Event or an Investment Company Event.

     "Redemption Price" means 100% of the principal amount of the Debentures
being redeemed plus accrued and unpaid interest on such Debentures to the
Redemption Date or, in the case of redemption in full at maturity, the Maturity
Date, or, in the case of a redemption due to the occurrence of a Special Event,
to the Special Redemption Date if such Special Redemption Date is on or after
July 30, 2010.

     "Special Redemption Price" means (1) if the Special Redemption Date is
before July 30, 2010, 107.5% of the principal amount of the Debentures being
redeemed pursuant to Section 10.02 of the Indenture plus accrued and unpaid
interest on such Debentures to the Special Redemption Date and (2) if the
Special Redemption Date is on or after July 30, 2010, the Redemption Price for
such Special Redemption Date.

     "Redemption Date" means the date fixed for the redemption of Capital
Securities, which shall be any Distribution Payment Date on or after July 30,
2010.

                                      A-I-6

<PAGE>

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

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

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

     (e) Redemption or Distribution Procedures.

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

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

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

                                      A-I-7

<PAGE>

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

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

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

     5. Voting Rights - Capital Securities. (a) Except as provided under
Sections 5(b) and 7 and as otherwise required by law and the Declaration, the
Holders of the Capital Securities will have no voting rights. The Administrators
are required to call a meeting of the Holders of the Capital Securities if
directed to do so by Holders of not less than 10% in liquidation amount of the
Capital Securities.

     (b) Subject to the requirements of obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Capital
Securities, voting separately as a class, have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available under the Indenture as the holder of the Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable or (iv) consent on behalf of all the Holders of the Capital
Securities to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required; provided, however, that, where
a consent or action under the Indenture would require the consent or act of the
holders of greater than a simple majority in principal amount of Debentures (a
"Super Majority") affected thereby, the Institutional Trustee may only give such
consent or take such action at the written direction of the Holders of not less
than the proportion in liquidation amount of the Capital Securities outstanding
which the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding. If the Institutional Trustee fails to enforce its
rights under the Debentures after the Holders of a Majority in liquidation
amount of such Capital Securities have so directed the Institutional Trustee, to
the fullest extent permitted by law, a Holder of the Capital Securities may
institute a legal proceeding directly against the Debenture Issuer to enforce
the Institutional Trustee's

                                      A-I-8

<PAGE>

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

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

     A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Event of Default hereunder. Any required approval or direction of
Holders of the Capital Securities may be given at a separate meeting of Holders
of the Capital Securities convened for such purpose, at a meeting of all of the
Holders of the Securities in the Trust or pursuant to written consent. The
Institutional Trustee will cause a notice of any meeting at which Holders of the
Capital Securities are entitled to vote, or of any matter upon which action by
written consent of such Holders is to be taken, to be mailed to each Holder of
record of the Capital Securities. Each such notice will include a statement
setting forth the following information (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the Holders of
the Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.

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

                                      A-I-9
<PAGE>

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

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

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

     (c) Subject to Section 6.7 of the Declaration and only after each Event of
Default (if any) with respect to the Capital Securities has been cured, waived
or otherwise eliminated and subject to the requirements of the second to last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waiving any past default and its
consequences that are waivable under the Indenture, or (iii) exercising any
right to rescind or annul a declaration that the principal of all the Debentures
shall be due and payable, provided, however, that, where a consent or action
under the Indenture would require a Super Majority, the Institutional Trustee
may only give such consent or take such action at the written direction of the
Holders of not less than the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Notwithstanding this Section
6(c), the Institutional Trustee shall not revoke any action previously
authorized or approved by a vote or consent of the Holders of the Capital
Securities. Other than with respect to directing the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or the Debenture Trustee as set forth above, the Institutional Trustee shall not
take any action described in clause (i), (ii) or (iii) above, unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights under the Declaration, to the
fullest extent permitted by law any Holder of the Common Securities may
institute a legal proceeding directly against any Person to enforce the
Institutional Trustee's rights under the Declaration, without first instituting
a legal proceeding against the Institutional Trustee or any other Person.

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

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

                                    A-I-10

<PAGE>

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

     (b) In the event the consent of the Institutional Trustee as the holder of
the Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
a Super Majority, the Institutional Trustee may only give such consent at the
written direction of the Holders of not less than the proportion in liquidation
amount of the Securities which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding.

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

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

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

     9. Ranking. The Capital Securities rank pari passu with, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive payment of Distributions and

                                     A-I-11

<PAGE>

payments upon liquidation, redemption and otherwise are subordinated to the
rights of the Holders of the Capital Securities with the result that no payment
of any Distribution on, or Redemption Price or Special Redemption Price of, any
Common Security, and no other payment on account of redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price or Special Redemption Price the full
amount of such Redemption Price or Special Redemption Price on all outstanding
Capital Securities then called for redemption, shall have been made or provided
for, and all funds immediately available to the Institutional Trustee shall
first be applied to the payment in full in cash of all Distributions on, or the
Redemption Price or Special Redemption Price of, the Capital Securities then due
and payable.

     10. Acceptance of Guarantee and Indenture. Each Holder of the Capital
Securities and the Common Securities, by the acceptance of such Securities,
agrees to the provisions of the Guarantee, including the subordination
provisions therein and to the provisions of the Indenture.

     11. No Preemptive Rights. The Holders of the Securities shall have no, and
the issuance of the Securities is not subject to, preemptive or similar rights
to subscribe for any additional securities.

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

                                     A-I-12

<PAGE>

                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

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

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

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND
WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR
OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (EACH A "PLAN"), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT
IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR
HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS
ELIGIBLE FOR THE

                                     A-1-1

<PAGE>

EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE
OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN
WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT
EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3)
OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE
OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY
OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO
FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH
THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

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

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

                                     A-1-2

<PAGE>

Certificate Number P-1               Number of Capital Securities [____________]

                             CUSIP NO [___________]

                    Certificate Evidencing Capital Securities

                                       of

                           Hanover Statutory Trust II

                          Fixed/Floating Rate TRUPS(R)

                (liquidation amount $1,000 per Capital Security)

     Hanover Statutory Trust II, a statutory trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that [______________] (the
"Holder") is the registered owner of [____________] capital securities of the
Trust representing undivided beneficial interests in the assets of the Trust,
designated the Fixed/Floating Rate TRUPS(R) (liquidation amount $1,000 per
Capital Security) (the "Capital Securities"). Subject to the Declaration (as
defined below), the Capital Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
Certificate duly endorsed and in proper form for transfer. The Capital
Securities represented hereby are issued pursuant to, and the designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities shall in all respects be subject to, the provisions of
the Amended and Restated Declaration of Trust of the Trust, dated as of November
4, 2005, among John A. Burchett and Irma N. Tavares, as Administrators,
Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as
Institutional Trustee, Hanover Capital Mortgage Holdings, Inc., as Sponsor, and
the holders from time to time of undivided beneficial interests in the assets of
the Trust, including the designation of the terms of the Capital Securities as
set forth in Annex I to the Declaration, as the same may be amended from time to
time (the "Declaration"). Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is entitled to the
benefits of the Guarantee to the extent provided therein. The Sponsor will
provide a copy of the Declaration, the Guarantee, and the Indenture to the
Holder without charge upon written request to the Sponsor at its principal place
of business.

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

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

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

                                     A-1-3

<PAGE>

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

                                        Hanover Statutory Trust II

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

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

                          CERTIFICATE OF AUTHENTICATION

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

                                        Wilmington Trust Company,
                                        not in its individual capacity but
                                        solely as the Institutional Trustee

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

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

                                     A-1-4

<PAGE>

                          [FORM OF REVERSE OF SECURITY]

     Distributions payable on each Capital Security will be payable (i) until
July 30, 2010, at a fixed rate per annum equal to 9.209% and (ii) from and
including July 30, 2010, at a variable per annum rate of interest, reset
quarterly, equal to LIBOR (as defined in the Declaration) plus 4.25% (the
"Coupon Rate") of the stated liquidation amount of $1,000 per Capital Security,
such rate being the rate of interest payable on the Debentures to be held by the
Institutional Trustee. Except as set forth below in respect of an Extension
Period, Distributions in arrears for more than one quarterly period will bear
interest thereon compounded quarterly at the applicable Coupon Rate for each
such quarterly period (to the extent permitted by applicable law). The term
"Distributions" as used herein includes cash distributions, any such compounded
distributions and any Additional Amounts payable on the Debentures unless
otherwise stated. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the Institutional Trustee and to the
extent the Institutional Trustee has funds legally available in the Property
Account therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution Period on the basis of (i) until
July 30, 2010, a 360-day year consisting of twelve 30-day months and (ii) from
and including July 30, 2010, a 360-day year and the actual number of days
elapsed in the relevant Distribution Period.

     Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on April 30, July 30, October 30 and
January 30 of each year, commencing on January 30, 2006 (each, a "Distribution
Payment Date"). The Debenture Issuer has the right under the Indenture to defer
payments of interest on the Debentures by extending the interest payment period
for up to four consecutive quarterly periods (each, an "Extension Period") at
any time and from time to time on the Debentures, subject to the conditions
described below, during which Extension Period no interest shall be due and
payable. During any Extension Period, interest will continue to accrue on the
Debentures, and interest on such accrued interest (such accrued interest and
interest thereon referred to herein as "Deferred Interest") will accrue at an
annual rate equal to the Coupon Rate in effect for each such Extension Period,
compounded quarterly from the date such Deferred Interest would have been
payable were it not for the Extension Period, to the extent permitted by law. No
Extension Period may end on a date other than a Distribution Payment Date. At
the end of any such Extension Period, the Debenture Issuer shall pay all
Deferred Interest then accrued and unpaid on the Debentures; provided, however,
that no Extension Period may extend beyond the Maturity Date, Redemption Date or
Special Redemption Date. Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period, provided, that such period
together with all such previous and further consecutive extensions thereof shall
not exceed four consecutive quarterly periods, or extend beyond the Maturity
Date, Redemption Date or Special Redemption Date. Upon the termination of any
Extension Period and upon the payment of all Deferred Interest, the Debenture
Issuer may commence a new Extension Period, subject to the foregoing
requirements. No interest or Deferred Interest shall be due and payable during
an Extension Period, except at the end thereof, but Deferred Interest shall
accrue upon each installment of interest that would otherwise have been due and
payable during such Extension Period until such installment is paid. The
deferral of the payment of interest during an Extension Period shall not defer
the payment of any Additional Amounts that may be due. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date. Distributions on the Securities must be paid on the dates payable (after
giving effect to any Extension Period) to the extent that the Trust has funds
legally available for the payment of such distributions in the Property Account
of the Trust. The Trust's funds available for Distribution to the Holders of the
Securities will be limited to payments received from the Debenture Issuer. The
payment of Distributions out of moneys held by the Trust is guaranteed by the
Guarantor pursuant to the Guarantee.

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

                                     A-1-5

<PAGE>

                                   ASSIGNMENT

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

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

__________________________________________
(Insert address and zip code of assignee),

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

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

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

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

Signature Guarantee:(1)

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

                                     A-1-6

<PAGE>

                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

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

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

                                     A-2-1

<PAGE>

Certificate Number C-1                           Number of Common Securities 620

                    Certificate Evidencing Common Securities

                                       of

                           Hanover Statutory Trust II

     Hanover Statutory Trust II, a statutory trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that Hanover Capital Mortgage
Holdings, Inc. (the "Holder") is the registered owner of 620 common securities
of the Trust representing undivided beneficial interests in the assets of the
Trust (liquidation amount $1,000 per Common Security)(the "Common Securities").
The Common Securities represented hereby are issued pursuant to, and the
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities shall in all respects be subject to, the
provisions of the Amended and Restated Declaration of Trust of the Trust, dated
as of November 4, 2005, among John A. Burchett and Irma N. Tavares, as
Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Institutional Trustee, the Holder, as Sponsor, and the holders from
time to time of undivided beneficial interests in the assets of the Trust,
including the designation of the terms of the Common Securities as set forth in
Annex I to the Declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Sponsor will provide a copy of the
Declaration and the Indenture to the Holder without charge upon written request
to the Sponsor at its principal place of business.

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

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

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

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

                                     A-2-2

<PAGE>

     IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of
____, 2005.

                                        Hanover Statutory Trust II

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

                                     A-2-3

<PAGE>

                          [FORM OF REVERSE OF SECURITY]

     Distributions payable on each Common Security will be identical in amount
to the Distributions payable on each Capital Security, which is (i) until July
30, 2010, at a fixed rate per annum equal to 9.209% and (ii) from and including
July 30, 2010, at a variable per annum rate of interest, reset quarterly, equal
to LIBOR (as defined in the Declaration) plus 4.25% (the "Coupon Rate") of the
stated liquidation amount of $1,000 per Common Security, such rate being the
rate of interest payable on the Debentures to be held by the Institutional
Trustee. Except as set forth below in respect of an Extension Period,
Distributions in arrears for more than one quarterly period will bear interest
thereon compounded quarterly at the applicable Coupon Rate for each such
quarterly period (to the extent permitted by applicable law). The term
"Distributions" as used herein includes cash distributions, any such compounded
distributions and any Additional Amounts payable on the Debentures unless
otherwise stated. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the Institutional Trustee and to the
extent the Institutional Trustee has funds legally available in the Property
Account therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution Period on the basis of (i) until
July 30, 2010 a 360-day year consisting of twelve 30-day months and (ii) from
and including July 30, 2010, a 360-day year and the actual number of days
elapsed in the relevant Distribution Period.

     Except as otherwise described below, Distributions on the Common Securities
will be cumulative, will accrue from the date of original issuance and will be
payable quarterly in arrears on April 30, July 30, October 30 and January 30 of
each year, commencing on January 30, 2006 (each, a "Distribution Payment Date").
The Debenture Issuer has the right under the Indenture to defer payments of
interest on the Debentures by extending the interest payment period for up to
four consecutive quarterly periods (each, an "Extension Period") at any time and
from time to time on the Debentures, subject to the conditions described below,
during which Extension Period no interest shall be due and payable. During any
Extension Period, interest will continue to accrue on the Debentures, and
interest on such accrued interest (such accrued interest and interest thereon
referred to herein as "Deferred Interest") will accrue at an annual rate equal
to the Coupon Rate in effect for each such Extension Period, compounded
quarterly from the date such Deferred Interest would have been payable were it
not for the Extension Period, to the extent permitted by law. No Extension
Period may end on a date other than a Distribution Payment Date. At the end of
any such Extension Period, the Debenture Issuer shall pay all Deferred Interest
then accrued and unpaid on the Debentures; provided, however, that no Extension
Period may extend beyond the Maturity Date, Redemption Date or Special
Redemption Date. Prior to the termination of any Extension Period, the Debenture
Issuer may further extend such period, provided, that such period together with
all such previous and further consecutive extensions thereof shall not exceed
four consecutive quarterly periods, or extend beyond the Maturity Date,
Redemption Date or Special Redemption Date. Upon the termination of any
Extension Period and upon the payment of all Deferred Interest, the Debenture
Issuer may commence a new Extension Period, subject to the foregoing
requirements. No interest or Deferred Interest shall be due and payable during
an Extension Period, except at the end thereof, but Deferred Interest shall
accrue upon each installment of interest that would otherwise have been due and
payable during such Extension Period until such installment is paid. The
deferral of the payment of interest during an Extension Period shall not defer
the payment of any Additional Amounts that may be due. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date. Distributions on the Securities must be paid on the dates payable (after
giving effect to any Extension Period) to the extent that the Trust has funds
legally available for the payment of such distributions in the Property Account
of the Trust. The Trust's funds legally available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

                                     A-2-4

<PAGE>

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

                                   ASSIGNMENT

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

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

__________________________________________
(Insert address and zip code of assignee),

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

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

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

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

Signature Guarantee:(1)

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

                                     A-2-5

<PAGE>

                                                                       EXHIBIT B

                         FORM OF TRANSFEREE CERTIFICATE
                           (UNLESS EXHIBIT C APPLIES)

                                                                 __________, [ ]

Hanover Capital Mortgage Holdings, Inc.
Hanover Statutory Trust II
200 Metroplex Drive, Suite 100
Edison, New Jersey 08817

Re:  Purchase of $[________] stated liquidation amount of Fixed/Floating Rate
     TRUPS(R) (the "Capital Securities") of Hanover Statutory Trust II

Ladies and Gentlemen:

     Reference is hereby made to the Amended and Restated Declaration of Trust
of Hanover Statutory Trust II, dated as of November 4, 2005, as amended from
time to time (the "Declaration"), among John A. Burchett and Irma N. Tavares, as
Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Institutional Trustee, Hanover Capital Mortgage Holdings, Inc., as
Sponsor, and the holders from time to time of undivided beneficial interests in
the assets of Hanover Statutory Trust II. Capitalized terms used but not defined
herein shall have the meanings given them in the Declaration.

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

1. We understand that the Fixed/Floating Rate TRUPS(R) (the "Capital
Securities") of Hanover Statutory Trust II (the "Trust") (including the
guarantee (the "Guarantee") of Hanover Capital Mortgage Holdings, Inc. (the
"Company") executed in connection therewith) and the Fixed/Floating Rate Junior
Subordinated Debt Securities due 2035 of the Company (the "Subordinated Debt
Securities") (the Capital Securities, the Guarantee and the Subordinated Debt
Securities together being referred to herein as the "Offered Securities"), have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered or sold except as permitted in the
following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing the Capital Securities that, if we decide to
offer, sell or otherwise transfer any such Capital Securities, such offer, sale
or transfer will be made only (a) to the Company or the Trust, (b) pursuant to
Rule 144A under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (c) to a "Non-U.S. Person" in
an "offshore transaction" pursuant to Regulation S under the Securities Act, (d)
pursuant to an exemption from registration, to an "accredited investor" within
the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring Capital Securities for its own account or for
the account of such an accredited investor for investment purposes and not with
a view to, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act, or (e) pursuant to another available exemption
from the registration requirements of the Securities Act, and in each of the
foregoing cases in accordance with any applicable state securities laws and any
requirements of law that govern the disposition of our property. The foregoing
restrictions on resale will not apply subsequent to the date on which, in the
written opinion of counsel, the Capital Securities are not "restricted
securities" within the meaning of Rule 144 under the Securities Act. If any
resale or other transfer of the Capital Securities is proposed to be made
pursuant to clause (d) or (e) above, the transferor shall deliver a letter from
the

                                      B-1

<PAGE>

transferee substantially in the form of this letter to the Institutional Trustee
as Transfer Agent, which shall provide as applicable, among other things, that
the transferee is an "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. We acknowledge on our behalf and on behalf of any investor
account for which we are purchasing Securities that the Trust and the Company
reserve the right prior to any offer, sale or other transfer pursuant to clause
(d) or (e) to require the delivery of any opinion of counsel, certifications
and/or other information satisfactory to the Trust and the Company. We
understand that the certificates for any Capital Security that we receive will
bear a legend substantially to the effect of the foregoing.

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

3. We are a sophisticated institutional investor, have knowledge and experience
in financial matters and are capable of independently evaluating the merits and
risks of our investment decision with respect to the Capital Securities, and we
have conducted, to the extent we deemed necessary, an independent investigation
of such matters, as, in our judgment, is necessary for us to make an informed
investment decision with respect to the acquisition of an interest in the
Capital Securities.

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

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

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

7. We acknowledge that the Trust and the Company and others will rely upon the
truth and accuracy of the foregoing acknowledgments, representations, warranties
and agreements and agree that if any of the acknowledgments, representations,
warranties and agreements deemed to have been made by our purchase of the
Capital Securities are no longer accurate, we shall promptly notify the Initial
Purchaser. If we are acquiring any Capital Securities as a fiduciary or agent
for one or more investor accounts, we represent that we have sole discretion
with respect to each such investor account and that we have full power to make
the foregoing acknowledgments, representations and agreement on behalf of each
such investor account. You are irrevocably authorized to produce this letter or
a copy hereof to any interested

                                      B-2

<PAGE>

party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.

                                        (Name of Purchaser)

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

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

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

Name: _____________________________

Address: __________________________

Taxpayer ID Number: _______________

                                      B-3

<PAGE>

                                                                       EXHIBIT C

                         FORM OF TRANSFEROR CERTIFICATE
               TO BE EXECUTED FOR QIBs OR REGULATION S TRANSFEREES

                                                                 __________, [_]

Hanover Capital Mortgage Holdings, Inc.
Hanover Statutory Trust II
200 Metroplex Drive, Suite 100
Edison, New Jersey 08817

Re:  Purchase of $[______] stated liquidation amount of Fixed/Floating Rate
     TRUPS(R) (the "Capital Securities") of Hanover Statutory Trust II

     Reference is hereby made to the Amended and Restated Declaration of Trust
of Hanover Statutory Trust II, dated as of November 4, 2005, as amended from
time to time (the "Declaration"), among John A. Burchett and Irma N. Tavares, as
Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Institutional Trustee, Hanover Capital Mortgage Holdings, Inc., as
Sponsor, and the holders from time to time of undivided beneficial interests in
the assets of Hanover Statutory Trust II. Capitalized terms used but not defined
herein shall have the meanings given them in the Declaration.

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

     In accordance with Section 8.2(b) of the Declaration, the Transferor does
hereby certify that such Capital Securities are being transferred in accordance
with the transfer restrictions set forth in the Capital Securities and:

________ Rule 144A under the Securities Act ("Rule 144A"), to a transferee that
         the Transferor reasonably believes is purchasing the Capital Securities
         for its own account or an account with respect to which the transferee
         exercises sole investment discretion and the transferee and any such
         account is a "qualified institutional buyer" within the meaning of Rule
         144A, in a transaction meeting the requirements of Rule 144A and in
         accordance with applicable securities laws of any state of the United
         States or any other jurisdiction; or

________ Regulation S under the Securities Act ("Regulation S"), to a person
         that is not a "U.S. Person" for purposes of Regulation S in an
         "offshore transaction" for purposes of Regulation S.

     We acknowledge that the Trust and the Sponsor and others will rely upon the
truth and accuracy of the foregoing acknowledgments, representations, warranties
and agreements. You are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.

                                        (Name of Transferor)

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

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

                                      C-1

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