10-Q

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001.
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM           TO          .

UNITED SECURITY BANCSHARES
(Exact name of registrant as specified in its charter)

CALIFORNIA (State or other jurisdiction of incorporation or organization)	91-2112732 (I.R.S. Employer Identification No.)
1525 East Shaw Ave., Fresno, California (Address of principal executive offices)	93710 (Zip Code)

Registrants telephone number, including area code (559) 248-4943

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days. Yes /x/  No / /

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, no par value
(Title of Class)

Shares outstanding as of July 31, 2001: 5,478,810

Page 1 of 30 sequential pages

TABLE OF CONTENTS

Facing Page		1
Table of Contents		2
PART I.  Financial Information
ITEM 1.  Financial Statements
	Balance Sheets	3
	Statements of Income and Comprehensive Income	4
	Statements of Changes in Shareholders' Equity	5
	Statements of Cash Flows	6
	Notes to Financial Statements	7
ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
	Results of Operations	16
	Financial Condition	19
	Liquidity and Asset/Liability Management	26
	Interest Rate Sensitivity and Market Risk	27
	Regulatory Matters	31
PART II. Other Information		32
Signatures		34

2

PART I.  Financial Information

ITEM 1.  Financial Statements

United Security Bancshares
Consolidated Statements of Condition—Balance Sheets
June 30, 2001 (unaudited) and December 31, 2000

				June 30, 2001			December 31, 2000
Assets
	Cash and due from banks			$	13,795,881		$	19,175,763
	Federal funds sold and securities purchased under agreements to resell				465,000			0
		Cash and cash equivalents			14,260,881			19,175,763
Securities available for sale (Note 2)					56,602,014			49,757,963
Securities held to maturity (Note 3)					0			10,248,105
	Total Investment Securities				56,602,014			60,006,068
Loans and leases (Note 4)					298,422,366			261,368,973
	Unearned fees				(917,506	)		(793,647	)
	Allowance for credit losses				(3,902,136	)		(3,772,943	)
		Net loans			293,602,724			256,802,383
	Accrued interest receivable				3,745,776			3,545,160
	Premises and equipment—net				3,173,162			3,401,703
	Other real estate owned				3,871,815			2,958,841
	Intangible assets				2,839,808			3,019,587
	Cash surrender value of life insurance				2,356,784			2,301,765
	Investment in limited partnership				2,876,817			2,079,557
	Deferred income taxes				1,282,768			1,240,260
	Other assets				2,902,629			2,301,326
Total Assets				$	387,515,178		$	356,832,413
Liabilities & Shareholders' Equity
Liabilities
	Deposits (Note 5)
		Noninterest bearing		$	49,194,192		$	52,897,725
		Interest bearing			259,916,508			218,964,804
			Total deposits		309,110,700			271,862,529
	Federal funds purchased and securities sold under agreements to repurchase (Note 6)				38,250,000			47,524,000
	Other borrowings (Note 6)				999,162			693,328
	Accrued interest payable				1,157,548			1,243,757
	Income taxes payable				206,530			63,949
	Accounts payable and other liabilities				1,831,420			1,695,631
			Total liabilities		351,555,360			323,083,194
Commitments and Contingent Liabilities (Note 4)
Shareholders' Equity (Note 7)
	Common stock, no par value 10,000,000 shares authorized, 5,478,810 and 5,419,487 issued and outstanding, in 2001 and 2000, respectively				19,810,334			19,178,104
	Retained earnings				16,833,135			14,916,233
	Unearned ESOP shares				(956,437	)		(681,665	)
	Accumulated other comprehensive income				272,786			336,547
			Total shareholders' equity		35,959,818			33,749,219
Total liabilities and shareholders' equity				$	387,515,178		$	356,832,413

See notes to financial statements

3

United Security Bancshares
Consolidated Statements of Income and Comprehensive Income (unaudited)

			Quarter Ended June 30, 2001			Quarter Ended June 30, 2000		Six Months Ended June 30, 2001			Six Months Ended June 30, 2000
Interest Income:
	Loans, including fees		$	6,874,436		$	5,908,638	$	13,709,548		$	11,193,368
	Investment securities—AFS—taxable			733,613			814,254		1,446,490			1,500,596
	Investment securities—HTM—taxable			49,683			152,228		201,912			302,790
	Investment securities—AFS—nontaxable			37,355			40,043		77,316			80,827
	Federal funds sold and securities purchased under agreements to resell			31,006			35,553		84,155			186,751
		Total interest income		7,726,093			6,950,716		15,519,421			13,264,332
Interest Expense:
	Interest on deposits			2,960,045			2,288,324		5,901,346			4,416,370
	Interest on other borrowings			418,258			400,914		893,139			568,690
		Total interest expense		3,378,303			2,689,238		6,794,485			4,985,060
Net Interest Income Before Provision for Credit Losses				4,347,790			4,261,478		8,724,936			8,279,272
Provision for Credit Losses (Note 4)				401,324			380,000		776,324			680,000
Net Interest Income				3,946,466			3,881,478		7,948,612			7,599,272
Noninterest Income:
	Customer service fees			745,037			556,530		1,309,907			1,155,904
	Gain on sale of securities			276,058			5,649		276,904			5,649
	Gain on sale of other real estate owned			35,681			0		35,681			15,719
	Gain on sale of fixed assets			0			0		7,905			0
	Other			69,339			64,456		131,424			122,071
		Total noninterest income		1,126,115			626,635		1,761,821			1,299,343
Noninterest Expense:
	Salaries and employee benefits			1,110,956			935,405		2,222,108			1,975,394
	Occupancy expense			414,818			393,790		838,346			806,250
	Data processing			128,630			131,404		251,159			260,342
	Professional fees			149,903			62,093		202,453			151,845
	Director fees			51,150			46,650		99,000			87,000
	Amortization of intangibles			89,890			89,890		179,779			179,779
	Correspondent bank service charges			52,247			53,660		99,043			97,562
	Other			411,379			362,040		757,579			701,114
		Total noninterest expense		2,408,973			2,074,932		4,649,467			4,259,286
Income Before Taxes on Income				2,663,608			2,433,181		5,060,966			4,639,329
Taxes on Income				989,442			860,638		1,873,995			1,626,152
Net Income			$	1,674,166		$	1,572,543	$	3,186,971		$	3,013,177
Other comprehensive income, net of tax:
Unrealized (loss) gain on available for sale securities—net income tax (benefit) of $(92,308), $21,551, $(42,507) and $27,260				(138,461	)		32,327		(63,761	)		40,890
Comprehensive Income			$	1,535,705		$	1,604,870	$	3,123,210		$	3,054,067
Net Income per common share (Note 9)
	Basic		$	0.31		$	0.30	$	0.59		$	0.57
	Diluted		$	0.30		$	0.28	$	0.57		$	0.54
Shares on which net income per common share were based (Note 9)
	Basic			5,442,152			5,327,843		5,442,152			5,327,843
	Diluted			5,576,016			5,582,252		5,576,016			5,582,252

See notes to financial statements

4

United Security Bancshares
Consolidated Statements of Shareholders' Equity
Periods Ended June 30, 2001

		Common stock		Common stock
		Number of Shares		Amount			Retained Earnings			Unearned ESOP Shares			Other Comprehensive Income (Loss)			Total
Balance January 1, 2000		5,230,949		$	17,986,895		$	10,726,115		$	0		$	(397,016	)	$	28,315,994
	Director/Employee stock options exercised	145,287			655,204												655,204
	Tax benefit of stock options exercised				74,746												74,746
	Net changes in unrealized gain (loss) on available for sale securities (net of income tax of $27,260)													40,890			40,890
	Dividends on common stock ($0.18 per share)							(970,384	)								(970,384	)
	Unearned ESOP shares	(8,500	)								(149,705	)					(149,705	)
	Net Income							3,013,177									3,013,177
Balance June 30, 2000 (unaudited)		5,367,736			18,716,845			12,768,908			(149,705	)		(356,126	)		30,979,922
	Director/Employee stock options exercised	82,370			394,794												394,794
	Tax benefit of stock options exercised				66,854												66,854
	Net changes in unrealized gain (loss) on available for sale securities (net of income tax of $483,333)													692,673			692,673
	Dividends on common stock ($0.18 per share)							(1,096,101	)								(1,096,101	)
	Unearned ESOP Shares Purchased	(38,361	)								(666,865	)					(666,865	)
	Release of unearned ESOP shares	7,742			(389	)					134,905						134,516
	Net Income							3,243,426									3,243,426
Balance December 31, 2000		5,419,487			19,178,104			14,916,233			(681,665	)		336,547			33,749,219
	Director/Employee stock options exercised	75,330			558,816												558,816
	Tax benefit of stock options exercised				73,414												73,414
Net changes in unrealized gain (loss) on available for sale securities (net of income tax benefit of $42,507)														(63,761	)		(63,761	)
	Dividends on common stock ($0.23 per share)							(1,270,069	)								(1,270,069	)
	Unearned ESOP Shares Purchased	(22,185	)								(382,004	)					(382,004	)
	Release of unearned ESOP shares	6,178									107,232						107,232
	Net Income							3,186,971									3,186,971
Balance June 30, 2001 (unaudited)		5,478,810		$	19,810,334		$	16,833,135		$	(956,437	)	$	272,786		$	35,959,818

See notes to financial statements

5

United Security Bancshares
Consolidated Statements of Cash Flows
Periods Ended June 30, 2001 and 2000 (unaudited)

			2001			2000
Cash Flows From Operating Activities:
	Net income		$	3,186,971		$	3,013,177
	Adjustments to reconcile net earnings to cash provided by operating activities:
		Provision for credit losses		776,324			680,000
		Depreciation and amortization		586,892			584,432
		Amortization (accretion) of investment securities		64,650			(8,148	)
		Gain on sale of securities		(276,904	)		(5,649	)
		Increase in accrued interest receivable		(200,616	)		(927,397	)
		Decrease in accrued interest payable		(86,209	)		(281,790	)
		Increase in unearned fees		123,859			232,990
		Increase in income taxes payable		142,581			111,717
		Deferred income taxes		0			(517,311	)
		Increase in accounts payable and accrued liabilities		45,815			53,530
		Gain on sale of other real estate owned		(35,681	)		(15,719	)
		Gain on sale of assets		(7,905	)		0
		Increase in surrender value of life insurance		(55,019	)		(47,850	)
		Loss in limited partnership interest		90,993			104,308
		Net decrease (increase) in other assets		406,356			(555,285	)
	Net cash provided by operating activities			4,762,107			2,421,005
Cash Flows From Investing Activities:
	Purchases of available-for-sale securities			(50,969,528	)		(21,562,332	)
	(Purchase) redemption of FHLB/FRB and other bank stock			(579,600	)		356,344
	Maturities and calls of available-for-sale securities			29,279,025			11,180,336
	Maturities and calls of held-to-maturity securities			10,250,000			0
	Proceeds from sales of available-for-sale securities			14,950,542			7,477,144
	Investment in limited partnership			(888,252	)		0
	Net increase in loans			(38,825,231	)		(42,108,803	)
	Proceeds from sales of other real estate owned			0			97,782
	Capital expenditures for premises and equipment			(193,667	)		(175,838	)
	Proceeds from sales of premises and equipment			23,000			0
	Net cash used in investing activities			(36,953,711	)		(44,735,367	)
Cash Flows From Financing Activities:
	Net increase in demand deposit and savings accounts			465,271			4,951,818
	Net increase in certificates of deposit			36,782,900			12,025,303
	Net decrease in federal funds purchased			(22,630,000	)		(512,510	)
	Net increase in repurchase agreements			13,356,000			30,957,238
	Director/Employee stock options exercised			558,816			655,204
	Proceeds from ESOP borrowings			399,143			149,705
	Repayment of ESOP borrowings			(93,309	)		0
	Purchase of unearned ESOP shares			(382,004	)		(149,705	)
	Payment of dividends			(1,180,095	)		(851,716	)
	Net cash provided by financing activities			27,276,722			47,225,337
Net (decrease) increase in cash and cash equivalents				(4,914,882	)		4,910,975
Cash and cash equivalents at beginning of period				19,175,763			11,815,235
Cash and cash equivalents at end of period			$	14,260,881		$	16,726,210

See notes to financial statements

6

United Security Bancshares
Notes to Consolidated Financial Statements—(Unaudited)

1.  Summary of Significant Accounting and Reporting Policies

    The consolidated financial statements include the accounts of United Security Bancshares, Inc., and its wholly owned subsidiaries, United Security Bank (the "Bank"), and United Security Bancshares Capital Trust I (the "Trust"), (collectively the "Company"). Intercompany accounts and transactions have been eliminated in consolidation. In the following notes, references to the Bank are references to United Security Bank. References to the Company are references to United Security Bancshares, Inc. (including the Bank), except for periods prior to June 12, 2001, in which case, references to the Company are references to the Bank.

    United Security Bancshares is a bank holding company, incorporated in the state of California for the purpose of acquiring all the capital stock of the Bank through a holding company reorganization (the "Reorganization") of the Bank. The reorganization, which was accounted for in a manner similar to a pooling of interests, was completed on June 12, 2001. Management believes the reorganization will provide the Company greater operating and financial flexibility and will permit expansion into a broader range of financial services and other business activities.

    United Security Bancshares Capital Trust I, a subsidiary of United Security Bancshares, is a Delaware statutory business trust formed for the exclusive purpose of issuing and selling Trust Preferred Securities. The Trust was formed on June 28, 2001 and had no financial impact on the consolidated statements as of June 30, 2001.

    These unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information on a basis consistent with the accounting policies reflected in the audited financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2000. The consolidated financial statements of the Company for the periods prior to the Reorganization consist of those of the Bank. These interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for any other interim period or for the year as a whole.

7

2.  Securities Available for Sale

    Following is a comparison of the amortized cost and approximate fair value of securities available for sale for the periods ended June 30, 2001 and December 31, 2000:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value (Carrying Amount)
June 30, 2001:
U.S. Government agencies	$	50,153,155	$	520,016	$	(145,437	)	$	50,527,734
U.S. Government agency collateralized mortgage obligations		764,277		633		(3,951	)		760,959
Obligations of state and political subdivisions		3,229,939		83,382		0			3,313,321
Other debt securities		2,000,000		0		0			2,000,000
	$	56,147,371	$	604,031	$	(149,388	)	$	56,602,014
December 31, 2000:
U.S. Government agencies	$	42,522,446	$	489,030	$	(78,794	)	$	42,932,682
U.S. Government agency collateralized mortgage obligations		1,357,252		0		(15,867	)		1,341,385
Obligations of state and political subdivisions		3,317,353		71,743		0			3,389,096
Other debt securities		2,000,000		94,800		0			2,094,800
	$	49,197,051	$	655,573	$	(94,661	)	$	49,757,963

    There were realized gains on sales of available-for-sale securities totaling $275,217 during the six month period ended June 30, 2001, realized gains on sale of available-for-sale securities totaling $5,649 during the year ended December 31, 2000.

    The amortized cost and fair value of securities available for sale at June 30, 2001, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2001
	Amortized Cost		Fair Value (Carrying Amount)
Due in one year or less	$	660,038	$	666,279
Due after one year through five years		23,373,635		23,671,053
Due after five years through ten years		15,792,386		15,715,640
Due after ten years		15,557,035		15,788,083
Collateralized mortgage obligations		764,277		760,959
	$	56,147,371	$	56,602,014

    Contractual maturities on collateralized mortgage obligations cannot be anticipated due to allowed paydowns.

    At June 30, 2001 and December 31, 2000, available-for-sale securities with an amortized cost of approximately $51,290,000 and $44,228,000 (fair value of $51,667,000 and $44,630,000) were pledged as collateral for public funds, treasury tax and loan balances, and repurchase agreements.

8

3.  Securities Held to Maturity

    The Company had no held-to-maturity securities at June 30, 2001. Following is a comparison of the amortized cost and approximate fair value of securities held to maturity at December 31, 2000:

	December 31, 2000
	Amortized Cost (Carrying Amount)		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government agencies	$	10,248,105	$	0	$	(74,380	)	$	10,173,725

    Because of the declining interest rate environment experienced during the current year, the issuers of the Company's held-to-maturity securities exercised the call provisions associated with the two securities held in this portfolio. Both securities were redeemed during the second quarter of 2001. There were realized gains of $1,687 on the calls of held-to-maturity securities during the six month period ended June 30, 2001, There were no realized gains or losses on sales of held-to-maturity securities during the year ended December 31, 2000. At December 31, 2000, held-to-maturity securities with an amortized cost of approximately $10,248,000 (fair value of $10,174,000) were pledged as collateral for public funds and the Federal Reserve Discount Window.

4.  Loans

    Loans include the following:

	June 30, 2001		December 31, 2000
Commercial and industrial	$	78,390,935	$	66,433,905
Real estate—mortgage		115,769,357		113,140,404
Real estate—construction		78,515,846		61,038,151
Agricultural		13,762,766		7,239,866
Installment/other		7,736,725		10,291,453
Lease financing		4,246,737		3,225,194
Total Loans	$	298,422,366	$	261,368,973

    The Company's loans are predominantly in the San Joaquin Valley, and the greater Oakhurst/East Madera County area, although the Company does participate in loans with other financial institutions, primarily in the state of California.

    Commercial and industrial loans represent 26.3% of total loans at June 30, 2001 and have a high degree of industry diversification. A substantial portion of the commercial and industrial loans are secured by accounts receivable, inventory, leases or other collateral including real estate. The remainder are unsecured; however, extensions of credit are predicated upon the financial capacity of the borrower. Repayment of commercial loans is generally from the cash flow of the borrower.

    Real estate mortgage loans, representing 38.8% of total loans at June 30, 2001, are secured by trust deeds on primarily commercial property. Repayment of real estate mortgage loans is generally from the cash flow of the borrower.

    Real estate construction loans, representing 26.3% of total loans at June 30, 2001, consist of loans to residential contractors which are secured by single family residential properties. All real estate loans have established equity requirements. Repayment on construction loans is generally from long-term mortgages with other lending institutions.

9

    Agricultural loans represent 4.6% of total loans at June 30, 2001 and are generally secured by land, equipment, inventory and receivables. Repayment is from the cash flow of the borrower.

    Lease financing loans, representing 1.4% of total loans at June 30, 2001, consist of loans to small businesses which are secured by commercial equipment. Repayment of the lease obligation is from the cash flow of the borrower.

    There were no loans over 90 days past due and still accruing interest at June 30, 2001. Loans over 90 days past due and still accruing interest totaled $595,009 at December 31, 2000. Nonaccrual loans totaled $2,437,130 and $2,809,647 at June 30, 2001 and December 31, 2000, respectively.

    An analysis of changes in the allowance for credit losses is as follows:

	June 30, 2001			December 31, 2000			June 30, 2000
Balance, beginning of year	$	3,772,943		$	2,642,525		$	2,642,525
Provision charged to operations		776,324			1,580,000			680,000
Losses charged to allowance		(654,736	)		(474,153	)		(278,966	)
Recoveries on loans previously charged off		7,605			24,571			5,409
Balance at end-of-period	$	3,902,136		$	3,772,943		$	3,048,968

    The allowance for credit losses represents management's estimate of the risk inherent in the loan portfolio based on the current economic conditions, collateral values and economic prospects of the borrowers. Significant changes in these estimates might be required in the event of a downturn in the economy and/or the real estate market in the San Joaquin Valley, and the greater Oakhurst and East Madera County area.

    At June 30, 2001 and 2000, the Company's recorded investment in loans for which impairment has been recognized totaled $2,695,217 and $6,015,661. Included in this amount is $658,178 and $116,648 of impaired loans for which the related specific allowance is $392,090 and $24,027, as well as $2,037,039 and $5,899,013 of impaired loans that as a result of write-downs or the fair value of the collateral, did not have a specific allowance. The average recorded investment in impaired loans was $3,176,237 and $6,379,357 for the six month periods ended June 30, 2001 and 2000, respectively. At December 31, 2000, the Company's recorded investment in loans for which impairment has been recognized totaled $3,393,159. Included in this amount is $137,948 of impaired loans for which the related specific allowance is $83,982, as well as $3,255,211 of impaired loans that as a result of write-downs or the fair value of the collateral, did not have a specific allowance. The average recorded investment in impaired loans was $5,437,373 for the year ended December 31, 2000. In most cases, the Company uses the cash basis method of income recognition for impaired loans. In the case of certain troubled debt restructuring for which the loan is performing under the current contractual terms, income is recognized under the accrual method. For the six months ended June 30, 2001 the Company recognized $2,036 on such loans. For the year ended December 31, 2000 and the six months ended June 30, 2000, the Company recognized $270,134 and $242,661 on such loans, respectively.

    In the normal course of business, the Company is party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. At June 30, 2001 and December 31, 2000 these financial instruments include commitments to extend credit of $80,223,647 and $84,289,157, respectively, and standby letters of credit of $6,147,556 and $7,249,590, respectively. These instruments involve elements of credit risk in excess of the amount recognized on the balance sheet. The contract amounts of these instruments reflect the extent of the involvement the bank has in off-balance sheet financial instruments.

    The Company's exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit and standby letters of credit is represented by

10

the contractual amounts of those instruments. The Bank uses the same credit policies as it does for on-balance-sheet instruments.

    Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Substantially all of these commitments are at floating interest rates based on prime. Commitments generally have fixed expiration dates. The Company evaluates each customer's creditworthiness on a case by case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation. Collateral held varies but includes accounts receivable, inventory, leases, property, plant and equipment, residential real estate and income-producing properties.

    Standby letters of credit are generally unsecured and are issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

5.  Deposits

    Deposits include the following:

			June 30, 2001		December 31, 2000
Noninterest bearing deposits			$	49,194,192	$	52,897,725
Interest bearing deposits:
	NOW and money market accounts			66,742,711		62,142,837
	Savings accounts			17,916,178		18,347,248
	Time deposits:
		Under $100,000		69,162,272		63,566,867
		$100,000 and over		106,095,347		74,907,852
Total interest bearing deposits				259,916,508		218,964,804
Total deposits			$	309,110,700	$	271,862,529

    At June 30, 2001, the scheduled maturities of all certificates of deposit and other time deposits are as follows:

One year or less	$	141,917,209
More than one year, but less than or equal to two years		27,190,700
More than two years, but less than or equal to three years		3,685,550
More than three years, but less than or equal to four years		910,060
More than four years, but less than or equal to five years		1,449,477
More than five years		104,623
	$	175,257,619

6.  Short-term Borrowings/Other Borrowings

    The Company had collateralized and uncollateralized lines of credit with aggregating $140,778,000, as well as repurchase agreement lines of credit totaling $41,482,000 at June 30, 2001. These lines of credit generally have interest rates tied to the Federal Funds rate or are indexed to short-term U.S. Treasury rates or LIBOR. At June 30, 2001, advances on the repurchase lines of credit totaled $38,250,000. The Company had collateralized and uncollateralized lines of credit aggregating $107,934,000, as well as a repurchase agreement line of credit of $24,894,000 at December 31, 2000. The Company had repurchase agreements of $24,894,000 and federal funds purchased of $22,630,000 at December 31, 2000.

11

    The table below provides further detail of the Company's repurchase agreements for the six months ended June 30, 2001 and the year ended December 31, 2000:

		June 30, 2001			December 31, 2000
Outstanding:
	Average for the period	$	30,039,778		$	24,876,850
	Maximum during the period	$	38,250,000		$	34,761,238
Interest rates:
	Average for the period		5.27	%		6.61	%
	Average at period end		4.46	%		6.67	%

    On June 20, 2000, the Bank's ESOP entered into an agreement with a correspondent bank to establish a $1,000,000 unsecured revolving line of credit with a variable rate of prime plus 100 basis points and maturity of June 20, 2005. The loan is guaranteed by the Bank. Advances on the line totaled $999,162 at June 30, 2001.

7.  Regulatory Matters

    Capital Guidelines—The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements adopted by the Board of Governors of the Federal Reserve System ("Board of Governors"). Failure to meet minimum capital requirements can initiate certain mandates and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

    Quantitative measures established by regulation to ensure capital adequacy require insured institutions to maintain a minimum leverage ratio of Tier 1 capital (the sum of common stockholders' equity, noncumulative perpetual preferred stock and minority interests in consolidated subsidiaries, minus intangible assets, identified losses and investments in certain subsidiaries, plus unrealized losses or minus unrealized gains on available for sale securities) to total assets. Institutions which have received the highest composite regulatory rating and which are not experiencing or anticipating significant growth are required to maintain a minimum leverage capital ratio of 3% Tier 1 capital to total assets. All other institutions are required to maintain a minimum leverage capital ratio of at least 100 to 200 basis points above the 3% minimum requirement. At June 30, 2001, the Company's leverage capital ratio was 8.74%. At June 30, 2001 and December 31, 2000, the Bank's leverage capital ratio was 8.54% and 8.81%.

    The Board of Governors has also adopted a statement of policy, supplementing its leverage capital ratio requirements, which provides definitions of qualifying total capital (consisting of Tier 1 capital and supplementary capital, including the allowance for loan losses up to a maximum of 1.25% of risk-weighted assets) and sets forth minimum risk-based capital ratios of capital to risk-weighted assets. Insured institutions are required to maintain a ratio of qualifying total capital to risk weighted assets of 8%, at least one-half of which must be in the form of Tier 1 capital. At June 30, 2001, the Company's ratio of qualifying total capital to risk-weighted assets was 10.62% and its ratio of Tier 1 capital to total risk-weighted assets was 9.49%. At June 30, 2001 and December 31, 2000, the Bank's ratio of qualifying

12

total capital to risk-weighted assets was 10.40% and 10.85% and its ratio of Tier 1 capital to total risk-weighted assets was 9.28% and 9.65%, respectively.

    As of June 30, 2001 and December 31, 2000, the most recent notifications from the Bank's regulators categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total capital and Tier 1 capital (as defined) to risk-based assets (as defined), and a minimum leverage ratio of Tier 1 capital to average assets (as defined) as set forth in the proceeding discussion. There are no conditions or events since the notification that management believes have changed the institution's category.

    Management believes that, under regulatory guidelines, the $15 million in Trust Preferred Securities issued in July of 2001 will qualify as Tier 1 capital up to 25% of Tier 1 capital. Any additional portion of Trust Preferred Securities will qualify as Tier 2 capital.

    Dividends—Subsequent to the Reorganization on June 12, 2001, dividends paid to shareholders will be paid by the bank holding company, subject to restrictions set forth in the California General Corporation Law. The primary source of funds with which dividends will be paid to shareholders will come from cash dividends received by the Company from the Bank. During June 2001, the Company received $1,400,000 in cash dividends from the Bank, from which the Company declared $636,000 as dividends payable to shareholders.

    Under California state banking law, the Bank may not pay cash dividends in an amount which exceeds the lesser of the retained earnings of the Bank or the Bank's net income for the last three fiscal years (less the amount of distributions to shareholders during that period of time). If the above test is not met, cash dividends may only be paid with the prior approval of the California State Department of Financial Institutions, in an amount not exceeding the greater of: (i) the Bank's retained earnings; (ii) its net income for the last fiscal year; or (iii) its net income for the current fiscal year. As of June 30, 2001, approximately $8,418,000 was available to the Bank for cash dividend distributions without prior approval. Year-to-date, the Bank has paid dividends of $1,180,095 to shareholders and dividends of $1,400,000 to the Company.

8.  Supplemental Cash Flow Disclosures

		Six Months Ended June 30,
		2001		2000
Cash paid during the period for:
	Interest	$	6,880,132	$	5,266,850
	Income Taxes		1,658,000		1,957,000
Noncash investing activities:
	Loans transferred to foreclosed property		1,324,252		0
	Dividends declared not paid		636,403		537,624

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9.  Net Income Per Share

    The following table provides a reconciliation of the numerator and the denominator of the basic EPS computation with the numerator and the denominator of the diluted EPS computation:

		Six Months Ended June 30,
		2001			2000
Net income available to common shareholders		$	3,186,971		$	3,013,177
Weighted average shares issued			5,498,549			5,329,259
	Less: unearned ESOP shares		(56,397	)		(1,416	)
Weighted average shares outstanding			5,442,152			5,327,843
	Add: dilutive effect of stock options		133,864			254,409
Weighted average shares outstanding
	adjusted for potential dilution		5,576,016			5,582,252
Basic earnings per share		$	0.59		$	0.57
Diluted earnings per share		$	0.57		$	0.54

10.  Other Comprehensive Income

    The following table provides a reconciliation of the amounts included in comprehensive income:

		June 30,
		2001			2000
Other comprehensive income, net of tax:
	Unrealized gain on sale securities—net income tax of $67,579 and $29,519	$	101,369		$	44,279
Less: reclassification adjustment for gain on sale of Available-for-sale securities included in net income—net income tax of $110,087 and $2,260			(165,130	)		(3,389	)
Net unrealized (loss) gain on available-for-sale securities		$	(63,761	)	$	40,890

11.  Subsequent Event

    On July 16, 2001, the Company's wholly-owned special-purpose trust subsidiary, United Security Bancshares Capital Trust I (the "Trust") issued $15 million in cumulative Trust Preferred Securities. The securities bear a floating rate of interest of 3.75% over the six month LIBOR rate, payable semi-annually. Concurrent with the issuance of the Trust Preferred Securities, the Trust used the proceeds from the Trust Preferred Securities offering to purchase a like amount of Junior Subordinated Debentures of the Company. The Company will pay interest on the Junior Subordinated Debentures to the Trust, which represents the sole revenues and sole source of dividend distributions to the holders of the Trust Preferred Securities. The Company has the right, assuming no default has occurred, to defer payments of interest on the Junior Subordinated Debentures at any time for a period not to exceed 20 consecutive quarters. The Trust Preferred Securities will mature on July 25, 2031, but can be redeemed after July 25, 2006 at a premium, and can be redeemed after July 25, 2011 at par. The obligations of the Trust are fully and unconditionally guaranteed, on a subordinated basis, by the Company.

    The Company received $14.5 million from the Trust upon issuance of the Junior Subordinated Debentures. The Company intends to invest a portion of the net proceeds in the Bank to increase the Bank's regulatory capital levels and intends to use the remaining net proceeds for general corporate

14

purposes. Under applicable regulatory guidelines, the Company expects that a portion of the Trust Preferred Securities will qualify as Tier I Capital, and the remainder as Tier II Capital.

    Issuance costs of $495,000 related to the Trust Preferred Securities will be deferred and amortized over the period until the securities may be redeemed at par on July 25, 2011. The Junior Subordinated Debentures will be recorded as a separate line item in the liability section of the Company's consolidated balance sheet in accordance with generally accepted accounting policies.

15

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Certain matters discussed or incorporated by reference in this Quarterly Report of Form 10-Q are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Such risks and uncertainties include, but are not limited to, those described in Management's Discussion and Analysis of Financial Condition and Results of Operations. Therefore, the information set forth therein should be carefully considered when evaluating the business prospects of the Company.

    On June 12, 2001, the United Security Bank (the "Bank") became the wholly owned subsidiary of United Security Bancshares, Inc. (the "Company") through a tax free holding company reorganization, accounted for on a basis similar to the pooling of interest method. In the transaction, each share of Bank stock was exchanged for a share of Company stock on a one to one basis. No additional equity was issued as part of this transaction. In the following discussion, references to the Bank are references to United Security Bank. References to the Company are references to United Security Bancshares, Inc. (including the Bank), except for periods prior to June 12, 2001, in which case, references to the Company are references to the Bank.

    On June 28, 2001, United Security Bancshares Capital Trust I (the "Trust") was formed as a Delaware business trust for the sole purpose of issuing trust preferred securities. On July 16, 2001, the Trust completed the issuance of $15 million in trust preferred securities, and concurrently, the Trust used the proceeds from that offering to purchase junior subordinated debentures of the Company. The Company will contribute a portion of the $14.5 million in net proceeds received from the Trust to the Bank to increase its regulatory capital and will use the rest for future expansion of the Company's business.

    The Company continues to seek ways to better meet its customers' needs for financial services, expand into new markets and compete in today's financial services environment. The Company's strategy is to be a better low-cost provider of services to its customer base while enlarging its market area and corresponding customer base to further its ability to provide those services. The Company currently has seven banking branches which provide financial services in Fresno and Madera counties.

Results of Operations

    For the six months ended June 30, 2001, the Company reported net income of $3.2 million or $0.59 per share ($0.57 diluted) as compared to $3.0 million or $0.57 per share ($0.54 diluted) for the six months ended June 30, 2000. The Company's return on average assets was 1.75% for the six months ended June 30, 2001 as compared to 2.00% for the same six month period of 2000. The Bank's return on average equity was 18.35% for the six months ended June 30, 2001 as compared to 20.31% for the same six month period of 2000, and reflects continued above-average performance in relation to the Company's peers.

Net Interest Income

    Net interest income, the most significant component of earnings, is the difference between the interest and fees received on earning assets and the interest paid on interest-bearing liabilities. Earning assets consist primarily of loans, and to a lesser extent, investments in securities issued by federal, state and local authorities, and corporations. These earning assets are funded by a combination of interest-bearing and noninterest-bearing liabilities, primarily customer deposits and short-term borrowings. Net interest income before provision for credit losses totaled $8.7 million for the six months ended June 30, 2001, representing an increase of $446 thousand or 5.4% when compared to the $8.3 million reported for the same six months of the previous year. The increase in net interest income between 2000 and 2001 is primarily the result of significant growth in earning assets which more than offset the general decline in market rates of interest between these two six-month periods.

16

    As summarized in Table 2, the increase in net interest income between the two six-month periods presented is comprised of an increase in total interest income of approximately $2.3 million which was only partially offset by an increase in total interest expense of approximately $1.8 million. The Bank's net interest margin, as shown in Table 1, decreased to 5.23% at June 30, 2001 from 6.06% at June 30, 2000, a decrease of 83 basis points (100 basis points = 1%) between the two periods. Market rates of interest decreased significantly between the six-month periods ended June 30, 2000 and 2001. The prime rate averaged 7.98% for the six months ended June 30, 2001 as compared to 8.97% for the comparative six months of 2000.

Table 1.—Distribution of Average Assets, Liabilities and Shareholders' Equity:

Interest rates and Interest Differentials
Periods Ended June 30, 2001 and 2000

			2001							2000
(dollars in thousands)			Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
Assets:
Interest-earning assets:
	Loans(1)		$	278,364		$	13,710	9.93	%	$	211,949		$	11,193	10.62	%
	Investment Securities—taxable			51,638			1,648	6.44	%		52,991			1,803	6.84	%
	Investment Securities—nontaxable(2)			3,291			77	4.72	%		3,374			81	4.83	%
	Federal funds sold and reverse repos			3,311			84	5.12	%		6,358			187	5.91	%
		Total interest-earning assets		336,604		$	15,519	9.30	%		274,672		$	13,264	9.71	%
Allowance for possible loan losses				(3,828	)						(2,939	)
Noninterest-bearing assets:
	Cash and due from banks			12,494							12,972
	Premises and equipment, net			3,318							3,794
	Accrued interest receivable			3,328							2,366
	Other real estate owned			3,254							515
	Other assets			11,631							11,530
		Total average assets	$	366,801						$	302,910
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
	NOW accounts		$	23,551		$	203	1.74	%	$	24,413		$	206	1.70	%
	Money market accounts			40,627			781	3.88	%		43,598			836	3.86	%
	Savings accounts			17,519			187	2.15	%		19,173			207	2.17	%
	Time deposits			163,709			4,730	5.83	%		114,631			3,167	5.56	%
	Other borrowings			33,038			893	5.45	%		18,024			569	6.35	%
		Total interest-bearing liabilities		278,444		$	6,794	4.92	%		219,839		$	4,985	4.56	%
Noninterest-bearing liabilities:
	Noninterest-bearing checking			50,584							51,187
	Accrued interest payable			1,338							1,002
	Other liabilities			1,410							1,049
		Total Liabilities		331,776							273,077
Total shareholders' equity				35,025							29,833
	Total average liabilites and Shareholders' equity		$	366,801						$	302,910
Interest income as a percentage of average earning assets								9.30	%						9.71	%
Interest expense as a percentage of average earning assets								4.07	%						3.65	%
Net interest margin								5.23	%						6.06	%

(1)

Loan amounts include nonaccrual loans, but the related interest income has been included only if collected for the period prior to the loan being placed on a nonaccrual basis. Loan interest income includes loan fees of approximately $692,000 and $347,000 for the six months ended June 30, 2001 and 2000, respectively.

(2)

Applicable nontaxable securities yields have not been calculated on a tax-equivalent basis because they are not material to the Company's results of operations.

17

    Both the Company's net interest income and net interest margin are affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as "volume change." Both are also affected by changes in yields on interest-earning assets and rates paid on interest-bearing liabilities, referred to as "rate change". The following table sets forth the changes in interest income and interest expense for each major category of interest-earning asset and interest-bearing liability, and the amount of change attributable to volume and rate changes for the periods indicated.

Table 2. Rate and Volume Analysis
(unaudited)
(dollars in thousands)

			Increase (Decrease) in the six months ended June 30, 2001 compared to June 30, 2000
			Total			Rate			Volume
Increase (decrease) in interest income:
	Loans		$	2,517		$	(771	)	$	3,288
	Investment securities			(159	)		(110	)		(49	)
	Federal funds sold and securities purchased Under agreements to resell			(103	)		(23	)		(80	)
		Total interest income		2,255			(904	)		3,159
Increase (decrease) in interest expense:
	Interest-bearing demand accounts			(58	)		3			(61	)
	Savings accounts			(20	)		(2	)		(18	)
	Time deposits			1,563			160			1,403
	Other borrowings			324			(91	)		415
		Total interest expense		1,809			70			1,739
Increase in net interest income			$	446		$	(974	)	$	1,420

    For the six months ended June 30, 2001, total interest income increased approximately $2.3 million or 17.0% as compared to the six months ended June 30, 2000. The change is attributable primarily to an increase in the overall volume of earning assets, which was only partially offset by a decrease in market rates of interest. Earning asset growth was exclusively in loans, while average investment securities, federal funds sold and repos experienced a decline between the two periods.

    For the six months ended June 30, 2001, total interest expense increased approximately $1.8 million or 36.3% as compared to the six month period ended June 30, 2000. The increase in total interest expense is attributable primarily to a year-to-date average increase in time deposits of more than $49.1 million between the six month periods ended June 30, 2000 and 2001, combined with an increase in the average cost of those deposits of 27 basis points. Other borrowings, including federal funds purchased and repurchase agreements, increased by $15 million on average between the six-month periods ended June 30, 2000 and June 30, 2001. Being short-term in nature, the cost of other borrowings declined by 90 basis points between those two six-month periods as market rates of interest dropped significantly during the first half of 2001. The average cost of the Company's total interest-bearing liabilities increased 36 basis points to 4.92% for the six months ended June 30, 2001.

    Provisions for credit losses and the amount added to the allowance for credit losses is determined on the basis of management's continuous credit review of the loan portfolio, consideration of past loan loss experience, current and future economic conditions, and other pertinent factors. Such factors consider the allowance for credit losses to be adequate when it covers estimated losses inherent in the loan portfolio. Based on the condition of the loan portfolio, management believes the allowance is sufficient to cover risk elements in the loan portfolio. For the six months ending June 30, 2001 the provision to the allowance for credit losses amounted to $776 thousand as compared to $680 thousand

18

for the six months June 30, 2000. The amount provided to the allowance for credit losses during the first six months brought the allowance to 1.31% of net outstanding loan balances at June 30, 2001, as compared to 1.45% of net outstanding loan balances at December 31, 2000, and 1.27% at June 30, 2000.

Noninterest Income

    Noninterest income consists primarily of fees and commissions earned on services that are provided to the Company's banking customers. Noninterest income for the six months ended June 30, 2001 increased $462 thousand when compared to the same period last year. The gain on sale of a single available-for-sale $7.5 million security accounted for $270 thousand or 58.4% of the increase in total noninterest income between the two six-month periods presented. Increases in customer service fees accounted for another $154 thousand or 33.3% of the total increase in noninterest income between the two periods. Increases in customer service fees are attributable to growth in checking service charges and overdraft fee income.

Noninterest Expense

    The following table sets forth the amount and percentage changes in the categories presented for the six months ended June 30, 2001 as compared to the six months ended June 30, 2000:

Table 3. Changes in Noninterest Expense

		Amount			Percent
Salaries and employee benefits		$	246,714		12.49	%
Occupancy expense			32,096		3.98	%
Data processing			(9,183	)	-3.53	%
Professional fees			50,608		33.33	%
Directors fees			12,000		13.79	%
Amortization of intangibles			0		0.00	%
Correspondent bank service charges			1,481		1.52	%
Other			56,465		8.05	%
	Total noninterest expense	$	390,181		9.16	%

    Noninterest expense, excluding provision for credit losses and income tax expense, totaled $4.6 million for the six months ended June 30, 2001 as compared to $4.3 million for the same six-month period of 2000, representing an increase of $390 thousand or 9.16% between the two periods. Increases in salaries and employee benefits were the result of additional staff to support the Company's strategic long-term growth objectives, as well as normal wage and benefit increases combined with increased medical insurance costs incurred during the year. Professional fees increased between the six-month periods presented primarily as the result of $44 thousand which was expensed during the second quarter in connection with the formation of the holding company.

Financial Condition

    Total assets increased to $387.5 million at June 30, 2001, up from $331.6 million at the end of the same period last year, and up from the balance of $356.8 million at December 31, 2000. Total deposits of $309.1 million at June 30, 2001 increased $53.3 million or 20.8% from the balance reported at June 30, 2000, and increased $37.2 million or 13.7% from the balance of $271.9 million reported at December 31, 2000. Between June 30, 2000 and June 30, 2001, loan growth totaled $58.3 million, while securities and other short-term investments decreased $2.7 million.

    Earning assets averaged approximately $336.6 million during the six months ended June 30, 2001, as compared to $274.7 million for the same six month period of 2000. Average interest-bearing

19

liabilities increased to $278.4 million for the six months ended June 30, 2001, as compared to $219.8 million for the comparative six month period of 2000.

Loans

    The Company's primary business is that of acquiring deposits and making loans, with the loan portfolio representing the largest and most important component of its earning assets. Loans totaled $298.4 million at June 30, 2001, an increase of $37.1 million or 14.2% when compared to the balance of $261.4 million at December 31, 2000, and an increase of $58.3 million or 24.3% when compared to the balance of $240.1 million reported at June 30, 2000. Loans on average rose 31.3% between the six month periods ended June 30, 2000 and June 30, 2001, with loans averaging $278.4 million for the six months ended June 30, 2001, as compared to $211.9 million for the same six month period of 2000.

    During the first six months of 2001, increases were experienced in all loan categories except installment loans. Approximately $17.5 million or more than 47% of the loan growth experienced during this period was attributable real estate construction lending. The following table sets forth the amounts of loans outstanding by category at June 30, 2001 and December 31, 2000, the category percentages as of those dates, and the net change between the two periods presented.

Table 4. Loans

	June 30, 2001				December 31, 2000
	Dollar Amount		% of Loans		Dollar Amount		% of Loans		Net Change			% Change
Commercial and industrial	$	78,390,935	26.3	%	$	66,433,905	25.4	%	$	11,957,030		18.00	%
Real estate—mortgage		115,769,357	38.8	%		113,140,404	43.3	%		2,628,953		2.32	%
Real estate—construction		78,515,846	26.3	%		61,038,151	23.4	%		17,477,695		28.63	%
Agricultural		13,762,766	4.6	%		7,239,866	2.8	%		6,522,900		90.10	%
Installment/other		7,736,725	2.6	%		10,291,453	3.9	%		(2,554,728	)	-24.82	%
Lease financing		4,246,737	1.4	%		3,225,194	1.2	%		1,021,543		31.67	%
Total Loans	$	298,422,366	100.0	%	$	261,368,973	100.0	%	$	37,053,393		14.18	%

    The overall average yield on the loan portfolio was 9.93% for the six months ended June 30, 2001 as compared to 10.62% for the six months ended June 30, 2000, and decreased between the two periods as the result of significant decreases in market rates of interest during the first six months of 2001. At June 30, 2001, 68.4% of the Company's loan portfolio consisted of floating rate instruments, as compared to 65.5% of the portfolio at December 31, 2000, with the majority of those tied to the prime rate.

Deposits

    Total deposits increased during the period to a balance of $309.1 million at June 30, 2001 representing an increase of $37.2 million or 13.7% from the balance of $271.9 million reported at December 31, 2000, and an increase of $53.3 million or 20.8% from the balance reported at June 30, 2000. Between December 31, 2000 and June 30, 2001, substantial increases were experienced in time deposits, while modest increases were experienced in interest-bearing demand accounts. Decreases were experienced in noninterest-bearing checking and savings accounts. Increases in time deposits are partly the result of an additional $25.2 million in brokered deposits acquired during the six months of 2001 bringing total brokered time deposits to $37.7 million at June 30, 2001.

    The following table sets forth the amounts of deposits outstanding by category at June 30, 2001 and December 31, 2000, and the net change between the two periods presented.

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Table 5. Deposits

			June 30, 2001		December 31, 2000		Net Change			Percentage Change
Noninterest bearing deposits			$	49,194,192	$	52,897,725	$	(3,703,533	)	-7.00	%
Interest bearing deposits:
	NOW and money market accounts			66,742,711		62,142,837		4,599,874		7.40	%
	Savings accounts			17,916,178		18,347,248		(431,070	)	-2.35	%
	Time deposits:
		Under $100,000		69,162,272		63,566,867		5,595,405		8.80	%
		$100,000 and over		106,095,347		74,907,852		31,187,495		41.63	%
Total interest bearing deposits				259,916,508		218,964,804		40,951,704		18.70	%
Total deposits			$	309,110,700	$	271,862,529	$	37,248,171		13.07	%

    The Company's deposit base consists of two major components represented by noninterest-bearing (demand) deposits and interest-bearing deposits. Interest-bearing deposits consist of time certificates, NOW and money market accounts and savings deposits. Total interest-bearing deposits increased $41.0 million or 18.70% between December 31, 2000 and June 30, 2001, while noninterest-bearing deposits decreased $3.7 million or 7.00% between the same two periods presented. Core deposits, consisting of all deposits other than time deposits of $100,000 or more, and brokered deposits, continue to provide the foundation for the Company's principal sources of funding and liquidity. These core deposits amounted to 64.8% and 71.4% of the total deposit portfolio at June 30, 2001 and December 31, 2000, respectively.

    On a year-to-date average (refer to Table 1), the Company experienced an increase of $43.0 million or 17.0% in total deposits between the six month periods ended June 30, 2000 and June 30, 2001. Between these two periods, average interest-bearing deposits increased $43.6 million or 21.6%, while total noninterest-bearing checking decreased $603 thousand or 1.2% on a year-to-date average basis. On average, the Company experienced increases in time deposits, and modest decreases in all other deposit categories between the six month periods ended June 30, 2000 and June 30, 2001.

Short-term Borrowings

    The Company has the ability to obtain borrowed funds consisting of federal funds purchased and securities sold under agreements to repurchase ("repurchase agreements") as alternatives to retail deposit funds. The Company has established collateralized and uncollateralized lines of credit with several correspondent banks, as well as a securities dealer, for the purpose of obtaining borrowed funds as needed. The Company may continue to borrow funds in the future as part of its asset/liability strategy, and may use these funds to acquire certain other assets as deemed appropriate by management for investment purposes and to better utilize the capital resources of the Bank. Federal funds purchased represent temporary overnight borrowings from correspondent banks and are generally unsecured. Repurchase agreements are collateralized by mortgage backed securities and securities of U.S. Government agencies, and generally have maturities of one to six months. The Company has the ability to secure longer maturities on such instruments if deemed appropriate as part of its asset/liability strategy. In addition, the Company has the ability to obtain borrowings from the Federal Reserve Bank of San Francisco which would be collateralized by certain pledged loans in the Company's loan portfolio.

    The Company had collateralized and uncollateralized lines of credit aggregating $140.8 million, as well as repurchase agreement lines of credit totaling $41.5 million at June 30, 2001. These lines of credit generally have interest rates tied to the Federal Funds rate or are indexed to short-term U.S. Treasury rates or LIBOR. At June 30, 2001, the Company had advances on the repurchase lines of credit totaling $38.3 million. The Bank had collateralized and uncollateralized lines of credit

21

aggregating $107.9 million, as well as a repurchase agreement line of credit of $24.9 million at December 31, 2000. The Bank had repurchase agreements of $24.9 million and federal funds purchased of $22.6 million outstanding at December 31, 2000.

Asset Quality and Allowance for Credit Losses

    Lending money is the Company's principal business activity, and ensuring appropriate evaluation, diversification, and control of credit risks is a primary management responsibility. Implicit in lending activities is the fact that losses will be experienced and that the amount of such losses will vary from time to time, depending on the risk characteristics of the loan portfolio as affected by local economic conditions and the financial experience of borrowers.

    The allowance for credit losses is maintained at a level deemed appropriate by management to provide for known and inherent risks in existing loans and commitments to extend credit. The adequacy of the allowance for credit losses is based upon management's continuing assessment of various factors affecting the collectibility of loans and commitments to extend credit; including current economic conditions, past credit experience, collateral, and concentrations of credit. There is no precise method of predicting specific losses or amounts which may ultimately be charged off on particular segments of the loan portfolio. The conclusion that a loan may become uncollectible, either in part or in whole, is judgmental and subject to economic, environmental, and other conditions which cannot be predicted with certainty. When determining the adequacy of the allowance for credit losses, the Company follows the guidelines set forth in the Interagency Policy Statement on the Allowance for Loan and Lease Losses ("Statement") issued jointly by banking regulators during December 1993. The Statement outlines characteristics that should be used in segmentation of the loan portfolio for purposes of the analysis including risk classification, past due status, type of loan, industry or collateral. It also outlines factors to consider when adjusting the loss factors for various segments of the loan portfolio.

    The Company's methodology for assessing the adequacy of the allowance for credit losses consists of several key elements, which include:

•

the formula allowance,

•

specific allowances for problem graded loans ("classified loans")

•

and the unallocated allowance

    In addition, the allowance analysis also incorporates the results of measuring impaired loans as provided in:

•

Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" and

•

SFAS 118, "Accounting by Creditors for Impairment of a Loan—Income Recognition and Disclosures."

    The formula allowance is calculated by applying loss factors to outstanding loans and certain unfunded loan commitments. Loss factors are based on the Company's historical loss experience and on the internal risk grade of those loans and, may be adjusted for significant factors that, in management's judgment, affect the collectability of the portfolio as of the evaluation date. Management determines the loss factors for problem graded loans (substandard, doubtful, and loss), special mention loans, and pass graded loans, based on a loss migration model. The migration analysis incorporates loan losses over the past twelve quarters (three years) and loss factors are adjusted to recognize and quantify the loss exposure from changes in market conditions and trends in the Company's loan portfolio. For purposes of this analysis, loans are grouped by internal risk classifications which are "pass", "special mention", "substandard", "doubtful", and "loss". Certain loans are homogenous in nature and are therefore pooled by risk grade. These homogenous loans include consumer installment and home equity loans. Special mention loans are currently performing but are potentially weak, as the borrower has begun to exhibit deteriorating trends, which if not corrected, could jeopardize repayment

22

of the loan and result in further downgrade. Substandard loans have well-defined weaknesses which, if not corrected, could jeopardize the full satisfaction of the debt. A loan classified as "doubtful" has critical weaknesses that make full collection of the obligation improbable. Classified loans, as defined by the Company, include loans categorized as substandard, doubtful, and loss.

    Specific allowances are established based on management's periodic evaluation of loss exposure inherent in classified loans, impaired loans, and other loans in which management believes there is a probability that a loss has been incurred in excess of the amount determined by the application of the formula allowance.

    The unallocated portion of the allowance is based upon management's evaluation of various conditions that are not directly measured in the determination of the formula and specific allowances. The conditions may include, but are not limited to, general economic and business conditions affecting the key lending areas of the Company, credit quality trends, collateral values, loan volumes and concentrations, and other business conditions.

    The Company's methodology includes features that are intended to reduce the difference between estimated and actual losses. The specific allowance portion of the analysis is designed to be self-correcting by taking into account the current loan loss experience based on that portion of the portfolio. By analyzing the probable estimated losses inherent in the loan portfolio on a quarterly basis, management is able to adjust specific and inherent loss estimates using the most recent information available. In performing the periodic migration analysis, management believes that historical loss factors used in the computation of the formula allowance need to be adjusted to reflect current changes in market conditions and trends in the Company's loan portfolio. There are a number of other factors which are reviewed when determining adjustments in the historical loss factors. They include 1) trends in delinquent and nonaccrual loans, 2) trends in loan volume and terms, 3) effects of changes in lending policies, 4) concentrations of credit, 5) competition, 6) national and local economic trends and conditions, 7) experience of lending staff, 8) loan review and Board of Directors oversight, and 9) other business conditions. During the second quarter of 2001, there were no changes in estimation methods or assumptions that affected the methodology for assessing the adequacy of the allowance for credit losses.

    Management and the Company's lending officers evaluate the loss exposure of classified and impaired loans on a weekly/monthly basis and through discussions and officer meetings as conditions change. The Company's Loan Committee meets weekly and serves as a forum to discuss specific problem assets that pose significant concerns to the Company, and to keep the Board of Directors informed through committee minutes. All special mention and classified loans are reported quarterly on Criticized Asset Reports which are reviewed by senior management. With this information, the migration analysis and the impaired loan analysis are performed on a quarterly basis and adjustments are made to the allowance as deemed necessary.

23

    Impaired loans are measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. The amount of impaired loans is not directly comparable to the amount of nonperforming loans disclosed later in this section. The primary differences between impaired loans and nonperforming loans are: i) all loan categories are considered in determining nonperforming loans while impaired loan recognition is limited to commercial and industrial loans, commercial and residential real estate loans, construction loans, and agricultural loans, and ii) impaired loan recognition considers not only loans 90 days or more past due, restructured loans and nonaccrual loans but also may include problem loans other than delinquent loans.

    The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include nonaccrual loans, restructured debt, and performing loans in which full payment of principal or interest is not expected. Management bases the measurement of these impaired loans on the fair value of the loan's collateral or the expected cash flows on the loans discounted at the loan's stated interest rates. Cash receipts on impaired loans not performing to contractual terms and that are on nonaccrual status are used to reduce principal balances. Impairment losses are included in the allowance for credit losses through a charge to the provision, if applicable.

    At June 30, 2001 and 2000, the Company's recorded investment in loans for which impairment has been recognized totaled $2.7 million and $6.0 million, respectively. Included in total impaired loans at June 30, 2001, is $658 thousand of impaired loans for which the related specific allowance is $392 thousand, as well as $2.0 million of impaired loans that as a result of write-downs or the fair value of the collateral, did not have a specific allowance. Total impaired loans at June 30, 2000 included $117 thousand of impaired loans for which the related specific allowance is $24 thousand, as well as $5.9 million of impaired loans that as a result of write-downs or the fair value of the collateral, did not have a specific allowance. The average recorded investment in impaired loans was $3.2 million during the first six months of 2001, and $6.4 million during the first six months of 2000. In most cases, the Bank uses the cash basis method of income recognition for impaired loans. In the case of certain troubled debt restructuring for which the loan is performing under the current contractual terms, income is recognized under the accrual method. For the six months ended June 30, 2001, the Bank recognized $2 thousand on such loans. For the six months ended June 30, 2000, the Bank recognized $243 thousand of income on such loans.

    Other factors that continue to gain management's attention are competition in the bank's market area and economic conditions which may ultimately affect the risk assessment of the portfolio. The Company has experienced increased competition from major banks, local independents and non-bank institutions creating pressure on loan pricing. During 1997 and 1998, the domestic economy showed signs of slowing, due in part to the prolonged contractions of worldwide economies. As a consequence, the Federal Reserve lowered interest rates three separate times during the fourth quarter of 1998 in an attempt to support the U.S. and foreign economies. Then as foreign economies began to recover and the domestic economy continued to grow during 1999, the Federal Reserve increased interest rates three times between June 30 and November 30, 1999 for a total increase of 75 basis points during the year. Interest rates were again raised 25 basis points early in February 2000, an additional 25 basis points in March 2000, and 50 basis points in May 2000. As the domestic economy began to slow in the third quarter of 2000 and stall during the fourth quarter of 2000, the Federal Reserve dropped interest rates by a total of 150 basis points during the first quarter of 2001, and an additional 125 basis points during the second quarter of 2001. We have gone from what was possibly considered the longest economic expansion in recent U.S. history, to potential recession in just a few short months, with skyrocketing energy costs, consumer confidence declining, and job layoffs announced at major corporations across the country. Although the economic outlook appears to be stabilizing, it is difficult

24

to determine what effects these changes will have on the domestic economy or whether the Federal Reserve will continue to adjust interest rates in an effort to control the economy. In addition, the recent increase in oil and energy prices may adversely effect the economy into the foreseeable future. It is likely that the California economy will continue to be impacted by these domestic as well as global events, although the overall economy of California has generally improved over the past several years. The local economy has been impacted to some degree over the past several years by such things as decreased exports and adverse weather patterns, which has increased worries about the future economic trends in the state. Local unemployment rates, as well as foreclosures in Fresno and Madera counties have increased during the past several years and persist to the current time. Despite the Central Valley's traditionally high unemployment, it is anticipated that the Central San Joaquin Valley will continue to grow and diversify as property and housing costs remain reasonable relative to other areas of the state, although this growth may begin to slow as the Federal Reserve seeks to control what it perceives as a potential recession in the economy. Management recognizes increased risk of loss due to the Company's exposure from local and worldwide economic conditions, as well as soft real estate markets, and takes these factors into consideration when analyzing the adequacy of the allowance for credit losses.

    The following table provides a summary of the Company's allowance for possible credit losses, provisions made to that allowance, and charge-off and recovery activity affecting the allowance for the periods indicated.

Table 6.  Allowance for Credit Losses—Summary of Activity
(Unaudited)
(dollars in thousands)

			June 30, 2001			June 30, 2000
Total loans outstanding at end of period before deducting allowances for credit losses			$	297,505		$	239,527
Average net loans outstanding during period				278,364			211,949
Balance of allowance at beginning of period				3,773			2,643
Loans charged off:
	Real estate			0			0
	Commercial and industrial			(637	)		(258	)
	Installment and other			(18	)		(21	)
		Total loans charged off		(655	)		(279	)
Recoveries of loans previously charged off:
	Real estate			0			0
	Commercial and industrial			8			4
	Installment and other			0			1
		Total loan recoveries		8			5
Net loans charged off				(647	)		(274	)
Provision charged to operating expense				776			680
Balance of allowance for credit losses at end of period			$	3,902		$	3,049
Net loan charge-offs to total average loans (annualized)				0.47%			0.26%
Net loan charge-offs to loans at end of period (annualized)				0.44%			0.23%
Allowance for credit losses to total loans at end of period				1.31%			1.27%
Net loan charge-offs to allowance for credit losses (annualized)				33.44%			18.07%
Net loan charge-offs to provision for credit losses (annualized)				83.38%			40.29%

25

    Management believes that the 1.31% credit loss allowance at June 30, 2001, is adequate to absorb known and inherent risks in the loan portfolio. No assurance can be given, however, that the economic conditions which may adversely affect the Company's service areas or other circumstances will not be reflected in increased losses in the loan portfolio.

    It is the Company's policy to discontinue the accrual of interest income on loans for which reasonable doubt exists with respect to the timely collectability of interest or principal due to the ability of the borrower to comply with the terms of the loan agreement. Such loans are placed on nonaccrual status whenever the payment of principal or interest is 90 days past due or earlier when the conditions warrant, and interest collected is thereafter credited to principal to the extent necessary to eliminate doubt as to the collectability of the net carrying amount of the loan. Management may grant exceptions to this policy if the loans are well secured and in the process of collection.

Table 7.  Nonperforming Assets
(dollars in thousands)

		June 30, 2001		December 31, 2000
Nonaccrual Loans(1)		$	2,437	$	2,810
Restructured Loans			191		0
	Total nonperforming loans		2,628		2,810
Other real estate owned			3,872		2,959
Total nonperforming assets		$	6,500	$	5,769
Loans past due 90 days or more, still accruing		$	0	$	595
Nonperforming loans to total gross loans			0.88%		1.08%
Nonperforming assets to total gross loans			2.18%		2.21%

(1)

Included in nonaccrual loans at June 30, 2001 and December 31, 2000, are restructured loans totaling $47.0 thousand and $57.8 thousand, respectively.

    The overall level of nonperforming assets has increased between December 31, 2000 and June 30, 2001 as the result of an increase in other real estate owned through foreclosure. Loans past due more than 30 days are receiving increased management attention and are monitored for increased risk. The Company continues to move past due loans to nonaccrual status in its ongoing effort to recognize loan problems at an earlier point in time when they may be dealt with more effectively. As impaired loans, nonaccrual and restructured loans are reviewed for specific reserve allocations and the allowance for credit losses is adjusted accordingly.

    Except for the loans included in the above table, there were no loans at June 30, 2001 where the known credit problems of a borrower caused the Company to have serious doubts as to the ability of such borrower to comply with the present loan repayment terms and which would result in such loan being included as a nonaccrual, past due or restructured loan at some future date.

Liquidity and Asset/Liability Management

    The primary function of asset/liability management is to provide adequate liquidity and maintain an appropriate balance between interest-sensitive assets and interest-sensitive liabilities.

Liquidity

    Liquidity management may be described as the ability to maintain sufficient cash flows to fulfill financial obligations, including loan funding commitments and customer deposit withdrawals, without

26

straining the Company's equity structure. To maintain an adequate liquidity position, the Company relies on, in addition to cash and cash equivalents, cash inflows from deposits and short-term borrowings, repayments of principal on loans and investments, and interest income received. The Company's principal cash outflows are for loan origination, purchases of investment securities, depositor withdrawals and payment of operating expenses.

    The Company continues to emphasize liability management as part of its overall asset/liability strategy. Through the discretionary acquisition of short term borrowings, the Company has been able to provide liquidity to fund asset growth while, at the same time, better utilizing its capital resources, and better controlling interest rate risk. The borrowings are generally short-term and more closely match the repricing characteristics of floating rate loans which comprise approximately 68.4% of the Company's loan portfolio at June 30, 2001. This does not preclude the Company from selling assets such as investment securities to fund liquidity needs but, with favorable borrowing rates, the Company has maintained a positive yield spread between borrowed liabilities and the assets which those liabilities fund. If, at some time, rate spreads become unfavorable, the Company has the ability to utilize an asset management approach and, either control asset growth or, fund further growth with maturities or sales of investment securities.

    The Company's liquid asset base which generally consists of cash and due from banks, federal funds sold, securities purchased under agreements to resell ("reverse repos") and investment securities, is maintained at a level deemed sufficient to provide the cash outlay necessary to fund loan growth as well as any customer deposit runoff that may occur. Within this framework is the objective of maximizing the yield on earning assets. This is generally achieved by maintaining a high percentage of earning assets in loans, which historically have represented the Company's highest yielding asset. At June 30, 2001, the Bank had 75.8% of total assets in the loan portfolio and a loan to deposit ratio of 96.2%. Liquid assets at June 30, 2001 include cash and cash equivalents totaling $14.3 million as compared to $19.2 million at December 31, 2000. Other sources of liquidity include collateralized and uncollateralized lines of credit from other banks, the Federal Home Loan Bank, and from the Federal Reserve Bank totaling $182.3 million at June 30, 2001.

    The liquidity of the parent company, United Security Bancshares, is primarily dependent on the payment of cash dividends by its subsidiary, United Security Bank, subject to limitations imposed by the Financial Code of the State of California. During 2001, total dividends paid by the Bank to the parent company totaled $1.4 million dollars. As a bank holding company newly formed under the Bank Holding Act of 1956, United Security Bancshares is to provide a source of financial strength for its subsidiary bank(s). To help provide financial strength, United Security Bancshares' trust subsidiary, United Security Bancshares Capital Trust I, recently completed a $15 million offering in Trust Preferred Securities, the proceeds of which were used to purchase Junior Subordinated Debentures of the Company. A portion of the $14.5 million in net proceeds received by the Company will be used to enhance the liquidity and capital positions of the Bank, and the remainder will provide liquidity to the holding company.

Interest Rate Sensitivity and Market Risk

    An interest rate-sensitive asset or liability is one that, within a defined time period, either matures or is subject to interest rate adjustments as market rates of interest change. Interest rate sensitivity is the measure of the volatility of earnings from movements in market rates of interest, which is generally reflected in interest rate spread. As interest rates change in the market place, yields earned on assets do not necessarily move in tandem with interest rates paid on liabilities. Interest rate sensitivity is related to liquidity in that each is affected by maturing assets and sources of funds. Interest rate

27

sensitivity is also affected by assets and liabilities with interest rates that are subject to change prior to maturity.

    The object of interest rate sensitivity management is to minimize the impact on earnings from interest rate changes in the marketplace. In recent years, deregulation, causing liabilities to become more interest rate sensitive, combined with interest rate volatility in the capital markets, has placed additional emphasis on this principal. When management decides to maintain repricing imbalances, it usually does so on the basis of a well conceived strategy designed to ensure that the risk is not excessive and that liquidity is properly maintained. The Company's interest rate risk management is the responsibility of the Asset/Liability Management Committee (ALCO) which reports to the Board of Directors on a periodic basis, pursuant to established operating policies and procedures.

    The Company's asset/liability profile is not complex. The Company does not currently engage in trading activities or use derivatives to control interest rate risk, although it has the ability to do so if deemed necessary by ALCO and approved by the Board of Directors. From the GAP report below, the Company is apparently subject to interest rate risk to the extent that its liabilities have the potential to reprice more quickly than its assets within the next year. At June 30, 2001, the Company had a cumulative 12 month GAP of $-35.5 million or -10.1% of total earning assets. Management believes the GAP analysis shown below is not entirely indicative of the Company's actual interest rate sensitivity, because certain interest-sensitive liabilities would not reprice to the same degree as interest-sensitive assets. For example, if the prime rate were to change by 50 basis points, the floating rate loans included in the $199.6 million immediately adjustable category would change by the full 50 basis points. Interest bearing checking and savings accounts which are also included in the immediately adjustable column probably would move only a portion of the 50 basis point rate change and, in fact, might not even move at all. In addition, many of the floating rate time deposits are at their floors, or have repricing rates below their current floors, which means that they might act as fixed-rate instruments in either a rising or a declining rate environment (see below for a discussion of the Bank's floating rate time deposits). The effects of market value risk have been mitigated to some degree by the makeup of the Bank's balance sheet. Loans are generally short-term or are floating-rate instruments. At June 30, 2001, $232.8 million or 78.7% of the loan portfolio matures or reprices within one year, and only 3.3% of the portfolio matures or reprices in more than 5 years. Total investment securities including call options and prepayment assumptions, have a duration of approximately 3.0 years. Nearly $269.6 million or 90.1% of interest-bearing deposit liabilities mature or can be repriced within the next 12 months, even though the rate elasticity of deposits with no defined maturities may not necessarily be the same as interest-earning assets.

    Since May of 1994, the Bank has offered a two-year floating rate certificate of deposit product to its customers which adjusts with changes in the Prime Rate, but which has an interest rate floor below which the rate paid cannot drop. The current rates below which the rates on this product cannot drop range from 3.50% to 6.50%, with approximately $14.3 million or 59.6% of those at a 6.50% floor. With the decrease in market rates of interest during the first half of 2001, all $24.0 million of the floating-rate CD's are at their floors making them fixed-rate instruments in a declining rate environment. In addition, all but $94 thousand of the CD's repricing rates are below their current floors which makes them fixed rate instruments even in a rising rate environment. In fact, $23.1 million or 96.3% of them would remain fixed rate instruments even if the prime rate were to increase 100 BP or less, and $17.9 million or 74.5% of them would remain fixed rate instruments even if the prime rate were to increase 200 BP or less. Of the $17.9 million in the two-year floating rate certificates of deposit which would behave as fixed rate instruments if rates were to increase or decrease 200 basis points, approximately $10.8 million mature in longer than one year. This $17.9 million in two-year floating rate certificates of deposit has been treated as fixed-rate instruments for the purpose of the following GAP report.

28

    Interest rate risk can be measured through various methods including GAP, duration and market value analysis as well as income simulation models. The Company employs each of these methods and refines these processes to make the most accurate measurements possible. The information provided by these calculations is the basis for management decisions in managing interest rate risk.

    The following table sets forth the Company's Gap, or estimated interest rate sensitivity profile based on ending balances as of June 30, 2001, representing the interval of time before earning assets and interest-bearing liabilities may respond to changes in market rates of interest. Assets and liabilities are categorized by remaining interest rate maturities rather than by principal maturities of obligations. $17.9 million in two-year, floating rate time deposits which would behave as fixed rate instruments if rates were to increase or decrease 200 basis points, and have therefore been treated as fixed rate instruments for purposes of this GAP report.

Table 8.  Maturities and Interest Rate Sensitivity
(Unaudited)
(dollars in thousands)

		June 30, 2001
		Immediately			Next Day But Within Three Months			After Three Months Within 12 Months			After One Year But Within Five Years			After Five Years			Total
Interest Rate Sensitivity Gap:
Loans(1)		$	199,569		$	12,217		$	21,016		$	53,341		$	9,842		$	295,985
Investment securities						197			606			23,888			31,911			56,602
Federal funds sold and reverse repos			465															465
	Total Earning Assets	$	200,034		$	12,414		$	21,622		$	77,229		$	41,753		$	353,052
Interest-bearing transaction accounts			66,743															66,743
Savings accounts			17,916															17,916
Time deposits(2)			7,322			58,646			79,695			29,490			105			175,258
Federal funds purchased/other borrowings			999			25,050			13,200									39,249
Total interest-bearing liabilities		$	92,980		$	83,696		$	92,895		$	29,490		$	105		$	299,166
Interest rate sensitivity gap		$	107,054		$	(71,282	)	$	(71,273	)	$	47,739		$	41,648		$	53,886
Cumulative gap		$	107,054		$	35,772		$	(35,501	)	$	12,238		$	53,886
Cumulative gap percentage to total earning assets			30.3	%		10.1	%		-10.1	%		3.5	%		15.3	%

(1)

Loan balance does not include nonaccrual loans of $2.437 million.

(2)

See above for discussion of the impact of floating rate CD's.

    The Company utilizes a vendor-purchased simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on both a 100 and 200 basis point rise and a 100 and 200 basis point fall in interest rates ramped over a twelve month period, with net interest impacts projected out as far as twenty four months. The model is based on the actual maturity and repricing characteristics of the Company's interest-sensitive assets and liabilities. The model incorporates assumptions regarding the impact of changing interest rates on

29

the prepayment of certain assets and liabilities. Projected net interest income is calculated assuming customers will reinvest maturing deposit accounts and the Company will originate a certain amount of new loans. The balance sheet growth assumptions utilized correspond closely to the Company's strategic growth plans and annual budget. Excess cash is invested in overnight funds or other short-term investments such as U.S. Treasuries. Cash shortfalls are covered through additional borrowing of overnight or short-term funds. The Board of Directors has adopted an interest rate risk policy which establishes maximum decreases in net interest income of 12% and 15% in the event of a 100 BP and 200 BP increase or decrease in market interest rates over a twelve month period. Based on the information and assumptions utilized in the simulation model at June 30, 2001, the resultant projected impact on net interest income falls within policy limits set by the Board of Directors for all rate scenarios run.

    The Company also utilizes the same vendor-purchased simulation model to project the impact of changes in interest rates on the underlying market value of all the Company's assets, liabilities, and off-balance sheet accounts under alternative interest rate scenarios. The resultant net value, as impacted under each projected interest rate scenario, is referred to as the market value of equity ("MV of Equity"). This technique captures the interest rate risk of the Company's business mix across all maturities. The market analysis is performed using an immediate rate shock of 200 basis points up and down calculating the present value of expected cash flows under each rate environment at applicable discount rates. The market value of loans is calculated by discounting the expected future cash flows over either the term to maturity for fixed rate loans or scheduled repricing for floating rate loans using the current rate at which similar loans would be made to borrowers with similar credit ratings. The market value of investment securities is based on quoted market prices obtained from reliable independent brokers. The market value of time deposits is calculated by discounting the expected cash flows using current rates for similar instruments of comparable maturities. The market value of deposits with no defined maturites, including interest-bearing checking, money market and savings accounts is calculated by discounting the expected cash flows at a rate equal to the difference between the cost of these deposits and the alternate use of the funds—federal funds in this case. Assumed maturities for these deposits are estimated using decay analysis and are generally assumed to have implied maturities of less than five years. For noninterest sensitive assets and liabilities, the market value is equal to their carrying value amounts at the reporting date. The Company's interest rate risk policy establishes maximum decreases in the Company's market value of equity of 12% and 15% in the event of an immediate and sustained 100 BP and 200 BP increase or decrease in market interest rates. As shown in the table below, the percentage changes in the net market value of the Company's equity are within policy limits for both rising and falling rate scenarios.

    The following sets forth the analysis of the Company's market value risk inherent in its interest-sensitive financial instruments as they relate to the entire balance sheet at June 30, 2001 and December 31, 2000 ($ in thousands). Fair value estimates are subjective in nature and involve uncertainties and significant judgment and, therefore, cannot be determined with absolute precision. Assumptions have been made as to the appropriate discount rates, prepayment speeds, expected cash flows and other variables. Changes in these assumptions significantly affect the estimates and as such, the obtained fair value may not be indicative of the value negotiated in the actual sale or liquidation of such financial instruments, nor comparable to that reported by other financial institutions. In addition,

30

fair value estimates are based on existing financial instruments without attempting to estimate future business.

	June 30, 2001							December 31, 2000
Change in Rates	Estimated MV of Equity		Change in MV of Equity $			Change in MV of Equity %		Estimated MV of Equity		Change in MV of Equity $			Change in MV of Equity %
+ 200 BP	$	39,181	$	(1,836	)	-4.48	%	$	42,193	$	(1,587	)	-3.62	%
+ 100 BP		39,976		(1,041	)	-2.54	%		43,129		(650	)	-1.49	%
0 BP		41,017		0		0.00	%		43,780		0		0.00	%
-100 BP		41,328		310		0.76	%		43,397		(382	)	-0.87	%
-200 BP		40,881		(137	)	-0.33	%		42,969		(811	)	-1.85	%

Regulatory Matters

Capital Adequacy

    Capital adequacy for bank holding companies and their subsidiary banks has become increasingly important in recent years. Continued deregulation of the banking industry since the 1980's has resulted in, among other things, a broadening of business activities beyond that of traditional banking products and services. Because of this volatility within the banking and financial services industry, regulatory agencies have increased their focus upon ensuring that banking institutions meet certain capital requirements as a means of protecting depositors and investors against such volatility.

    The Board of Governors of the Federal Reserve System ("Board of Governors") has adopted regulations requiring insured institutions to maintain a minimum leverage ratio of Tier 1 capital (the sum of common stockholders' equity, noncumulative perpetual preferred stock and minority interests in consolidated subsidiaries, minus intangible assets, identified losses and investments in certain subsidiaries, plus unrealized losses or minus unrealized gains on available for sale securities) to total assets. Institutions which have received the highest composite regulatory rating and which are not experiencing or anticipating significant growth are required to maintain a minimum leverage capital ratio of 3% Tier 1 capital to total assets. All other institutions are required to maintain a minimum leverage capital ratio of at least 100 to 200 basis points above the 3% minimum requirement.

    The Board of Governors has also adopted a statement of policy, supplementing its leverage capital ratio requirements, which provides definitions of qualifying total capital (consisting of Tier 1 capital and supplementary capital, including the allowance for loan losses up to a maximum of 1.25% of risk-weighted assets) and sets forth minimum risk-based capital ratios of capital to risk-weighted assets. Insured institutions are required to maintain a ratio of qualifying total capital to risk weighted assets of 8%, at least one-half (4%) of which must be in the form of Tier 1 capital.

    The following table sets forth the Company's and the Bank's actual capital positions at June 30, 2001 and the minimum capital requirements for both under the regulatory guidelines discussed above:

31

Table 9.  Capital Ratios

	Company		Bank
	Actual Capital Ratios		Actual Capital Ratios		Minimum Capital Ratios
Total risk-based capital ratio	10.62	%	10.40	%	8.00	%
Tier 1 capital to risk-weighted assets	9.49	%	9.28	%	4.00	%
Leverage ratio	8.74	%	8.54	%	3.00	%

    As is indicated by the above table, the Company and the Bank exceeded all applicable regulatory capital guidelines at June 30, 2001. Management believes that, under the current regulations, the both will continue to meet their minimum capital requirements in the foreseeable future.

Dividends

    Dividends paid to shareholders by the Company are subject to restrictions set forth in the California General Corporation Law. The California General Corporation Law provides that a corporation may make a distribution to its shareholders if retained earnings immediately prior to the dividend payout are at least equal the amount of the proposed distribution. The primary source of funds with which dividends will be paid to shareholders will come from cash dividends received by the Company from the Bank. During June 2001, the Company received $1,400,000 in cash dividends from the Bank, from which the Company declared $636,000 as dividends payable to shareholders.

    The Bank as a state-chartered bank is subject to dividend restrictions set forth in California state banking law, and administered by the California Commissioner of Financial Institutions ("Commissioner"). Under such restrictions, the Bank may not pay cash dividends in an amount which exceeds the lesser of the retained earnings of the Bank or the Bank's net income for the last three fiscal years (less the amount of distributions to shareholders during that period of time). If the above test is not met, cash dividends may only be paid with the prior approval of the Commissioner, in an amount not exceeding the Bank's net income for its last fiscal year or the amount of its net income for the current fiscal year. This is not the case with the Bank. Year-to-date dividends of $2.6 million paid through June 30, 2001, were well within the maximum allowed under those regulatory guidelines, without approval of the Commissioner.

Reserve Balances

    The Bank is required to maintain average reserve balances with the Federal Reserve Bank. At June 30, 2001 the Bank's qualifying balance with the Federal Reserve was approximately $3.7 million, consisting of vault cash and balances.

PART II.  OTHER INFORMATION

    Item 1.  Not applicable

    Item 2.  Not applicable

    Item 3.  Not applicable

    Item 4.  Submission of Matters to a Vote of Security Holders:

    On May 16, 2001, United Security Bank held its Annual Meeting of Shareholders. Matters submitted to a vote included the election of nine directors, and approval of the Plan of Reorganization and Merger Agreement whereby United Security Bank would become a wholly-owned subsidiary of a

32

newly-formed bank holding company, United Security Bancshares. The results of the vote are as follows:

1)

Election of Directors:

	For	Withhold Authority
Robert G. Bitter, Pharm D.	4,316,459	1,005
Stanley J. Cavalla	4,316,459	1,005
Tom Ellithorpe	4,316,459	1,005
Ronnie D. Miller	4,316,459	1,005
Mike Munoz, Jr.	4,315,259	2,205
Walter Reinhard	4,316,459	1,005
John Terzian	4,282,175	35,209
Bobbi Thomason	4,316,459	1,005
Dennis R. Woods	4,310,459	7,005

2)

The proposal to approve the Plan of Reorganization and Merger Agreement dated April 24, 2001:

For	Against	Abstain
3,427,711	600	42,902

    Item 5.  Other Items

    During March 2001, the Bank made application to become a NASDAQ listed company. The Bank feels that the NASDAQ listing will provide greater exposure for the Company. The application process was be completed during the second quarter of 2001 and the Bank (now the Company) officially became a NASDAQ listed company on May 31, 2001.

    Item 6.  Exhibits and Reports on Form 8-K:

(a)

Exhibits:

10.1	Amended and Restated Declaration of Trust for USB Capital Trust I—dated July 16, 2001 (page 31)
10.2	Indenture Agreement between United Security Bancshares and Bank of New York for Junior Subordinated Securities—dated July 16, 2001 (page 120)

(b)

Reports on Form 8-K:



1)

A report on Form 8-K was filed on July 27, 2001 whereby the Company announced that it had completed the issuance of $15 million in trust preferred securities through it's newly-formed, wholly-owned subsidiary, USB Capital Trust I. In addition, the Company announced that on June 12, 2001 the bank holding reorganization involving United Security Bancshares and United Security Bank had been completed.

33

Signatures

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	UNITED SECURITY BANCSHARES
Date: August 9, 2001	By:	/s/ DENNIS R. WOODS Dennis R. Woods Chairman of the Board and President
	By:	/s/ KENNETH L. DONAHUE Kenneth L. Donahue Senior Vice President and Chief Financial Officer

34

QuickLinks

TABLE OF CONTENTS

PART I. Financial Information
ITEM 1. Financial Statements

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Asset/Liability Management
Interest Rate Sensitivity and Market Risk
Regulatory Matters

Signatures

EX-10.1

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



                        AMENDED AND RESTATED DECLARATION

                                    OF TRUST

                               USB CAPITAL TRUST I

                            Dated as of July 16, 2001



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



                                TABLE OF CONTENTS



                                                                                     Page
                                                                                     ----

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS
                                                                                
Section  1.1   Definitions.............................................................1

                                   ARTICLE II
                                  ORGANIZATION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                   ARTICLE III
                                     SPONSOR

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

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

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

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

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

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

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

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

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

                                       (i)


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

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

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

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

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

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

                                    ARTICLE V
                                  DISTRIBUTIONS

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

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

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

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

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

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

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

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

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

                                   ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

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

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

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

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

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

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

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

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

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

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

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

                                      (ii)


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

                                    ARTICLE X
                                   ACCOUNTING

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

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

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

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

                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

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

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

                                   ARTICLE XII
          REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE

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

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

                                  ARTICLE XIII
                                  MISCELLANEOUS

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

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

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

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

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

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

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

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


ANNEXES AND EXHIBITS

ANNEX I            Terms of Floating Rate MMCapS(SM)

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


                                     (iii)


                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                               USB CAPITAL TRUST I

                                  July 16, 2001

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

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

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

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

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

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS

              Section 1.1  DEFINITIONS

              Unless the context otherwise requires:

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



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

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

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

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

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

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

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

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

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

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

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

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

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

                                        2


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

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

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

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

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

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

              "CERTIFICATE" means any certificate evidencing Securities.

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

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

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

              "COMMISSION" means the Securities and Exchange Commission.

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

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

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

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

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

                                        3


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                        4


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                        5


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                        6


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                        7


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                        8


                                   ARTICLE II
                                  ORGANIZATION

              Section 2.1  NAME.


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

              Section 2.2  OFFICE.

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

              Section 2.3  PURPOSE.

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

              Section 2.4  AUTHORITY.

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

                                        9


              Section 2.5  TITLE TO PROPERTY OF THE TRUST.

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

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

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

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

                     (A) the issuance and sale of the Securities;

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

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

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

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

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

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

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

                                       10


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

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

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

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

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

                     (A) the establishment of the Property Account;

                     (B) the receipt of the Debentures;

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

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

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

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

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

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

                                       11


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

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

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

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

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

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

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

                                       12


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

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

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

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

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

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

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

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

                                       13


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

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

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

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

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

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

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

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

              Section 2.8  POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.

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

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

                                       14


              (c) The Institutional Trustee shall:

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

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

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

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

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

                                       15


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

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

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

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

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

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

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

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

                                       16


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

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

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

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

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

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

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

                                       17


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

              Section 2.10 CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE.

              Subject to the provisions of Section 2.9:

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

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

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

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

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

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

                                       18


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

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

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

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

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

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

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

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

                                       19


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

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

              Section 2.11 DELAWARE TRUSTEE.

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

              Section 2.12 EXECUTION OF DOCUMENTS.

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

              Section 2.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.

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

              Section 2.14 DURATION OF TRUST.

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

                                       20


              Section 2.15 MERGERS.

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

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

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

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

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

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

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

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

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

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

                                       21


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

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

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

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

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

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

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

                                   ARTICLE III
                                     SPONSOR

              Section 3.1  SPONSOR'S PURCHASE OF COMMON SECURITIES.

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

              Section 3.2  RESPONSIBILITIES OF THE SPONSOR.

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

                                       22


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

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

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

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

              Section 4.1  NUMBER OF TRUSTEES.

              The number of Trustees initially shall be two, and:

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

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

              Section 4.2  DELAWARE TRUSTEE.

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

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

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

                                       23


              Section 4.3  INSTITUTIONAL TRUSTEE; ELIGIBILITY.

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

              (i)  not be an Affiliate of the Sponsor;

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

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

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

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

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

              Section 4.4  CERTAIN QUALIFICATIONS OF THE DELAWARE TRUSTEE
GENERALLY.

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

              Section 4.5  ADMINISTRATORS.

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

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

                                       24


              Section 4.6  INITIAL DELAWARE TRUSTEE.

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

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

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

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

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

                                       25


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

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

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

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

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

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

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

                                       26


              Section 4.8  VACANCIES AMONG TRUSTEES.

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

              Section 4.9  EFFECT OF VACANCIES.

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

              Section 4.10 MEETINGS OF THE TRUSTEES AND THE ADMINISTRATORS.

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

                                       27


              Section 4.11 DELEGATION OF POWER.

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

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

              Section 4.12 CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

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

                                    ARTICLE V
                                  DISTRIBUTIONS

              Section 5.1  DISTRIBUTIONS.

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

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

              Section 6.1  GENERAL PROVISIONS REGARDING SECURITIES.

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

                                       28


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

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

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

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

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

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

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

                                       29


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

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

              Section 6.3  FORM AND DATING.

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

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

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

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

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

                                       30


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

              Section 6.5  TEMPORARY SECURITIES.

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

              Section 6.6  CANCELLATION.

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

              Section 6.7  RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS.

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

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

                                       31


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

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

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

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

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

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

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

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

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

                                       32


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

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

                                  ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

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

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

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

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

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

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

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

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

                                       33


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

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

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

              Section 8.1  GENERAL.

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

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

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

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

                                       34


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

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

              Section 8.2  TRANSFER PROCEDURES AND RESTRICTIONS.

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

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

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

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

                                       35


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

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

                                       36


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

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

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

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

              Section 8.3  DEEMED SECURITY HOLDERS.

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

                                       37


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

              Section 9.1  LIABILITY.

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

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

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

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

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

              Section 9.2  EXCULPATION.

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

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

                                       38


              Section 9.3  FIDUCIARY DUTY.

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

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

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

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

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

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

                                       39


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

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

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

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

                                       40


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

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

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

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

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

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

                                       41


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

              Section 9.2  OUTSIDE BUSINESSES.

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

              Section 9.3  COMPENSATION; FEE. THE SPONSOR AGREES:

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

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

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

                                   ARTICLE X
                                   ACCOUNTING

              Section 10.1 FISCAL YEAR.

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

                                       42


              Section 10.2 CERTAIN ACCOUNTING MATTERS.

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

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

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

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

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

              Section 10.3 BANKING.

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

                                       43


              Section 10.4 WITHHOLDING.

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

                                   ARTICLE XI
                             AMENDMENTS AND MEETINGS

              Section 11.1 AMENDMENTS.

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

              (i) the Institutional Trustee,

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

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

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

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

              (i) unless the Institutional Trustee shall have first received

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

                                       44


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

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

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

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

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

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

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

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

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

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

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

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

                                       45


              (i) cure any ambiguity;

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

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

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

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

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

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

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

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

                                       46


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

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

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

                                  ARTICLE XII
                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
                              AND DELAWARE TRUSTEE

              Section 12.1 REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL
TRUSTEE.

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

                                       47


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

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

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

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

              Section 12.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.

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

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

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

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

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

                                       48


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

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

                                  ARTICLE XIII
                                  MISCELLANEOUS

              Section 13.1 NOTICES.

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

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

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

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

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

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

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

                                       49


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

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

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

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

              Section 13.2 GOVERNING LAW.

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

              Section 13.3 SUBMISSION TO JURISDICTION.

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

                                       50


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

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

              Section 13.4 INTENTION OF THE PARTIES.

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

              Section 13.5 HEADINGS.

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

              Section 13.6 SUCCESSORS AND ASSIGNS.

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

              Section 13.7 PARTIAL ENFORCEABILITY.

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

              Section 13.8 COUNTERPARTS.

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

                                       51


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

                                              THE BANK OF NEW YORK (DELAWARE)
                                                as Delaware Trustee

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

                                              THE BANK OF NEW YORK
                                                as Institutional Trustee

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

                                              UNITED SECURITY BANCSHARES
                                                as Sponsor

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

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

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

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



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

                                              THE BANK OF NEW YORK (DELAWARE)
                                                as Delaware Trustee



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


                                              THE BANK OF NEW YORK
                                                as Institutional Trustee



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

                                              UNITED SECURITY BANCSHARES
                                                as Sponsor

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

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


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


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



                                     ANNEX I

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

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

              1.   DESIGNATION AND NUMBER.

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

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

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

                                    Annex I-1


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

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

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

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

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

                                    Annex I-2


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

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

                                    Annex I-3


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

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

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

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

                                    Annex I-4


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

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

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

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

                                    Annex I-5


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

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

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

              4.   REDEMPTION AND DISTRIBUTION.

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

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

                                    Annex I-6


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

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

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

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

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

                                    Annex I-7





                      Year Beginning                       Percentage
                      --------------                       ----------
                                                        
                      July 25, 2006                        107.6875%
                      July 25, 2007                        106.1500%
                      July 25, 2008                        104.6125%
                      July 25, 2009                        103.0750%
                      July 25, 2010                        101.5375%
                July 25, 2011 and after                    100.0000%


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

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

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

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

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

                                    Annex I-8


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

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

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

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

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

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

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

                                    Annex I-9


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

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

              (e)  Redemption or Distribution Procedures.

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

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

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

                                   Annex I-10


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

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

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

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

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

                                   Annex I-11


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

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

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

                                   Annex I-12


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

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

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

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

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

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

                                   Annex I-13


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

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

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

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

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

                                   Annex I-14


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

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

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

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

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

                                   Annex I-15


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

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

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

                                   Annex I-16


                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

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

              THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14

                                  Exhibit A-1-1


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

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

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

                                  Exhibit A-1-2


Certificate Number:_________            Number of Capital Securities:__________

                             CUSIP NO [___________]

                    Certificate Evidencing Capital Securities

                                       of

                               USB CAPITAL TRUST I

                            Floating Rate MMCapS(SM)

                (liquidation amount $1,000 per Capital Security)

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

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

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

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

                                  Exhibit A-1-3


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

                                              USB CAPITAL TRUST I

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

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


                          CERTIFICATE OF AUTHENTICATION

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

                                              THE BANK OF NEW YORK, as the
                                              Institutional Trustee

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

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

                                  Exhibit A-1-4


                          [FORM OF REVERSE OF SECURITY]

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

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

                                  Exhibit A-1-5


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

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

                                  Exhibit A-1-6


                                   ASSIGNMENT

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

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

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

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

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

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

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

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

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


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

                                  Exhibit A-1-7


                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

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

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

                                  Exhibit A-2-1


Certificate Number:________                Number of Common Securities:_________

                    Certificate Evidencing Common Securities

                                       of

                               USB CAPITAL TRUST I

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

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

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

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

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

                                  Exhibit A-2-2


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

                                           USB CAPITAL TRUST I

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

                                  Exhibit A-2-3


                          [FORM OF REVERSE OF SECURITY]

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

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

                                  Exhibit A-2-4


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

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

                                  Exhibit A-2-5


                                   ASSIGNMENT

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

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

Insert assignee's social security or tax identification number)

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

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

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

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

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


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

                                  Exhibit A-2-6


                                                                       Exhibit B


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

                                                             ___________, [    ]

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

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

Ladies and Gentlemen:

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

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

                                   Exhibit B-1


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

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

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

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

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

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

                                   Exhibit B-2


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

                                              Very truly yours,


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

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

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

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

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

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

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

                                   Exhibit B-3


                                                                       EXHIBIT C

                         FORM OF TRANSFEROR CERTIFICATE
                             TO BE EXECUTED FOR QIBs

                                                             ___________, [    ]

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


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

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

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

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

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

                                                 (Name of Transferor)

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

                                   Exhibit C-1

EX-10.2

                           UNITED SECURITY BANCSHARES
                                    as Issuer




                                    INDENTURE

                            Dated as of July 16, 2001

                              THE BANK OF NEW YORK
                                   as Trustee


                         JUNIOR SUBORDINATED SECURITIES



                                TABLE OF CONTENTS


                                                                                                Page
                                                                                                ----
                                    ARTICLE I
                                   DEFINITIONS
                                                                                           
Section 1.01          Definitions.................................................................1

                                   ARTICLE II
                                 DEBT SECURITIES

Section 2.01          Authentication and Dating...................................................9

Section 2.02          Form of Trustee's Certificate of Authentication............................10

Section 2.03          Form and Denomination of Debt Securities...................................10

Section 2.04          Execution of Debt Securities...............................................10

Section 2.05          Exchange and Registration of Transfer of Debt Securities...................11

Section 2.06          Mutilated, Destroyed, Lost or Stolen Debt Securities.......................13

Section 2.07          Temporary Debt Securities..................................................14

Section 2.08          Payment of Interest........................................................15

Section 2.09          Cancellation of Debt Securities Paid, etc..................................16

Section 2.10          Computation of Interest....................................................16

Section 2.11          Extension of Interest Payment Period.......................................18

Section 2.12          CUSIP Numbers..............................................................19

                                   ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY

Section 3.01          Payment of Principal, Premium and Interest; Agreed Treatment of the
                      Debt Securities ...........................................................19

Section 3.02          Offices for Notices and Payments, etc......................................20

Section 3.03          Appointments to Fill Vacancies in Trustee's Office.........................20

Section 3.04          Provision as to Paying Agent...............................................20

Section 3.05          Certificate to Trustee.....................................................21

Section 3.06          Additional Interest........................................................21

Section 3.07          Compliance with Consolidation Provisions...................................22

Section 3.08          Limitation on Dividends....................................................22

Section 3.09          Covenants as to the Trust..................................................23

                                      (i)


                                   ARTICLE IV
                LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

Section 4.01          Securityholders' Lists.....................................................23

Section 4.02          Preservation and Disclosure of Lists.......................................23


                                    ARTICLE V
      REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT

Section 5.01          Events of Default..........................................................25

Section 5.02          Payment of Debt Securities on Default; Suit Therefor.......................26

Section 5.03          Application of Moneys Collected by Trustee.................................28

Section 5.04          Proceedings by Securityholders.............................................28

Section 5.05          Proceedings by Trustee.....................................................29

Section 5.06          Remedies Cumulative and Continuing.........................................29

Section 5.07          Direction of Proceedings and Waiver of Defaults by Majority of
                      Securityholders ...........................................................29

Section 5.08          Notice of Defaults.........................................................30

Section 5.09          Undertaking to Pay Costs...................................................30

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

Section 6.01          Duties and Responsibilities of Trustee.....................................31

Section 6.02          Reliance on Documents, Opinions, etc.......................................32

Section 6.03          No Responsibility for Recitals, etc........................................33

Section 6.04          Trustee, Authenticating Agent, Paying Agents, Transfer Agents or
                      Registrar May Own Debt Securities..........................................33

Section 6.05          Moneys to be Held in Trust.................................................33

Section 6.06          Compensation and Expenses of Trustee.......................................34

Section 6.07          Officers' Certificate as Evidence..........................................34

Section 6.08          Eligibility of Trustee.....................................................35

Section 6.09          Resignation or Removal of Trustee..........................................35

Section 6.10          Acceptance by Successor Trustee............................................36

Section 6.11          Succession by Merger, etc..................................................37

Section 6.12          Authenticating Agents......................................................38

                                      (ii)


                                   ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

Section 7.01          Action by Securityholders..................................................39

Section 7.02          Proof of Execution by Securityholders......................................40

Section 7.03          Who Are Deemed Absolute Owners.............................................40

Section 7.04          Debt Securities Owned by Company Deemed Not Outstanding....................40

Section 7.05          Revocation of Consents; Future Holders Bound...............................41

                                  ARTICLE VIII
                            SECURITYHOLDERS' MEETINGS

Section 8.01          Purposes of Meetings.......................................................41

Section 8.02          Call of Meetings by Trustee................................................41

Section 8.03          Call of Meetings by Company or Securityholders.............................42

Section 8.04          Qualifications for Voting..................................................42

Section 8.05          Regulations................................................................42

Section 8.06          Voting.....................................................................43

Section 8.07          Quorum; Actions............................................................43

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

Section 9.01          Supplemental Indentures without Consent of Securityholders.................44

Section 9.02          Supplemental Indentures with Consent of Securityholders....................45

Section 9.03          Effect of Supplemental Indentures..........................................46

Section 9.04          Notation on Debt Securities................................................47

Section 9.05          Evidence of Compliance of Supplemental Indenture to be Furnished to
                      Trustee....................................................................47

                                    ARTICLE X
                            REDEMPTION OF SECURITIES

Section 10.01         Optional Redemption........................................................47

Section 10.02         Special Event Redemption...................................................47

Section 10.03         Notice of Redemption; Selection of Debt Securities.........................47

Section 10.04         Payment of Debt Securities Called for Redemption...........................48

                                     (iii)


                                   ARTICLE XI
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

Section 11.01         Company May Consolidate, etc., on Certain Terms............................49

Section 11.02         Successor Entity to be Substituted.........................................49

Section 11.03         Opinion of Counsel to be Given to Trustee..................................50

                                   ARTICLE XII
                     SATISFACTION AND DISCHARGE OF INDENTURE

Section 12.01         Discharge of Indenture.....................................................50

Section 12.02         Deposited Moneys to be Held in Trust by Trustee............................51

Section 12.03         Paying Agent to Repay Moneys Held..........................................51

Section 12.04         Return of Unclaimed Moneys.................................................51

                                  ARTICLE XIII
         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 13.01         Indenture and Debt Securities Solely Corporate Obligations.................51

                                   ARTICLE XIV
                            MISCELLANEOUS PROVISIONS

Section 14.01         Successors.................................................................52

Section 14.02         Official Acts by Successor Entity..........................................52

Section 14.03         Surrender of Company Powers................................................52

Section 14.04         Addresses for Notices, etc.................................................52

Section 14.05         Governing Law..............................................................52

Section 14.06         Evidence of Compliance with Conditions Precedent...........................53

Section 14.07         Non-Business Days..........................................................53

Section 14.08         Table of Contents, Headings, etc...........................................53

Section 14.09         Execution in Counterparts..................................................53

Section 14.10         Separability...............................................................53

Section 14.11         Assignment.................................................................54

Section 14.12         Acknowledgment of Rights...................................................54

                                      (iv)


                                   ARTICLE XV
                        SUBORDINATION OF DEBT SECURITIES

Section 15.01         Agreement to Subordinate...................................................54

Section 15.02         Default on Senior Indebtedness.............................................55

Section 15.03         Liquidation; Dissolution; Bankruptcy.......................................55

Section 15.04         Subrogation................................................................56

Section 15.05         Trustee to Effectuate Subordination........................................57

Section 15.06         Notice by the Company......................................................57

Section 15.07         Rights of the Trustee; Holders of Senior Indebtedness......................58

Section 15.08         Subordination May Not Be Impaired..........................................59


EXHIBITS


EXHIBIT A    FORM OF DEBT SECURITY

                                      (v)


          THIS INDENTURE, dated as of July 16, 2001, between United Security
Bancshares, a bank holding company incorporated in California (hereinafter
sometimes called the "Company"), and The Bank of New York, as trustee
(hereinafter sometimes called the "Trustee").

                              W I T N E S S E T H :

          WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance of its Floating Rate Junior Subordinated Deferrable
Interest Debentures due July 25, 2031 (the "Debt Securities") under this
Indenture and to provide, among other things, for the execution and
authentication, delivery and administration thereof, the Company has duly
authorized the execution of this Indenture; and

          WHEREAS, all acts and things necessary to make this Indenture a valid
agreement according to its terms, have been done and performed;

          NOW, THEREFORE, This Indenture Witnesseth:

          In consideration of the premises, and the purchase of the Debt
Securities by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Debt Securities as follows:

                                    ARTICLE I
                                   DEFINITIONS

          Section 1.01 DEFINITIONS.

          The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.01. All accounting terms used
herein and not expressly defined shall have the meanings assigned to such terms
in accordance with generally accepted accounting principles and the term
"generally accepted accounting principles" means such accounting principles as
are generally accepted at the time of any computation. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.

          "Additional Interest" shall have the meaning set forth in Section
3.06.

          "Authenticating Agent" means any agent or agents of the Trustee which
at the time shall be appointed and acting pursuant to Section 6.12.

          "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.

          "Board of Directors" means the board of directors or the executive
committee or any other duly authorized designated officers of the Company.



          "Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.

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

          "Calculation Agent" means the Person identified as "Trustee" in the
first paragraph hereof, in its individual capacity and not as Trustee, and,
subject to the provisions of Article VI hereof, shall also include its
successors and assigns, in their individual capacities and not as Trustee.

          "Capital Securities" means undivided beneficial interests in the
assets of the Trust which rank PARI PASSU with Common Securities issued by the
Trust; PROVIDED, HOWEVER, that if an Event of Default (as defined in the
Declaration) has occurred and is continuing, the rights of holders of such
Common Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of holders
of such Capital Securities.

          "Capital Securities Guarantee" means the guarantee that the Company
will enter into with The Bank of New York or other Persons that operates
directly or indirectly for the benefit of holders of Capital Securities of the
Trust.

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

                  "Certificate" means a certificate signed by any one of the
principal executive officer, the principal financial officer or the principal
accounting officer of the Company.

                                       2


          "Common Securities" means undivided beneficial interests in the assets
of the Trust which rank PARI PASSU with Capital Securities issued by the Trust;
PROVIDED, HOWEVER, that if an Event of Default (as defined in the Declaration)
has occurred and is continuing, the rights of holders of such Common Securities
to payment in respect of distributions and payments upon liquidation, redemption
and otherwise are subordinated to the rights of holders of such Capital
Securities.

          "Company" means United Security Bancshares, a bank holding company
incorporated in California, and, subject to the provisions of Article XI, shall
include its successors and assigns.

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

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

          "Debt Security" or "Debt Securities" has the meaning stated in the
first recital of this Indenture.

          "Debt Security Register" has the meaning specified in Section 2.05.

          "Declaration" means the Amended and Restated Declaration of Trust of
the Trust, as amended or supplemented from time to time.

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

          "Defaulted Interest" has the meaning set forth in Section 2.08.

          "Deferred Interest" has the meaning set forth in Section 2.11.

          "Event of Default" means any event specified in Section 5.01, which
has continued for the period of time, if any, and after the giving of the
notice, if any, therein designated.

          "Extension Period" has the meaning set forth in Section 2.11.

                                       3


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

          "Indenture" means this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented, or
both.

          "Institutional Trustee" has the meaning set forth in the Declaration.

          "Interest Payment Date" means January 25th and July 25th of each year,
commencing on January 25, 2002, during the term of this Indenture.

          "Interest Rate" means a per annum rate of interest, reset
semi-annually, equal to LIBOR, as determined on the immediately preceding LIBOR
Determination Date, plus 375 basis points; provided, that the applicable
Interest Rate may not exceed 12.50% through the Interest Payment Date in July
2011.

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

          "LIBOR" means the London Interbank Offered Rate for six-month U.S.
Dollar deposits in Europe as determined by the Calculation Agent according to
Section 2.10(b).

          "LIBOR Banking Day" has the meaning set forth in Section 2.10(b)(1).

          "LIBOR Business Day" has the meaning set forth in Section 2.10(b)(1).

          "LIBOR Determination Date" has the meaning set forth in Section
2.10(b).

          "Liquidation Amount" means the stated amount of $1,000 per Trust
Security.

          "Maturity Date" means July 25, 2031.

          "Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors, the Vice Chairman, the President or any Vice President,
and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the
Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary
of the Company, and delivered to the Trustee. Each such certificate shall
include the statements provided for in Section 14.06 if and to the extent
required by the provisions of such Section.

                                       4


          "Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or may be other
counsel satisfactory to the Trustee. Each such opinion shall include the
statements provided for in Section 14.06 if and to the extent required by the
provisions of such Section.

          The term "outstanding," when used with reference to Debt Securities,
subject to the provisions of Section 7.04, means, as of any particular time, all
Debt Securities authenticated and delivered by the Trustee or the Authenticating
Agent under this Indenture, except

          (a) Debt Securities theretofore canceled by the Trustee or the
     Authenticating Agent or delivered to the Trustee for cancellation;

          (b) Debt Securities, or portions thereof, for the payment or
     redemption of which moneys in the necessary amount shall have been
     deposited in trust with the Trustee or with any paying agent (other than
     the Company) or shall have been set aside and segregated in trust by the
     Company (if the Company shall act as its own paying agent); provided that,
     if such Debt Securities, or portions thereof, are to be redeemed prior to
     maturity thereof, notice of such redemption shall have been given as
     provided in Articles Ten and Fourteen or provision satisfactory to the
     Trustee shall have been made for giving such notice; and

          (c) Debt Securities paid pursuant to Section 2.06 or in lieu of or in
     substitution for which other Debt Securities shall have been authenticated
     and delivered pursuant to the terms of Section 2.06 unless proof
     satisfactory to the Company and the Trustee is presented that any such Debt
     Securities are held by bona fide holders in due course.

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

          "Predecessor Security" of any particular Debt Security means every
previous Debt Security evidencing all or a portion of the same debt as that
evidenced by such particular Debt Security; and, for the purposes of this
definition, any Debt Security authenticated and delivered under Section 2.06 in
lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence
the same debt as the lost, destroyed or stolen Debt Security.

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

          "Principal Office of the Trustee," or other similar term, means the
office of the Trustee, at which at any particular time its corporate trust
business shall be principally administered, which at all times shall be located
within the United States and at the time of the execution of this Indenture
shall be 101 Barclay Street, Floor 21 West, New York, NY 10286.

                                       5


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

          "Redemption Date" has the meaning set forth in Section 10.01.

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



                      Year Beginning                  Percentage
                      --------------                  ----------
                                                    
                       July 25, 2006                   107.6875%
                       July 25, 2007                   106.1500%
                       July 25, 2008                   104.6125%
                       July 25, 2009                   103.0750%
                       July 25, 2010                   101.5375%
                  July 25, 2011 and after              100.0000%


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

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

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

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

          "Responsible Officer" means, with respect to the Trustee, any officer
within the Principal Office of the Trustee, 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 Principal
Trust Office of the 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.

                                       6


          "Securityholder," "holder of Debt Securities" or other similar terms,
means any Person in whose name at the time a particular Debt Security is
registered on the Debt Security Register.

          "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of the
Company for money borrowed and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company;
(ii) all capital lease obligations of the Company; (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of the Company
for the reimbursement of any letter of credit, any banker's acceptance, any
security purchase facility, any repurchase agreement or similar arrangement, any
interest rate swap, any other hedging arrangement, any obligation under options
or any similar credit or other transaction; (v) all obligations of the type
referred to in clauses (i) through (iv) above of other Persons for the payment
of which the Company is responsible or liable as obligor, guarantor or
otherwise; and (vi) all obligations of the type referred to in clauses (i)
through (v) above of other Persons secured by any lien on any property or asset
of the Company (whether or not such obligation is assumed by the Company),
whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, with the prior approval of the Federal Reserve if not
otherwise generally approved, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior or are PARI PASSU in right of payment to the Debt
Securities.

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

          "Special Redemption Date" has the meaning set forth in 10.02.

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

          "Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or

                                       7


more of its Subsidiaries, or by such Person and one or more of its Subsidiaries,
and (iii) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For the purposes of this definition, "voting
stock" means shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary voting power
for the election of a majority of the directors (or the equivalent) of such
Person, other than shares, interests, participations or other equivalents having
such power only by reason of the occurrence of a contingency.

          "Tax Event" means the receipt by the Company 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
Company 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 Debt Securities, there is more than an insubstantial risk that: (i) the
Trust is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to income received or accrued on
the Debt Securities; (ii) interest payable by the Company on the Debt Securities
is not, or within 90 days of the date of such opinion, will not be, deductible
by the Company, in whole or in part, for United States federal income tax
purposes; or (iii) the Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties,
assessments or other governmental charges.

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

          "Trust" means USB Capital Trust I, the Delaware business trust, or any
other similar trust created for the purpose of issuing Capital Securities in
connection with the issuance of Debt Securities under this Indenture, of which
the Company is the sponsor.

                                       8


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

          "Trust Securities" means Common Securities and Capital Securities of
USB Capital Trust I.

          "Trustee" means the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder.

          "United States" means the United States of America and the District of
Columbia.

          "U.S. Person" has the meaning given to United States Person as set
forth in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.

                                   ARTICLE II
                                 DEBT SECURITIES

          Section 2.01 AUTHENTICATION AND DATING.

          Upon the execution and delivery of this Indenture, or from time to
time thereafter, Debt Securities in an aggregate principal amount not in excess
of $15,464,000 may be executed and delivered by the Company to the Trustee for
authentication, and the Trustee shall thereupon authenticate and make available
for delivery said Debt Securities to or upon the written order of the Company,
signed by its Chairman of the Board of Directors, Vice Chairman, President,
Chief Financial Officer or one of its Vice Presidents and by its Secretary, any
Assistant Secretary, Treasurer or any Assistant Treasurer, without any further
action by the Company hereunder. In authenticating such Debt Securities, and
accepting the additional responsibilities under this Indenture in relation to
such Debt Securities, the Trustee shall be entitled to receive, and (subject to
Section 6.01) shall be fully protected in relying upon:

          (a) a copy of any Board Resolution or Board Resolutions relating
thereto and, if applicable, an appropriate record of any action taken pursuant
to such resolution, in each case certified by the Secretary or an Assistant
Secretary of the Company as the case may be; and

          (b) an Opinion of Counsel prepared in accordance with Section 14.06
which shall also state:

               (1) that such Debt Securities, when authenticated and delivered
          by the Trustee and issued by the Company in each case in the manner
          and subject to any conditions specified in such Opinion of Counsel,
          will constitute valid and legally binding obligations of the Company;
          and

               (2) that all laws and requirements in respect of the execution
          and delivery by the Company of the Debt Securities, have been complied
          with and that authentication and delivery of the Debt Securities by
          the Trustee will not violate the terms of this Indenture.

                                       9


          The Trustee shall have the right to decline to authenticate and
deliver any Debt Securities under this Section if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if a
Responsible Officer of the Trustee in good faith shall determine that such
action would expose the Trustee to personal liability to existing holders.

          The definitive Debt Securities shall be typed, printed, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the officers executing such Debt Securities, as evidenced
by their execution of such Debt Securities.

          Section 2.02 FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

          The Trustee's certificate of authentication on all Debt Securities
shall be in substantially the following form:

          This is one of the Debt Securities referred to in the within-mentioned
Indenture.

                  __________________________________, as Trustee

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

          Section 2.03 FORM AND DENOMINATION OF DEBT SECURITIES.


          The Debt Securities shall be substantially in the form of Exhibit A
hereto. The Debt Securities shall be in registered, certificated form without
coupons and in minimum denominations of $100,000 and any multiple of $1,000 in
excess thereof. The Debt Securities shall be numbered, lettered, or otherwise
distinguished in such manner or in accordance with such plans as the officers
executing the same may determine with the approval of the Trustee as evidenced
by the execution and authentication thereof.

          Section 2.04 EXECUTION OF DEBT SECURITIES.

          The Debt Securities shall be signed in the name and on behalf of the
Company by the manual or facsimile signature of its Chairman of the Board of
Directors, Vice Chairman, President, Chief Financial Officer, Executive Vice
President, Senior Vice President or Vice President, under its corporate seal
which may be affixed thereto or printed, engraved or otherwise reproduced
thereon, by facsimile or otherwise, and which need not be attested. Only such
Debt Securities as shall bear thereon a certificate of authentication
substantially in the form herein before recited, executed by the Trustee or the
Authenticating Agent by the manual signature of an authorized officer, shall be
entitled to the benefits of this Indenture or be valid or obligatory for any
purpose. Such certificate by the Trustee or the Authenticating Agent upon any
Debt Security executed by the Company shall be conclusive evidence that the Debt
Security so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.

          In case any officer of the Company who shall have signed any of the
Debt Securities shall cease to be such officer before the Debt Securities so
signed shall have been

                                       10


authenticated and delivered by the Trustee or the Authenticating Agent, or
disposed of by the Company, such Debt Securities nevertheless may be
authenticated and delivered or disposed of as though the Person who signed such
Debt Securities had not ceased to be such officer of the Company; and any Debt
Security may be signed on behalf of the Company by such Persons as, at the
actual date of the execution of such Debt Security, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.

          Every Debt Security shall be dated the date of its authentication.

          Section 2.05 EXCHANGE AND REGISTRATION OF TRANSFER OF DEBT SECURITIES.

          The Company shall cause to be kept, at the office or agency maintained
for the purpose of registration of transfer and for exchange as provided in
Section 3.02, a register (the "Debt Security Register") for the Debt Securities
issued hereunder in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration and transfer of all
Debt Securities as in this Article Two provided. Such register shall be in
written form or in any other form capable of being converted into written form
within a reasonable time.

          Debt Securities to be exchanged may be surrendered at the Principal
Office of the Trustee or at any office or agency to be maintained by the Company
for such purpose as provided in Section 3.02, and the Company shall execute, the
Company or the Trustee shall register and the Trustee or the Authenticating
Agent shall authenticate and make available for delivery in exchange therefor
the Debt Security or Debt Securities which the Securityholder making the
exchange shall be entitled to receive. Upon due presentment for registration of
transfer of any Debt Security at the principal corporate trust office of the
Trustee or at any office or agency of the Company maintained for such purpose as
provided in Section 3.02, the Company shall execute, the Company or the Trustee
shall register and the Trustee or the Authenticating Agent shall authenticate
and make available for delivery in the name of the transferee or transferees a
new Debt Security for a like aggregate principal amount. Registration or
registration of transfer of any Debt Security by the Trustee or by any agent of
the Company appointed pursuant to Section 3.02, and delivery of such Debt
Security, shall be deemed to complete the registration or registration of
transfer of such Debt Security.

          All Debt Securities presented for registration of transfer or for
exchange or payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
either the Trustee or the Authenticating Agent duly executed by, the holder or
his attorney duly authorized in writing.

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

          The Company or the Trustee shall not be required to exchange or
register a transfer of any Debt Security for a period of 15 days next preceding
the date of selection of Debt Securities for redemption.

                                       11


          Notwithstanding the foregoing, Debt Securities may not be transferred
except in compliance with the restricted securities legend set forth below (the
"Restrictive Securities Legend"), unless otherwise determined by the Company in
accordance with applicable law:

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

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
HOLDING OF THIS

                                       12


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

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE 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.

          THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED
STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC"). THIS OBLIGATION IS SUBORDINATED TO THE
CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE
COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY AND IS NOT
SECURED.

          Section 2.06 MUTILATED, DESTROYED, LOST OR STOLEN DEBT SECURITIES.

          In case any Debt Security shall become mutilated or be destroyed, lost
or stolen, the Company shall execute, and upon its written request the Trustee
shall authenticate and deliver, a new Debt Security bearing a number not
contemporaneously outstanding, in exchange and substitution for the mutilated
Debt Security, or in lieu of and in substitution for the Debt Security so
destroyed, lost or stolen. In every case the applicant for a substituted Debt
Security shall furnish to the Company and the Trustee such security or indemnity
as may be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant

                                       13


shall also furnish to the Company and the Trustee evidence to their satisfaction
of the destruction, loss or theft of such Debt Security and of the ownership
thereof.

          The Trustee may authenticate any such substituted Debt Security and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Debt Security, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debt Security which has matured or is about to mature or
has been called for redemption in full shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Debt Security,
pay or authorize the payment of the same (without surrender thereof except in
the case of a mutilated Debt Security) if the applicant for such payment shall
furnish to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless and, in case of destruction, loss
or theft, evidence satisfactory to the Company and to the Trustee of the
destruction, loss or theft of such Security and of the ownership thereof.

          Every substituted Debt Security issued pursuant to the provisions of
this Section 2.06 by virtue of the fact that any such Debt Security is
destroyed, lost or stolen shall constitute an additional contractual obligation
of the Company, whether or not the destroyed, lost or stolen Debt Security shall
be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Debt Securities
duly issued hereunder. All Debt Securities shall be held and owned upon the
express condition that, to the extent permitted by applicable law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debt Securities and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.

          Section 2.07 TEMPORARY DEBT SECURITIES.

          Pending the preparation of definitive Debt Securities, the Company may
execute and the Trustee shall authenticate and make available for delivery
temporary Debt Securities that are typed, printed or lithographed. Temporary
Debt Securities shall be issuable in any authorized denomination, and
substantially in the form of the definitive Debt Securities but with such
omissions, insertions and variations as may be appropriate for temporary Debt
Securities, all as may be determined by the Company. Every such temporary Debt
Security shall be executed by the Company and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with the same
effect, as the definitive Debt Securities. Without unreasonable delay the
Company will execute and deliver to the Trustee or the Authenticating Agent
definitive Debt Securities and thereupon any or all temporary Debt Securities
may be surrendered in exchange therefor, at the principal corporate trust office
of the Trustee or at any office or agency maintained by the Company for such
purpose as provided in Section 3.02, and the Trustee or the Authenticating Agent
shall authenticate and make available for delivery in exchange for such
temporary Debt Securities a like aggregate principal amount of such definitive
Debt Securities. Such exchange shall be made by the Company at its own expense
and without any charge therefor except that in case of any such exchange
involving a registration of transfer

                                       14


the Company may require payment of a sum sufficient to cover any tax, fee or
other governmental charge that may be imposed in relation thereto. Until so
exchanged, the temporary Debt Securities shall in all respects be entitled to
the same benefits under this Indenture as definitive Debt Securities
authenticated and delivered hereunder.

          Section 2.08 PAYMENT OF INTEREST.

          Each Debt Security will bear interest at the then applicable Interest
Rate from and including each Interest Payment Date or, in the case of the first
interest period, the original date of issuance of such Debt Security to, but
excluding, the next succeeding Interest Payment Date or, in the case of the last
interest period, the Redemption Date, Special Redemption Date or Maturity Date,
as applicable, on the principal thereof, on any overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) on
Deferred Interest on any overdue installment of interest (including Defaulted
Interest), payable (subject to the provisions of Article XII) on each Interest
Payment Date commencing on January 25, 2002. Interest and any Deferred Interest
on any Debt Security that is payable, and is punctually paid or duly provided
for, on any Interest Payment Date shall be paid to the Person in whose name said
Debt Security (or one or more Predecessor Securities) is registered at the close
of business on the regular record date for such interest installment, except
that interest and any Deferred Interest payable on the Maturity Date shall be
paid to the Person to whom principal is paid. In the event that any Debt
Security or portion thereof is called for redemption and the redemption date is
subsequent to a regular record date with respect to any Interest Payment Date
and prior to such Interest Payment Date, interest on such Debt Security will be
paid upon presentation and surrender of such Debt Security.

          Any interest on any Debt Security, other than Deferred Interest, that
is payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
payable to the registered holder on the relevant regular record date by virtue
of having been such holder, and such Defaulted Interest shall be paid by the
Company to the Persons in whose names such Debt Securities (or their respective
Predecessor Securities) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each such Debt Security and
the date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of such
Defaulted Interest which shall not be more than fifteen nor less than ten days
prior to the date of the proposed payment and not less than ten days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such special record date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at his or her address as it
appears in the Debt Security Register, not less than ten days prior to such
special record date. Notice of the proposed

                                       15


payment of such Defaulted Interest and the special record date therefor having
been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons
in whose names such Debt Securities (or their respective Predecessor Securities)
are registered on such special record date and thereafter the Company shall have
no further payment obligation in respect of the Defaulted Interest.

          Any interest scheduled to become payable on an Interest Payment Date
occurring during an Extension Period shall not be Defaulted Interest and shall
be payable on such other date as may be specified in the terms of such Debt
Securities.

          The term "regular record date" as used in this Section shall mean the
tenth day of the month in which an Interest Payment shall occur, whether or not
such date is a Business Day.

          Subject to the foregoing provisions of this Section, each Debt
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Debt Security shall carry the rights to
interest accrued and unpaid, and to accrue, that were carried by such other Debt
Security.

          Section 2.09 CANCELLATION OF DEBT SECURITIES PAID, ETC.

          All Debt Securities surrendered for the purpose of payment,
redemption, exchange or registration of transfer, shall, if surrendered to the
Company or any paying agent, be surrendered to the Trustee and promptly canceled
by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be
promptly canceled by it, and no Debt Securities shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture. All
Debt Securities canceled by any Authenticating Agent shall be delivered to the
Trustee. The Trustee shall destroy all canceled Debt Securities unless the
Company otherwise directs the Trustee in writing. If the Company shall acquire
any of the Debt Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debt
Securities unless and until the same are surrendered to the Trustee for
cancellation.

          Section 2.10 COMPUTATION OF INTEREST.

          (a) The amount of interest payable for any interest period will be
computed on the basis of a 360-day year and the actual number of days elapsed in
the relevant interest period; PROVIDED, HOWEVER, that upon the occurrence of a
Special Event Redemption pursuant to Section 10.02 the amounts payable pursuant
to this Declaration shall be calculated as set forth in the definition of
Special Redemption Price.

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

               (1) On the second LIBOR Business Day (provided that on such day
          commercial banks are open for business (including dealings in foreign
          currency deposits) in London (a "LIBOR Banking Day"), and otherwise
          the next preceding LIBOR Business Day that is also a LIBOR Banking
          Day) prior to August 1 and February 1 (except, with respect to the
          first interest payment period, on July 12,

                                       16


          2001), (each such day, a "LIBOR Determination Date"), LIBOR shall
          equal the rate, as obtained by the Calculation Agent for six-month
          Eurodollar deposits in Europe which appears on Telerate Page 3750 (as
          defined in the International Swaps and Derivatives Association, Inc.
          1991 Interest Rate and Currency Exchange Definitions) or such other
          page as may replace such Page 3750, as of 11:00 a.m. (London time) on
          such LIBOR Determination Date, as reported by Bloomberg Financial
          Markets Commodities News. "LIBOR Business Day" means any day that is
          not a Saturday, Sunday or other day on which commercial banking
          institutions in New York, New York, are authorized or obligated by law
          or executive order to be closed. If such rate is superseded on
          Telerate Page 3750 by a corrected rate before 12:00 noon (London time)
          on the same LIBOR Determination Date, the corrected rate as so
          substituted will be the applicable LIBOR for that LIBOR Determination
          Date.

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

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

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

                                       17


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

          Section 2.11 EXTENSION OF INTEREST PAYMENT PERIOD.

          So long as no Event of Default has occurred and is continuing, the
Company shall have the right, from time to time and without causing an Event of
Default, to defer payments of interest on the Debt Securities by extending the
interest payment period on the Debt Securities at any time and from time to time
during the term of the Debt Securities, for up to ten consecutive semi-annual
periods (each such extended interest payment period, an "Extension Period"),
during which Extension Period no interest shall be due and payable (except any
Additional Interest that may be due and payable). No Extension Period may end on
a date other than an Interest Payment Date. During any Extension Period,
interest will continue to accrue on the Debt Securities and interest on such
accrued interest (such accrued interest and interest thereon referred to herein
as "Deferred Interest") will accrue at the Interest Rate, compounded
semi-annually from the date such Deferred Interest would have been payable were
it not for the Extension Period, both to the extent permitted by law. No
interest or Deferred Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Deferred Interest. At the end of any such Extension Period the Company shall pay
all Deferred Interest then accrued and unpaid on the Debt Securities; PROVIDED,
HOWEVER, that no Extension Period may extend beyond the Maturity Date; and
PROVIDED FURTHER, HOWEVER, that during any such Extension Period, the Company
shall be subject to the restrictions set forth in Section 3.08 of this
Indenture. Prior to the termination of any Extension Period, the Company may
further extend such period, provided that such period together with all such
previous and further consecutive extensions thereof shall not exceed ten
consecutive semi-annual periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all Deferred
Interest, the Company may commence a new Extension Period, subject to the
foregoing requirements. The Company must give the Trustee notice of its election
to begin such Extension Period at least one Business Day prior to the earlier of
(i) the next succeeding date on which interest on the Debt Securities would have
been payable except for the election to begin such Extension Period or (ii) the
date such interest is payable, but in any event not later than the related
regular record date. The Trustee shall give notice of the Company's election to
begin a new Extension Period to the Securityholders.

                                       18


          Section 2.12 CUSIP NUMBERS.

          The Company in issuing the Debt Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Securityholders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Debt Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debt Securities, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee in writing of any change in the CUSIP numbers.

                                   ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY

          Section 3.01 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED
     TREATMENT OF THE DEBT SECURITIES.

          (a) The Company covenants and agrees that it will duly and punctually
pay or cause to be paid the principal of and premium, if any, and interest on
the Debt Securities at the place, at the respective times and in the manner
provided in this Indenture and the Debt Securities. At the option of the
Company, each installment of interest on the Debt Securities may be paid (i) by
mailing checks for such interest payable to the order of the holders of Debt
Securities entitled thereto as they appear on the Debt Security Register or (ii)
by wire transfer to any account with a banking institution located in the United
States designated by such Person to the paying agent no later than the related
record date.

          (b) The Company will treat the Debt Securities as indebtedness, and
the amounts payable in respect of the principal amount of such Debt Securities
as interest, for all U.S. federal income tax purposes. All payments in respect
of such Debt Securities will be made free and clear of U.S. withholding tax to
any beneficial owner thereof that has provided an Internal Revenue Service Form
W8 BEN (or any substitute or successor form) establishing its non-US status for
U.S. federal income tax purposes.

          (c) As of the date of this Indenture, the Company has no intention to
exercise its right under Section 2.11 to defer payments of interest on the Debt
Securities by commencing an Extension Period.

          (d) As of the date of this Indenture, the Company believes that the
likelihood that it would exercise its right under Section 2.11 to defer payments
of interest on the Debt Securities by commencing an Extension Period at any time
during which the Debt Securities are outstanding is remote because of the
restrictions that would be imposed on the Company's ability to declare or pay
dividends or distributions on, or to redeem, purchase or make a liquidation
payment with respect to, any of its outstanding equity and on the Company's
ability to make any payments of principal of or interest on, or repurchase or
redeem, any of its debt securities that rank PARI PASSU in all respects with (or
junior in interest to) the Debt Securities.

                                       19


          Section 3.02 OFFICES FOR NOTICES AND PAYMENTS, ETC.

          So long as any of the Debt Securities remain outstanding, the Company
will maintain in Fresno, California, an office or agency where the Debt
Securities may be presented for payment, an office or agency where the Debt
Securities may be presented for registration of transfer and for exchange as in
this Indenture provided and an office or agency where notices and demands to or
upon the Company in respect of the Debt Securities or of this Indenture may be
served. The Company will give to the Trustee written notice of the location of
any such office or agency and of any change of location thereof. Until otherwise
designated from time to time by the Company in a notice to the Trustee, or
specified as contemplated by Section 2.05, such office or agency for all of the
above purposes shall be the office or agency of the Trustee. In case the Company
shall fail to maintain any such office or agency in Fresno, California, or shall
fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at the
principal corporate trust office of the Trustee.

          In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside Fresno, California, where
the Debt Securities may be presented for registration of transfer and for
exchange in the manner provided in this Indenture, and the Company may from time
to time rescind such designation, as the Company may deem desirable or
expedient; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain any such office or
agency in Fresno, California, for the purposes above mentioned. The Company will
give to the Trustee prompt written notice of any such designation or rescission
thereof.

          Section 3.03 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE.

          The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.09, a
Trustee, so that there shall at all times be a Trustee hereunder.

          Section 3.04 PROVISION AS TO PAYING AGENT.

          (a) If the Company shall appoint a paying agent other than the
Trustee, it will cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provision of this Section 3.04,

               (1) that it will hold all sums held by it as such agent for the
          payment of the principal of and premium, if any, or interest, if any,
          on the Debt Securities (whether such sums have been paid to it by the
          Company or by any other obligor on the Debt Securities) in trust for
          the benefit of the holders of the Debt Securities;

               (2) that it will give the Trustee prompt written notice of any
          failure by the Company (or by any other obligor on the Debt
          Securities) to make any payment of the principal of and premium, if
          any, or interest, if any, on the Debt Securities when the same shall
          be due and payable; and

                                       20


               (3) that it will, at any time during the continuance of any Event
          of Default, upon the written request of the Trustee, forthwith pay to
          the Trustee all sums so held in trust by such paying agent.

          (b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or interest, if
any, on the Debt Securities, set aside, segregate and hold in trust for the
benefit of the holders of the Debt Securities a sum sufficient to pay such
principal, premium or interest so becoming due and will notify the Trustee in
writing of any failure to take such action and of any failure by the Company (or
by any other obligor under the Debt Securities) to make any payment of the
principal of and premium, if any, or interest, if any, on the Debt Securities
when the same shall become due and payable.

          Whenever the Company shall have one or more paying agents for the Debt
Securities, it will, on or prior to each due date of the principal of and
premium, if any, or interest, if any, on the Debt Securities, deposit with a
paying agent a sum sufficient to pay the principal, premium or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless such paying agent is the Trustee) the Company shall
promptly notify the Trustee in writing of its action or failure to act.

          (c) Anything in this Section 3.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Debt Securities, or for any other reason, pay, or
direct any paying agent to pay to the Trustee all sums held in trust by the
Company or any such paying agent, such sums to be held by the Trustee upon the
same terms and conditions herein contained.

          (d) Anything in this Section 3.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.04 is subject to
Sections 12.03 and 12.04.

          Section 3.05 CERTIFICATE TO TRUSTEE.

          The Company will deliver to the Trustee on or before 120 days after
the end of each fiscal year, so long as Debt Securities are outstanding
hereunder, a Certificate stating that in the course of the performance by the
signers of their duties as officers of the Company they would normally have
knowledge of any default by the Company in the performance of any covenants
contained herein, stating whether or not they have knowledge of any such default
and, if so, specifying each such default of which the signers have knowledge and
the nature thereof.

          Section 3.06 ADDITIONAL INTEREST.

          If and for so long as the Trust is the holder of all Debt Securities
and is required to pay any additional taxes, duties, assessments or other
governmental charges as a result of a Tax Event, the Company will pay such
additional amounts (the "Additional Interest") on the Debt Securities as shall
be required so that the net amounts received and retained by the Trust after
paying taxes, duties, assessments or other governmental charges will be equal to
the amounts the Trust would have received if no such taxes, duties, assessments
or other governmental charges had been imposed. Whenever in this Indenture or
the Debt Securities there is a reference in any

                                       21


context to the payment of principal of or interest on the Debt Securities, such
mention shall be deemed to include mention of payments of the Additional
Interest provided for in this paragraph to the extent that, in such context,
Additional Interest is, was or would be payable in respect thereof pursuant to
the provisions of this paragraph and express mention of the payment of
Additional Interest (if applicable) in any provisions hereof shall not be
construed as excluding Additional Interest in those provisions hereof where such
express mention is not made, PROVIDED, HOWEVER, that the deferral of the payment
of interest during an Extension Period pursuant to Section 2.11 shall not defer
the payment of any Additional Interest that may be due and payable.

          Section 3.07 COMPLIANCE WITH CONSOLIDATION PROVISIONS.

          The Company will not, while any of the Debt Securities remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its property to any other Person unless the
provisions of Article XI hereof are complied with.

          Section 3.08 LIMITATION ON DIVIDENDS.

          If Debt Securities are initially issued to the Trust or a trustee of
such trust in connection with the issuance of Trust Securities by the Trust
(regardless of whether Debt Securities continue to be held by such trust) and
(i) there shall have occurred and be continuing an Event of Default, (ii) the
Company shall be in default with respect to its payment of any obligations under
the Capital Securities Guarantee or (iii) the Company shall have given notice of
its election to defer payments of interest on the Debt Securities by extending
the interest payment period as provided herein and such period, or any extension
thereof, shall have commenced and be continuing, then the Company may not (A)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of the Company's capital
stock or (B) make any payment of principal of or interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company that rank PARI
PASSU in all respects with or junior in interest to the Debt Securities (other
than (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Company in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the occurrence of any of (i), (ii) or (iii), above, (b) as a result of any
exchange or conversion of any class or series of the Company's capital stock (or
any capital stock of a subsidiary of the Company) for any class or series of the
Company's capital stock or of any class or series of the Company's indebtedness
for any class or series of the Company's capital stock, (c) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (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

                                       22


stock as that on which the dividend is being paid or ranks PARI PASSU with or
junior to such stock).

          Section 3.09 COVENANTS AS TO THE TRUST.

          For so long as such Trust Securities remain outstanding, the Company
shall maintain 100% ownership of the Common Securities; PROVIDED, HOWEVER, that
any permitted successor of the Company under this Indenture that is a U.S.
Person may succeed to the Company's ownership of such Common Securities. The
Company, as owner of the Common Securities, shall use commercially reasonable
efforts to cause the Trust (a) to remain a statutory business trust, except in
connection with a distribution of Debt Securities to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration, (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes and (c) to cause
each holder of Trust Securities to be treated as owning an undivided beneficial
interest in the Debt Securities.

                                   ARTICLE IV
                                LISTS AND REPORTS
                         BY THE COMPANY AND THE TRUSTEE

          Section 4.01 SECURITYHOLDERS' LISTS.

          The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:

          (a) on each regular record date for an Interest Payment Date, a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Securityholders of the Debt Securities as of such record date; and

          (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;

except that no such lists need be furnished under this Section 4.01 so long as
the Trustee is in possession thereof by reason of its acting as Debt Security
registrar.

          Section 4.02 PRESERVATION AND DISCLOSURE OF LISTS.

          (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debt Securities (1) contained in the most recent list furnished to it as
provided in Section 4.01 or (2) received by it in the capacity of Debt
Securities registrar (if so acting) hereunder. The Trustee may destroy any list
furnished to it as provided in Section 4.01 upon receipt of a new list so
furnished.

          (b) In case three or more holders of Debt Securities (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each

                                       23


such applicant has owned a Debt Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other holders of Debt Securities with
respect to their rights under this Indenture or under such Debt Securities and
is accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall within five Business Days
after the receipt of such application, at its election, either:

               (1) afford such applicants access to the information preserved at
          the time by the Trustee in accordance with the provisions of
          subsection (a) of this Section 4.02, or

               (2) inform such applicants as to the approximate number of
          holders of Debt Securities whose names and addresses appear in the
          information preserved at the time by the Trustee in accordance with
          the provisions of subsection (a) of this Section 4.02, and as to the
          approximate cost of mailing to such Securityholders the form of proxy
          or other communication, if any, specified in such application.

          If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Securityholder of Debt Securities whose name and
address appear in the information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this Section 4.02 a copy of
the form of proxy or other communication which is specified in such request with
reasonable promptness after a tender to the Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within five days after such tender, the Trustee shall mail to
such applicants and file with the Securities and Exchange Commission, if
permitted or required by applicable law, together with a copy of the material to
be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the holders of
all Debt Securities, as the case may be, or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If said
Commission, as permitted or required by applicable law, after opportunity for a
hearing upon the objections specified in the written statement so filed, shall
enter an order refusing to sustain any of such objections or if, after the entry
of an order sustaining one or more of such objections, said Commission shall
find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Securityholders with reasonable
promptness after the entry of such order and the renewal of such tender;
otherwise the Trustee shall be relieved of any obligation or duty to such
applicants respecting their application.

          (c) Each and every holder of Debt Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Debt Securities in accordance with the provisions of subsection (b) of this
Section 4.02, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).

                                       24


                                    ARTICLE V
                   REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                            UPON AN EVENT OF DEFAULT

          Section 5.01 EVENTS OF DEFAULT.

          The following Events of Default shall be "Events of Default" with
respect to Debt Securities:

          (a) the Company defaults in the payment of any interest upon any Debt
Security when it becomes due and payable, and continuance of such default for a
period of 30 days; for the avoidance of doubt, an extension of any interest
payment period by the Company in accordance with Section 2.11 of this Indenture
shall not constitute a default under this clause 5.01(a); or

          (b) the Company defaults in the payment of all or any part of the
principal of (or premium, if any, on) any Debt Securities as and when the same
shall become due and payable either at maturity, upon redemption, by declaration
of acceleration or otherwise; or

          (c) the Company defaults in the performance of, or breaches, any of
its covenants or agreements in Sections 3.06, 3.07, 3.08 and 3.09 of this
Indenture (other than a covenant or agreement a default in whose performance or
whose breach is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 90 days after there has
been given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Debt Securities, a written notice specifying
such default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or

          (d) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company 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 the Company or for any substantial part of
its property, or orders the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or

          (e) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or

          (f) the Trust shall have voluntarily or involuntarily liquidated,
dissolved, wound-up its business or otherwise terminated its existence except in
connection with (1) the distribution of the Debt Securities to holders of such
Trust Securities in liquidation of their

                                       25


interests in the Trust, (2) the redemption of all of the outstanding Trust
Securities or (3) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration.

          If an Event of Default occurs and is continuing with respect to the
Debt Securities, then, and in each and every such case, unless the principal of
the Debt Securities shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debt Securities then outstanding hereunder, by notice in writing to the Company
(and to the Trustee if given by Securityholders), may declare the entire
principal of the Debt Securities and the interest accrued thereon, if any, to be
due and payable immediately, and upon any such declaration the same shall become
immediately due and payable.

          The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Debt Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all the Debt Securities and the
principal of and premium, if any, on the Debt Securities which shall have become
due otherwise than by acceleration (with interest upon such principal and
premium, if any, and Deferred Interest, to the extent permitted by law) and such
amount as shall be sufficient to cover reasonable compensation to the Trustee
and each predecessor Trustee, their respective agents, attorneys and counsel,
and all other amounts due to the Trustee pursuant to Section 6.06, and if any
and (ii) all Events of Default under this Indenture, other than the non-payment
of the principal of or premium, if any, on Debt Securities which shall have
become due by acceleration, shall have been cured, waived or otherwise remedied
as provided herein -- then and in every such case the holders of a majority in
aggregate principal amount of the Debt Securities then outstanding, by written
notice to the Company and to the Trustee, may waive all defaults and rescind and
annul such declaration and its consequences, but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.

          In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the holders of the Debt Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the Debt
Securities shall continue as though no such proceeding had been taken.

          Section 5.02 PAYMENT OF DEBT SECURITIES ON DEFAULT; SUIT THEREFOR.

          The Company covenants that upon the occurrence of an Event of Default
pursuant to clause 5.01(a) or 5.01(b) and upon demand of the Trustee, the
Company will pay to the Trustee, for the benefit of the holders of the Debt
Securities the whole amount that then shall have become due and payable on all
Debt Securities for principal and premium, if any, or interest, or both, as the
case may be, including Deferred Interest accrued on the Debt Securities; and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and

                                       26


expenses of collection, including a reasonable compensation to the Trustee, its
agents, attorneys and counsel, and any other amounts due to the Trustee under
Section 6.06. In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or any other obligor on such
Debt Securities and collect in the manner provided by law out of the property of
the Company or any other obligor on such Debt Securities wherever situated the
moneys adjudged or decreed to be payable.

          In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debt Securities
under Bankruptcy Law, or in case a receiver or trustee shall have been appointed
for the property of the Company or such other obligor, or in the case of any
other similar judicial proceedings relative to the Company or other obligor upon
the Debt Securities, or to the creditors or property of the Company or such
other obligor, the Trustee, irrespective of whether the principal of the Debt
Securities shall then be due and payable as therein expressed or by declaration
of acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 5.02, shall be
entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal and interest
owing and unpaid in respect of the Debt Securities and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for reasonable compensation to the Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all other amounts due to the Trustee under Section 6.06) and of
the Securityholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Debt Securities, or to the creditors or property of
the Company or such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the holders of the Debt Securities in any
election of a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or Person performing
similar functions in comparable proceedings, and to collect and receive any
moneys or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of its charges and expenses; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the Securityholders to make such payments to the Trustee,
and, in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other
amounts due to the Trustee under Section 6.06.

          Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Debt Securities or the rights of any holder thereof or to authorize the Trustee
to vote in respect of the claim of any Securityholder in any such proceeding.

                                       27


          All rights of action and of asserting claims under this Indenture, or
under any of the Debt Securities, may be enforced by the Trustee without the
possession of any of the Debt Securities, or the production thereof at any trial
or other proceeding relative thereto, and any such suit or proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the holders of
the Debt Securities.

          In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Debt Securities, and it shall not be necessary to make any holders of the
Debt Securities parties to any such proceedings.

          Section 5.03 APPLICATION OF MONEYS COLLECTED BY TRUSTEE.

          Any moneys collected by the Trustee shall be applied in the following
order, at the date or dates fixed by the Trustee for the distribution of such
moneys, upon presentation of the several Debt Securities in respect of which
moneys have been collected, and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:

          First: To the payment of costs and expenses incurred by, and
reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all
other amounts due to the Trustee under Section 6.06;

          Second: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XV;

          Third: To the payment of the amounts then due and unpaid upon Debt
Securities for principal (and premium, if any), and interest on the Debt
Securities, in respect of which or for the benefit of which money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due on such Debt Securities for principal (and premium, if any) and
interest, respectively; and

          Fourth: The balance, if any, to the Company.

          Section 5.04 PROCEEDINGS BY SECURITYHOLDERS.

          No holder of any Debt Security shall have any right to institute any
suit, action or proceeding for any remedy hereunder, unless such holder
previously shall have given to the Trustee written notice of an Event of Default
with respect to the Debt Securities and unless the holders of not less than 25%
in aggregate principal amount of the Debt Securities then outstanding shall have
given the Trustee a written request to institute such action, suit or proceeding
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred thereby, and
the Trustee for 60 days after its receipt of such notice, request and offer of
indemnity shall have failed to institute any such action, suit or proceeding;
PROVIDED, that no holder of Debt Securities shall have any right to prejudice
the rights of any other holder of Debt Securities, obtain priority or preference
over any

                                       28


other such holder or enforce any right under this Indenture except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Debt Securities.

          Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Debt Security to receive payment of the principal of,
premium, if any, and interest, on such Debt Security when due, or to institute
suit for the enforcement of any such payment, shall not be impaired or affected
without the consent of such holder. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.

          Section 5.05 PROCEEDINGS BY TRUSTEE.

          In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceeding in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.

          Section 5.06 REMEDIES CUMULATIVE AND CONTINUING.

          Except as otherwise provided in Section 2.06, all powers and remedies
given by this Article V to the Trustee or to the Securityholders shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any other
powers and remedies available to the Trustee or the holders of the Debt
Securities, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to the Debt Securities, and no delay or
omission of the Trustee or of any holder of any of the Debt Securities to
exercise any right or power accruing upon any Event of Default occurring and
continuing as aforesaid shall impair any such right or power, or shall be
construed to be a waiver of any such default or an acquiescence therein; and,
subject to the provisions of Section 5.04, every power and remedy given by this
Article V or by law to the Trustee or to the Securityholders may be exercised
from time to time, and as often as shall be deemed expedient, by the Trustee or
by the Securityholders.

          Section 5.07 DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY
     MAJORITY OF SECURITYHOLDERS.

          The holders of a majority in aggregate principal amount of the Debt
Securities affected (voting as one class) at the time outstanding shall have the
right to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee with respect to such Debt Securities; PROVIDED, HOWEVER, that
(subject to the provisions of Section 6.01) the Trustee shall have the right to
decline to follow any such direction if the Trustee shall determine that the
action so directed would be unjustly prejudicial to the holders not taking part
in such direction or if the Trustee being advised by counsel determines that the
action or proceeding so directed may not lawfully be taken or if a Responsible
Officer of the Trustee shall determine that the action or

                                       29


proceedings so directed would involve the Trustee in personal liability. Prior
to any declaration accelerating the maturity of the Debt Securities, the holders
of a majority in aggregate principal amount of the Debt Securities at the time
outstanding may on behalf of the holders of all of the Debt Securities waive (or
modify any previously granted waiver of) any past default or Event of Default
and its consequences, except a default (a) in the payment of principal of,
premium, if any, or interest on any of the Debt Securities, (b) in respect of
covenants or provisions hereof which cannot be modified or amended without the
consent of the holder of each Debt Security affected, or (c) in respect of the
covenants contained in Section 3.09; PROVIDED, HOWEVER, that if the Debt
Securities are held by the Trust or a trustee of such trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation preference of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver; provided, further, that
if the consent of the holder of each outstanding Debt Security is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of this Indenture
and the Company, the Trustee and the holders of the Debt Securities shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon. Whenever any default or Event of Default
hereunder shall have been waived as permitted by this Section 5.07, said default
or Event of Default shall for all purposes of the Debt Securities and this
Indenture be deemed to have been cured and to be not continuing.

          Section 5.08 NOTICE OF DEFAULTS.

          The Trustee shall, within 90 days after a Responsible Officer of the
Trustee shall have received notice or obtained actual knowledge of the
occurrence of a default with respect to the Debt Securities, mail to all
Securityholders, as the names and addresses of such holders appear upon the Debt
Security Register, notice of all defaults with respect to the Debt Securities
known to the Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" for the purpose of this Section 5.08
being hereby defined to be the events specified in subsections (a), (b), (c),
(d) and (e) of Section 5.01, not including periods of grace, if any, provided
for therein); PROVIDED, that, except in the case of default in the payment of
the principal of, premium, if any, or interest on any of the Debt Securities,
the Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines that the withholding
of such notice is in the interests of the Securityholders.

          Section 5.09 UNDERTAKING TO PAY COSTS.

          All parties to this Indenture agree, and each holder of any Debt
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.09 shall not apply to any suit

                                       30


instituted by the Trustee, to any suit instituted by any Securityholder, or
group of Securityholders, holding in the aggregate more than 10% in principal
amount of the Debt Securities outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Debt Security against the Company on or
after the same shall have become due and payable.

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

          Section 6.01 DUTIES AND RESPONSIBILITIES OF TRUSTEE.

          With respect to the holders of Debt Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default with respect to the Debt
Securities and after the curing or waiving of all Events of Default which may
have occurred, with respect to the Debt Securities, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default with respect to the Debt Securities has occurred (which
has not been cured or waived) the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.

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

          (a) prior to the occurrence of an Event of Default with respect to
Debt Securities and after the curing or waiving of all Events of Default which
may have occurred

              (1) the duties and obligations of the Trustee with respect to
          Debt Securities shall be determined solely by the express provisions
          of this Indenture, and the Trustee shall not be liable except for the
          performance of such duties and obligations with respect to the Debt
          Securities as are specifically set forth in this Indenture, and no
          implied covenants or obligations shall be read into this Indenture
          against the Trustee, and

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

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

                                       31


          (c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with the direction of
the Securityholders pursuant to Section 5.07, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.

          None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers.

          Section 6.02 RELIANCE ON DOCUMENTS, OPINIONS, ETC.

          Except as otherwise provided in Section 6.01:

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

          (b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;

          (c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;

          (d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;

          (e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default with respect to the Debt Securities (that has not been cured or
waived) to exercise with respect to Debt Securities such of the rights and
powers vested in it by this Indenture, and to use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;

          (f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
coupon or other paper or document, unless

                                       32


requested in writing to do so by the holders of not less than a majority in
principal amount of the outstanding Debt Securities affected thereby; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to so proceeding;

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

          (h) the Trustee shall not be charged with knowledge of any Default or
Event of Default with respect to the Debt Securities unless either (1) a
Responsible Officer shall have actual knowledge of such Default or Event of
Default or (2) written notice of such Default or Event of Default shall have
been given to the Trustee by the Company or any other obligor on the Debt
Securities or by any holder of the Debt Securities.

          Section 6.03 NO RESPONSIBILITY FOR RECITALS, ETC.

          The recitals contained herein and in the Debt Securities (except in
the certificate of authentication of the Trustee or the Authenticating Agent)
shall be taken as the statements of the Company and the Trustee and the
Authenticating Agent assume no responsibility for the correctness of the same.
The Trustee and the Authenticating Agent make no representations as to the
validity or sufficiency of this Indenture or of the Debt Securities. The Trustee
and the Authenticating Agent shall not be accountable for the use or application
by the Company of any Debt Securities or the proceeds of any Debt Securities
authenticated and delivered by the Trustee or the Authenticating Agent in
conformity with the provisions of this Indenture.

          Section 6.04 TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER
     AGENTS OR REGISTRAR MAY OWN DEBT SECURITIES.

          The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Debt Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Debt Securities with the same
rights it would have if it were not Trustee, Authenticating Agent, paying agent,
transfer agent or Debt Security registrar.

          Section 6.05 MONEYS TO BE HELD IN TRUST.

          Subject to the provisions of Section 12.04, all moneys received by the
Trustee or any paying agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company
 . So long as no Event of Default shall have occurred and be continuing, all
interest allowed on any such moneys, if any, shall be paid from time to time to
the Company upon the written order of the Company, signed by the Chairman of the
Board of Directors, the Vice Chairman, the

                                       33


President, the Chief Financial Officer, the Chief Operating Officer, a Vice
President, the Treasurer or an Assistant Treasurer of the Company.

          Section 6.06 COMPENSATION AND EXPENSES OF TRUSTEE.

          The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as shall be agreed
to in writing between the Company and the Trustee (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its written
request for all documented reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all Persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Company also covenants to indemnify each of the
Trustee or any predecessor Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any and all loss, damage,
claim, liability or expense including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on the part of
the Trustee and arising out of or in connection with the acceptance or
administration of this Trust, including the costs and expenses of defending
itself against any claim of liability in the premises. The obligations of the
Company under this Section 6.06 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for documented expenses, disbursements and advances
shall constitute additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Debt Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the benefit of the holders of particular Debt Securities.

          Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in subsections (d), (e) or (f) of
Section 5.01, the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.

          The provisions of this Section shall survive the resignation or
removal of the Trustee and the defeasance or other termination of this
Indenture.

          Section 6.07 OFFICERS' CERTIFICATE AS EVIDENCE.

          Except as otherwise provided in Sections 6.01 and 6.02, whenever in
the administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.

                                       34


          Section 6.08 ELIGIBILITY OF TRUSTEE.

          The Trustee hereunder shall at all times be a U.S. Person that is a
banking corporation organized and doing business under the laws of the United
States of America or any state thereof or of the District of Columbia and
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least 50 million U.S. dollars ($50,000,000) and
subject to supervision or examination by federal, state, or District of Columbia
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.08 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent records of condition so published.

          The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee, notwithstanding that such corporation shall be otherwise eligible and
qualified under this Article.

          In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.08, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.09.

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

          Section 6.09 RESIGNATION OR REMOVAL OF TRUSTEE.

          (a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice of such resignation to the Company
and by mailing notice thereof, at the Company's expense, to the holders of the
Debt Securities at their addresses as they shall appear on the Debt Security
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee or trustees by written instrument, in duplicate,
executed by order of its Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed and have accepted appointment
within 30 days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee, or any Securityholder
who has been a bona fide holder of a Debt Security or Debt Securities for at
least six months may, subject to the provisions of Section 5.09, on behalf of
himself and all others similarly situated, petition any such court for the
appointment of a successor Trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor Trustee.

          (b) In case at any time any of the following shall occur --

               (1) the Trustee shall fail to comply with the provisions of the
          last paragraph of Section 6.08 after written request therefor by the
          Company or by any

                                       35


          Securityholder who has been a bona fide holder of a Debt Security or
          Debt Securities for at least six months,

               (2) the Trustee shall cease to be eligible in accordance with the
          provisions of Section 6.08 and shall fail to resign after written
          request therefor by the Company or by any such Securityholder, or

               (3) the Trustee shall become incapable of acting, or shall be
          adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
          its property shall be appointed, or any public officer shall take
          charge or control of the Trustee or of its property or affairs for the
          purpose of rehabilitation, conservation or liquidation,

then, in any such case, the Company may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee, or, subject to the
provisions of Section 5.09, any Securityholder who has been a bona fide holder
of a Debt Security or Debt Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint successor Trustee.

          (c) Upon prior written notice to the Company and the Trustee, the
holders of a majority in aggregate principal amount of the Debt Securities at
the time outstanding may at any time remove the Trustee and nominate a successor
Trustee, which shall be deemed appointed as successor Trustee unless within ten
Business Days after such nomination the Company objects thereto, in which case
or in the case of a failure by such holders to nominate a successor Trustee, the
Trustee so removed or any Securityholder, upon the terms and conditions and
otherwise as in subsection (a) of this Section 6.09 provided, may petition any
court of competent jurisdiction for an appointment of a successor.

          (d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 6.09 shall
become effective upon acceptance of appointment by the successor Trustee as
provided in Section 6.10.

          Section 6.10 ACCEPTANCE BY SUCCESSOR TRUSTEE.

          Any successor Trustee appointed as provided in Section 6.09 shall
execute, acknowledge and deliver to the Company and to its predecessor Trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations with respect to the
Debt Securities of its predecessor hereunder, with like effect as if originally
named as Trustee herein; but, nevertheless, on the written request of the
Company or of the successor Trustee, the Trustee ceasing to act shall, upon
payment of any amounts then due it pursuant to the provisions of Section 6.06,
execute and deliver an instrument transferring to such successor Trustee all the
rights and powers of the Trustee so ceasing to act and shall duly assign,
transfer and deliver to

                                       36


such successor Trustee all property and money held by such retiring Trustee
thereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments in writing for more fully and certainly vesting
in and confirming to such successor Trustee all such rights and powers. Any
Trustee ceasing to act shall, nevertheless, retain a lien upon all property or
funds held or collected by such Trustee to secure any amounts then due it
pursuant to the provisions of Section 6.06.

          If a successor Trustee is appointed, the Company, the retiring Trustee
and the successor Trustee shall execute and deliver an indenture supplemental
hereto which shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Debt Securities as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the Trust hereunder
by more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be Trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee.

          No successor Trustee shall accept appointment as provided in this
Section 6.10 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 6.08.

          In no event shall a retiring Trustee be liable for the acts or
omissions of any successor Trustee hereunder.

          Upon acceptance of appointment by a successor Trustee as provided in
this Section 6.10, the Company shall mail notice of the succession of such
Trustee hereunder to the holders of Debt Securities at their addresses as they
shall appear on the Debt Security Register. If the Company fails to mail such
notice within ten Business Days after the acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Company.

          Section 6.11 SUCCESSION BY MERGER, ETC.

          Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; PROVIDED, that such corporation shall be otherwise eligible
and qualified under this Article.

          In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debt Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee, and deliver such Debt
Securities so authenticated; and in case at that time any of the

                                       37


Debt Securities shall not have been authenticated, any successor to the Trustee
may authenticate such Debt Securities either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Debt
Securities or in this Indenture provided that the certificate of the Trustee
shall have; PROVIDED, HOWEVER, that the right to adopt the certificate of
authentication of any predecessor Trustee or authenticate Debt Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.

          Section 6.12 AUTHENTICATING AGENTS.

          There may be one or more Authenticating Agents appointed by the
Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Debt Securities
issued upon exchange or registration of transfer thereof as fully to all intents
and purposes as though any such Authenticating Agent had been expressly
authorized to authenticate and deliver Debt Securities; provided that the
Trustee shall have no liability to the Company for any acts or omissions of the
Authenticating Agent with respect to the authentication and delivery of Debt
Securities. Any such Authenticating Agent shall at all times be a corporation
organized and doing business under the laws of the United States or of any state
or territory thereof or of the District of Columbia authorized under such laws
to act as Authenticating Agent, having a combined capital and surplus of at
least $50,000,000 and being subject to supervision or examination by federal,
state, territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually pursuant to law or the
requirements of such authority, then for the purposes of this Section 6.12 the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect herein specified in this Section.

          Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such Authenticating Agent hereunder, if such successor corporation is
otherwise eligible under this Section 6.12 without the execution or filing of
any paper or any further act on the part of the parties hereto or such
Authenticating Agent.

          Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent with respect to the Debt
Securities by giving written notice of termination to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible under this Section 6.12, the Trustee may, and upon the request of the
Company shall, promptly appoint a successor Authenticating Agent eligible under
this Section 6.12, shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all holders of Debt Securities as
the names and addresses of such holders appear

                                       38


on the Debt Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities with respect to the Debt Securities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent herein.

          The Company agrees to pay to any Authenticating Agent from time to
time reasonable compensation for its services. Any Authenticating Agent shall
have no responsibility or liability for any action taken by it as such in
accordance with the directions of the Trustee.

                                  ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

          Section 7.01 ACTION BY SECURITYHOLDERS.

          Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Debt Securities may
take any action (including the making of any demand or request, the giving of
any notice, consent or waiver or the taking of any other action), the fact that
at the time of taking any such action the holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such holders of
Debt Securities voting in favor thereof at any meeting of such Securityholders
duly called and held in accordance with the provisions of Article VIII, or (c)
by a combination of such instrument or instruments and any such record of such a
meeting of such Securityholders or (d) by any other method the Trustee deems
satisfactory.

          If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action or
revocation of the same, the Company may, at its option, as evidenced by an
Officers' Certificate, fix in advance a record date for such Debt Securities for
the determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action or revocation of the same may be given before or after
the record date, but only the Securityholders of record at the close of business
on the record date shall be deemed to be Securityholders for the purposes of
determining whether Securityholders of the requisite proportion of outstanding
Debt Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, and for that purpose the outstanding Debt Securities shall be
computed as of the record date; PROVIDED, HOWEVER, that no such authorization,
agreement or consent by such Securityholders on the record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.

                                       39


          Section 7.02 PROOF OF EXECUTION BY SECURITYHOLDERS.

          Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of
the execution of any instrument by a Securityholder or his agent or proxy shall
be sufficient if made in accordance with such reasonable rules and regulations
as may be prescribed by the Trustee or in such manner as shall be satisfactory
to the Trustee. The ownership of Debt Securities shall be proved by the Debt
Security Register or by a certificate of the Debt Security registrar. The
Trustee may require such additional proof of any matter referred to in this
Section as it shall deem necessary.

          The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.

          Section 7.03 WHO ARE DEEMED ABSOLUTE OWNERS.

          Prior to due presentment for registration of transfer of any Debt
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any Debt Security registrar may deem the Person in whose
name such Debt Security shall be registered upon the Debt Security Register to
be, and may treat him as, the absolute owner of such Debt Security (whether or
not such Debt Security shall be overdue) for the purpose of receiving payment of
or on account of the principal of, premium, if any, and interest on such Debt
Security and for all other purposes; and neither the Company nor the Trustee nor
any Authenticating Agent nor any paying agent nor any transfer agent nor any
Debt Security registrar shall be affected by any notice to the contrary. All
such payments so made to any holder for the time being or upon his order shall
be valid, and, to the extent of the sum or sums so paid, effectual to satisfy
and discharge the liability for moneys payable upon any such Debt Security.

          Section 7.04 DEBT SECURITIES OWNED BY COMPANY DEEMED NOT OUTSTANDING.

          In determining whether the holders of the requisite aggregate
principal amount of Debt Securities have concurred in any direction, consent or
waiver under this Indenture, Debt Securities which are owned by the Company or
any other obligor on the Debt Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Debt Securities shall be disregarded and
deemed not to be outstanding for the purpose of any such determination;
PROVIDED, that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver, only Debt
Securities which a Responsible Officer of the Trustee actually knows are so
owned shall be so disregarded. Debt Securities so owned which have been pledged
in good faith may be regarded as outstanding for the purposes of this Section
7.04 if the pledgee shall establish to the satisfaction of the Trustee the
pledgee's right to vote such Debt Securities and that the pledgee is not the
Company or any such other obligor or Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company or
any such other obligor. In the case of a dispute as to such right, any decision
by the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.

                                       40


          Section 7.05 REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND.

          At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Debt Securities specified in
this Indenture in connection with such action, any holder (in cases where no
record date has been set pursuant to Section 7.01) or any holder as of an
applicable record date (in cases where a record date has been set pursuant to
Section 7.01) of a Debt Security (or any Debt Security issued in whole or in
part in exchange or substitution therefor) the serial number of which is shown
by the evidence to be included in the Debt Securities the holders of which have
consented to such action may, by filing written notice with the Trustee at the
Principal Office of the Trustee and upon proof of holding as provided in Section
7.02, revoke such action so far as concerns such Debt Security (or so far as
concerns the principal amount represented by any exchanged or substituted Debt
Security). Except as aforesaid any such action taken by the holder of any Debt
Security shall be conclusive and binding upon such holder and upon all future
holders and owners of such Debt Security, and of any Debt Security issued in
exchange or substitution therefor or on registration of transfer thereof,
irrespective of whether or not any notation in regard thereto is made upon such
Debt Security or any Debt Security issued in exchange or substitution therefor.

                                  ARTICLE VIII
                            SECURITYHOLDERS' MEETINGS

          Section 8.01 PURPOSES OF MEETINGS.

          A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article VIII for any of the following
purposes:

          (a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of Article V;

          (b) to remove the Trustee and nominate a successor trustee pursuant to
the provisions of Article VI;

          (c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02; or

          (d) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of such Debt Securities
under any other provision of this Indenture or under applicable law.

          Section 8.02 CALL OF MEETINGS BY TRUSTEE.

          The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in New York, as the Trustee shall determine. Notice of every meeting of the
Securityholders, setting forth the time and the

                                       41


place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be mailed to holders of Debt Securities affected at their
addresses as they shall appear on the Debt Securities Register. Such notice
shall be mailed not less than 20 nor more than 180 days prior to the date fixed
for the meeting.

          Section 8.03 CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS.

          In case at any time the Company pursuant to a Board Resolution, or the
holders of at least 10% in aggregate principal amount of the Debt Securities, as
the case may be, then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in [Issuer City, State] for such meeting and may call such meeting to take
any action authorized in Section 8.01, by mailing notice thereof as provided in
Section 8.02.

          Section 8.04 QUALIFICATIONS FOR VOTING.

          To be entitled to vote at any meeting of Securityholders a Person
shall (a) be a holder of one or more Debt Securities with respect to which the
meeting is being held or (b) a Person appointed by an instrument in writing as
proxy by a holder of one or more such Debt Securities. The only Persons who
shall be entitled to be present or to speak at any meeting of Securityholders
shall be the Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

          Section 8.05 REGULATIONS.

          Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Debt Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.

          The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.

          Subject to the provisions of Section 7.04, at any meeting each holder
of Debt Securities with respect to which such meeting is being held or proxy
therefor shall be entitled to one vote for each $1,000 principal amount of Debt
Securities held or represented by him; PROVIDED, HOWEVER, that no vote shall be
cast or counted at any meeting in respect of any Debt Security challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of

                                       42


Debt Securities held by him or instruments in writing as aforesaid duly
designating him as the Person to vote on behalf of other Securityholders. Any
meeting of Securityholders duly called pursuant to the provisions of Section
8.02 or 8.03 may be adjourned from time to time by a majority of those present,
whether or not constituting a quorum, and the meeting may be held as so
adjourned without further notice.

          Section 8.06 VOTING.

          The vote upon any resolution submitted to any meeting of holders of
Debt Securities with respect to which such meeting is being held shall be by
written ballots on which shall be subscribed the signatures of such holders or
of their representatives by proxy and the serial number or numbers of the Debt
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more Persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 8.02. The record
shall show the serial numbers of the Debt Securities voting in favor of or
against any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.

          Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

          Section 8.07 QUORUM; ACTIONS.

          The Persons entitled to vote a majority in principal amount of the
Debt Securities shall constitute a quorum for a meeting of Securityholders;
PROVIDED, HOWEVER, that if any action is to be taken at such meeting with
respect to a consent, waiver, request, demand, notice, authorization, direction
or other action which may be given by the holders of not less than a specified
percentage in principal amount of the Debt Securities, the Persons holding or
representing such specified percentage in principal amount of the Debt
Securities will constitute a quorum. In the absence of a quorum within 30
minutes of the time appointed for any such meeting, the meeting shall, if
convened at the request of Securityholders, be dissolved. In any other case the
meeting may be adjourned for a period of not less than 10 days as determined by
the permanent chairman of the meeting prior to the adjournment of such meeting.
In the absence of a quorum at any such adjourned meeting, such adjourned meeting
may be further adjourned for a period of not less than 10 days as determined by
the permanent chairman of the meeting prior to the adjournment of such adjourned
meeting. Notice of the reconvening of any adjourned meeting shall be given as
provided in Section 8.02, except that such notice need be given only once not
less than five days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the

                                       43


percentage, as provided above, of the principal amount of the Debt Securities
which shall constitute a quorum.

          Except as limited by the proviso in the first paragraph of Section
9.02, any resolution presented to a meeting or adjourned meeting duly reconvened
at which a quorum is present as aforesaid may be adopted by the affirmative vote
of the holders of a majority in principal amount of the Debt Securities;
PROVIDED, HOWEVER, that, except as limited by the proviso in the first paragraph
of Section 9.02, any resolution with respect to any consent, waiver, request,
demand, notice, authorization, direction or other action that this Indenture
expressly provides may be given by the holders of not less than a specified
percentage in principal amount of the Debt Securities may be adopted at a
meeting or an adjourned meeting duly reconvened and at which a quorum is present
as aforesaid only by the affirmative vote of the holders of a not less than such
specified percentage in principal amount of the Debt Securities.

          Any resolution passed or decision taken at any meeting of holders of
Debt Securities duly held in accordance with this Section shall be binding on
all the Securityholders, whether or not present or represented at the meeting.

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

          Section 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
SECURITYHOLDERS.

          The Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto, without the consent of the Securityholders, for one or more
of the following purposes:

          (a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company, pursuant to Article XI
hereof;

          (b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of Debt Securities
as the Board of Directors shall consider to be for the protection of the holders
of such Debt Securities, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of all or
any of the several remedies provided in this Indenture as herein set forth;
PROVIDED, HOWEVER, that in respect of any such additional covenant, restriction
or condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;

          (c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in

                                       44


regard to matters or questions arising under this Indenture; provided that any
such action shall not adversely affect the interests of the holders of the Debt
Securities;

          (d) to add to, delete from, or revise the terms of Debt Securities,
including, without limitation, any terms relating to the issuance, exchange,
registration or transfer of Debt Securities, including to provide for transfer
procedures and restrictions substantially similar to those applicable to the
Capital Securities as required by Section 2.05 (for purposes of assuring that no
registration of Debt Securities is required under the Securities Act of 1933, as
amended); provided that any such action shall not adversely affect the interests
of the holders of the Debt Securities then outstanding (it being understood, for
purposes of this proviso, that transfer restrictions on Debt Securities
substantially similar to those that were applicable to Capital Securities shall
not be deemed to adversely affect the holders of the Debt Securities);

          (e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debt Securities and to add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.10;

          (f) to make any change (other than as elsewhere provided in this
paragraph) that does not adversely affect the rights of any Securityholder in
any material respect; or

          (g) to provide for the issuance of and establish the form and terms
and conditions of the Debt Securities, to establish the form of any
certifications required to be furnished pursuant to the terms of this Indenture
or the Debt Securities, or to add to the rights of the holders of Debt
Securities.

          The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

          Any supplemental indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debt Securities at the time outstanding,
notwithstanding any of the provisions of Section 9.02.

          Section 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS.

          With the consent (evidenced as provided in Section 7.01) of the
holders of not less than a majority in aggregate principal amount of the Debt
Securities at the time outstanding affected by such supplemental indenture
(voting as a class), the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act, then in effect, applicable to indentures qualified
thereunder) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the

                                       45


Debt Securities; PROVIDED, HOWEVER, that no such supplemental indenture shall
without the consent of the holders of each Debt Security then outstanding and
affected thereby (i) extend the fixed maturity of any Debt Security, or reduce
the principal amount thereof or any premium thereon, or reduce the rate or
extend the time of payment of interest thereon, or reduce any amount payable on
redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that provided in the Debt
Securities, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debt Securities the
holders of which are required to consent to any such supplemental indenture; and
PROVIDED, FURTHER, that if the Debt Securities are held by the Trust or a
trustee of such trust, such supplemental indenture shall not be effective until
the holders of a majority in liquidation preference of Trust Securities shall
have consented to such supplemental indenture; provided further, that if the
consent of the Securityholder of each outstanding Debt Security is required,
such supplemental indenture shall not be effective until each holder of the
Trust Securities shall have consented to such supplemental indenture.

          Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.

          Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders thereby as their names and addresses appear
upon the Debt Security Register. Any failure of the Trustee to mail such notice,
or any defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.

          It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

          Section 9.03 EFFECT OF SUPPLEMENTAL INDENTURES.

          Upon the execution of any supplemental indenture pursuant to the
provisions of this Article IX, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Debt Securities shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.

                                       46


          Section 9.04 NOTATION ON DEBT SECURITIES.

          Debt Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article IX may bear a
notation as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Debt Securities so modified as to
conform, in the opinion of the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared and executed by the Company, authenticated by the Trustee or the
Authenticating Agent and delivered in exchange for the Debt Securities then
outstanding.

          Section 9.05 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE
     FURNISHED TO TRUSTEE.

          The Trustee, subject to the provisions of Sections 6.01 and 6.02,
shall, in addition to the documents required by Section 14.06, receive an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX. The Trustee shall receive an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article IX is authorized or permitted by, and conforms to, the terms of this
Article IX and that it is proper for the Trustee under the provisions of this
Article IX to join in the execution thereof.

                                   ARTICLE X
                            REDEMPTION OF SECURITIES

          Section 10.01 OPTIONAL REDEMPTION.

          At any time the Company shall have the right, subject to the receipt
by the Company of prior approval from the Federal Reserve, if then required
under applicable capital guidelines or policies of the Federal Reserve, to
redeem the Debt Securities, in whole or in part, on any January 25th or July
25th on or after July 25, 2006 (the "Redemption Date"), at the Redemption Price.

          Section 10.02 SPECIAL EVENT REDEMPTION.

          If a Special Event shall occur and be continuing, the Company shall
have the right, subject to the receipt by the Company of prior approval from the
Federal Reserve if then required under applicable capital guidelines or policies
of the Federal Reserve, to redeem the Debt Securities, in whole but not in part,
at any time within 90 days following the occurrence of such Special Event (the
"Special Redemption Date"), at the Special Redemption Price.

          Section 10.03 NOTICE OF REDEMPTION; SELECTION OF DEBT SECURITIES.

          In case the Company shall desire to exercise the right to redeem all,
or, as the case may be, any part of the Debt Securities, it shall fix a date for
redemption and shall mail a notice of such redemption at least 30 and not more
than 60 days prior to the date fixed for redemption to the holders of Debt
Securities so to be redeemed as a whole or in part at their last addresses as

                                       47


the same appear on the Debt Security Register. Such mailing shall be by first
class mail. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the holder of any Debt Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Debt Security.

          Each such notice of redemption shall specify the CUSIP number, if any,
of the Debt Securities to be redeemed, the date fixed for redemption, the
redemption price at which Debt Securities are to be redeemed, the place or
places of payment, that payment will be made upon presentation and surrender of
such Debt Securities, that interest accrued to the date fixed for redemption
will be paid as specified in said notice, and that on and after said date
interest thereon or on the portions thereof to be redeemed will cease to accrue.
If less than all the Debt Securities are to be redeemed the notice of redemption
shall specify the numbers of the Debt Securities to be redeemed. In case the
Debt Securities are to be redeemed in part only, the notice of redemption shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and after the date fixed for redemption, upon surrender of such Debt
Security, a new Debt Security or Debt Securities in principal amount equal to
the unredeemed portion thereof will be issued.

          Prior to 10:00 a.m. New York City time on the Redemption Date or on
the Special Redemption Date (as the case may be) specified in the notice of
redemption given as provided in this Section, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the redemption date all the Debt Securities so called for redemption
at the appropriate redemption price, together with accrued interest to the date
fixed for redemption.

          The Company will give the Trustee notice not less than 45 nor more
than 60 days prior to the redemption date as to the aggregate principal amount
of Debt Securities to be redeemed and the Trustee shall select, in such manner
as in its sole discretion it shall deem appropriate and fair, the Debt
Securities or portions thereof (in integral multiples of $1,000) to be redeemed.

          Section 10.04 PAYMENT OF DEBT SECURITIES CALLED FOR REDEMPTION.

          If notice of redemption has been given as provided in Section 10.03,
the Debt Securities or portions of Debt Securities with respect to which such
notice has been given shall become due and payable on the Redemption Date or the
Special Redemption Date (as the case may be) and at the place or places stated
in such notice at the applicable redemption price, together with interest
accrued to the date fixed for redemption, and on and after said Redemption Date
or the Special Redemption Date (as the case may be) (unless the Company shall
default in the payment of such Debt Securities at the redemption price, together
with interest accrued to said date) interest on the Debt Securities or portions
of Debt Securities so called for redemption shall cease to accrue. On
presentation and surrender of such Debt Securities at a place of payment
specified in said notice, such Debt Securities or the specified portions thereof
shall be

                                       48


paid and redeemed by the Company at the applicable redemption price, together
with interest accrued thereon to the Redemption Date or the Special Redemption
Date (as the case may be).

          Upon presentation of any Debt Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Debt
Security or Debt Securities of authorized denominations in principal amount
equal to the unredeemed portion of the Debt Security so presented.

                                   ARTICLE XI
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

          Section 11.01 COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.

          Nothing contained in this Indenture or in the Debt Securities shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company) or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance,
transfer or other disposition of the property or capital stock of the Company or
its successor or successors as an entirety, or substantially as an entirety, to
any other corporation (whether or not affiliated with the Company, or its
successor or successors) authorized to acquire and operate the same; PROVIDED,
HOWEVER, that the Company hereby covenants and agrees that, upon any such
consolidation, merger (where the Company is not the surviving corporation),
sale, conveyance, transfer or other disposition, the due and punctual payment of
the principal of (and premium, if any) and interest on all of the Debt
Securities in accordance with their terms, according to their tenor, and the due
and punctual performance and observance of all the covenants and conditions of
this Indenture to be kept or performed by the Company, shall be expressly
assumed by supplemental indenture satisfactory in form to the Trustee executed
and delivered to the Trustee by the entity formed by such consolidation, or into
which the Company shall have been merged, or by the entity which shall have
acquired such property or capital stock.

          Section 11.02 SUCCESSOR ENTITY TO BE SUBSTITUTED.

          In case of any such consolidation, merger, sale, conveyance, transfer
or other disposition and upon the assumption by the successor entity, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of and
premium, if any, and interest on all of the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed or observed by the Company, such successor entity
shall succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the Company, and thereupon the predecessor entity
shall be relieved of any further liability or obligation hereunder or upon the
Debt Securities. Such successor entity thereupon may cause to be signed, and may
issue either in its own name or in the name of the Company, any or all of the
Debt Securities issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee or the Authenticating Agent; and,
upon the order of such successor entity instead of the Company and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee or the Authenticating Agent shall

                                       49


authenticate and deliver any Debt Securities which previously shall have been
signed and delivered by the officers of the Company, to the Trustee or the
Authenticating Agent for authentication, and any Debt Securities which such
successor entity thereafter shall cause to be signed and delivered to the
Trustee or the Authenticating Agent for that purpose. All the Debt Securities so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Debt Securities theretofore or thereafter issued in accordance
with the terms of this Indenture as though all of such Debt Securities had been
issued at the date of the execution hereof.

          Section 11.03 OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE.

          The Trustee, subject to the provisions of Sections 6.01 and 6.02,
shall receive, in addition to the Opinion of Counsel required by Section 9.05,
an Opinion of Counsel as conclusive evidence that any consolidation, merger,
sale, conveyance, transfer or other disposition, and any assumption, permitted
or required by the terms of this Article XI complies with the provisions of this
Article XI.

                                  ARTICLE XII
                     SATISFACTION AND DISCHARGE OF INDENTURE

          Section 12.01 DISCHARGE OF INDENTURE.

          When (a) the Company shall deliver to the Trustee for cancellation all
,Debt Securities theretofore authenticated (other than any Debt Securities which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.06) and not theretofore canceled, or (b) all the
Debt Securities not theretofore canceled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds,
which shall be immediately due and payable, sufficient to pay at maturity or
upon redemption all of the Debt Securities (other than any Debt Securities which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.06) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, but excluding, however, the amount of any moneys for the payment of
principal of, and premium, if any, or interest on the Debt Securities (1)
theretofore repaid to the Company in accordance with the provisions of Section
12.04, or (2) paid to any state or to the District of Columbia pursuant to its
unclaimed property or similar laws, and if in the case of either clause (a) or
clause (b) the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect except for the provisions of Sections 2.05, 2.06, 2.08, 3.01, 3.02, 3.04,
6.06, 6.09 and 12.04 hereof shall survive until such Debt Securities shall
mature or are redeemed, as the case may be, and are paid. Thereafter, Sections
6.09 and 12.04 shall survive, and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with, and at the cost and
expense

                                       50


of the Company, shall execute proper instruments acknowledging satisfaction of
and discharging this Indenture, the Company, however, hereby agreeing to
reimburse the Trustee for any costs or expenses thereafter reasonably and
properly incurred by the Trustee in connection with this Indenture or the Debt
Securities.

          Section 12.02 DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE.

          Subject to the provisions of Section 12.04, all moneys deposited with
the Trustee pursuant to Section 12.01 shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Company if acting as its own paying agent), to the holders of the particular
Debt Securities for the payment of which such moneys have been deposited with
the Trustee, of all sums due and to become due thereon for principal, and
premium, if any, and interest.

          Section 12.03 PAYING AGENT TO REPAY MONEYS HELD.

          Upon the satisfaction and discharge of this Indenture, all moneys then
held by any paying agent of the Debt Securities (other than the Trustee) shall,
upon demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.

          Section 12.04 RETURN OF UNCLAIMED MONEYS.

          Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of, and premium, if any, or interest on Debt
Securities and not applied but remaining unclaimed by the holders of Debt
Securities for two years after the date upon which the principal of, and
premium, if any, or interest on such Debt Securities, as the case may be, shall
have become due and payable, shall be repaid to the Company by the Trustee or
such paying agent on written demand; and the holder of any of the Debt
Securities shall thereafter look only to the Company for any payment which such
holder may be entitled to collect and all liability of the Trustee or such
paying agent with respect to such moneys shall thereupon cease.

                                  ARTICLE XIII
                    IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
                             OFFICERS AND DIRECTORS

          Section 13.01 INDENTURE AND DEBT SECURITIES SOLELY CORPORATE
     OBLIGATIONS.

          No recourse for the payment of the principal of or premium, if any, or
interest on any Debt Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture, or
in any such Debt Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer, director, employee or agent, as such, past, present or future, of the
Company or of any successor corporation of the Company, either directly or
through the Company or any successor corporation of the Company, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all

                                       51


such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the Debt
Securities.

                                  ARTICLE XIV
                            MISCELLANEOUS PROVISIONS

          Section 14.01 SUCCESSORS.

          All the covenants, stipulations, promises and agreements of the
Company contained in this Indenture shall bind its successors and assigns
whether so expressed or not.

          Section 14.02 OFFICIAL ACTS BY SUCCESSOR ENTITY.

          Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee, officer or other authorized Person of any entity that
shall at the time be the lawful successor of the Company.

          Section 14.03 SURRENDER OF COMPANY POWERS.

          The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company and thereupon such power so
surrendered shall terminate both as to the Company, and as to any permitted
successor.

          Section 14.04 ADDRESSES FOR NOTICES, ETC.

          Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the
Securityholders on the Company may be given or served in writing by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company, with the
Trustee for the purpose) to United Security Bancshares, 1525 E. Shaw Avenue,
Fresno, California, 93710, Attention: Kenneth L. Donahue. Any notice, direction,
request or demand by any Securityholder or the Company to or upon the Trustee
shall be deemed to have been sufficiently given or made, for all purposes, if
given or made in writing at the office of the Trustee, addressed to the Trustee,
101 Barclay Street, Floor 21W, New York, NY 10286 Attention: Corporate Trust
Administration.

          Section 14.05 GOVERNING LAW.

          This Indenture and each Debt Security shall be deemed to be a contract
made under the law of the State of New York, and for all purposes shall be
governed by and construed in accordance with the law of said State, without
regard to conflict of laws principles thereof.

                                       52


          Section 14.06 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

          Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.

          Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (except certificates delivered pursuant to
Section 3.05) shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition; (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

          Section 14.07 NON-BUSINESS DAYS.

          In any case where the date of payment of interest on or principal of
the Debt Securities is not a Business Day, the payment of such interest on or
principal of the Debt Securities need not be made on such date but may be made
on the next succeeding Business Day, with the same force and effect as if made
on the date of payment and no interest shall accrue for the period from and
after such date, except if such Business Day is in the next succeeding calendar
year, such payment will be made on the immediately preceding Business Day.

          Section 14.08 TABLE OF CONTENTS, HEADINGS, ETC.

          The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.

          Section 14.09 EXECUTION IN COUNTERPARTS.

          This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

          Section 14.10 SEPARABILITY.

          In case any one or more of the provisions contained in this Indenture
or in the Debt Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of such Debt
Securities, but this Indenture and such Debt Securities shall be

                                       53


construed as if such invalid or illegal or unenforceable provision had never
been contained herein or therein.

          Section 14.11 ASSIGNMENT.

          The Company will have the right at all times to assign any of its
rights or obligations under this Indenture to a direct or indirect wholly owned
Subsidiary of the Company, provided that, in the event of any such assignment,
the Company will remain liable for all such obligations. Subject to the
foregoing, this Indenture is binding upon and inures to the benefit of the
parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties thereto.

          Section 14.12 ACKNOWLEDGMENT OF RIGHTS.

          The Company acknowledges that, with respect to any Debt Securities
held by the Trust or the Institutional Trustee of the Trust, if the
Institutional Trustee of the Trust fails to enforce its rights under this
Indenture as the holder of Debt Securities held as the assets of the Trust after
the holders of a majority in Liquidation Amount of the Capital Securities of the
Trust have so directed in writing such Institutional Trustee, a holder of record
of such Capital Securities may to the fullest extent permitted by law institute
legal proceedings directly against the Company to enforce such Institutional
Trustee's rights under this Indenture without first instituting any legal
proceedings against such Institutional Trustee or any other Person.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest (or premium, if any) or principal on the Debt Securities on the date
such interest (or premium, if any) or principal is otherwise due and payable (or
in the case of redemption, on the redemption date), the Company acknowledges
that a holder of record of Capital Securities of the Trust may directly
institute a proceeding against the Company for enforcement of payment to such
holder directly of the principal of (or premium, if any) or interest on the Debt
Securities having an aggregate principal amount equal to the aggregate
Liquidation Amount of the Capital Securities of such holder on or after the
respective due date specified in the Debt Securities.

                                   ARTICLE XV
                        SUBORDINATION OF DEBT SECURITIES

          Section 15.01 AGREEMENT TO SUBORDINATE.

          The Company covenants and agrees, and each holder of Debt Securities
issued hereunder and under any supplemental indenture or by any Board Resolution
(the "Additional Provisions") by such Securityholder's acceptance thereof
likewise covenants and agrees, that all Debt Securities shall be issued subject
to the provisions of this Article XV; and each holder of a Debt Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.

                                       54


          The payment by the Company of the principal of, and premium, if any,
and interest on all Debt Securities issued hereunder and under any Additional
Provisions shall, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to the prior payment in full of all
Senior Indebtedness of the Company, whether outstanding at the date of this
Indenture or thereafter incurred.

          No provision of this Article XV shall prevent the occurrence of any
default or Event of Default hereunder.

          Section 15.02 DEFAULT ON SENIOR INDEBTEDNESS.

          In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company following any grace period, or in the event
that the maturity of any Senior Indebtedness of the Company has been accelerated
because of a default, and such acceleration has not been rescinded or canceled
then, in either case, no payment shall be made by the Company with respect to
the principal of, or premium, if any, or interest on the Debt Securities.

          In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.02, such payment shall, subject to Section 15.06,
be held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee in writing
within 90 days of such payment of the amounts then due and owing on the Senior
Indebtedness and only the amounts specified in such notice to the Trustee shall
be paid to the holders of Senior Indebtedness.

          Section 15.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY.

          Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company,
on account of the principal (and premium, if any) or interest on the Debt
Securities; and upon any such dissolution or winding-up or liquidation or
reorganization, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Securityholders or the Trustee would be entitled to receive from the
Company, except for the provisions of this Article XV, shall be paid by the
Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, or by the Securityholders
or by the Trustee under this Indenture if received by them or it, directly to
the holders of Senior Indebtedness of the Company (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such holders,
as calculated by the Company) or their representative or representatives, or to
the trustee or trustees

                                       55


under any indenture pursuant to which any instruments evidencing such Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay such Senior Indebtedness in full, in money or
money's worth, after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Indebtedness, before any payment or
distribution is made to the Securityholders.

          In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness of the
Company, remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full in money in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the benefit of the holders
of such Senior Indebtedness.

          For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Debt Securities to the payment of all Senior Indebtedness of the Company,
that may at the time be outstanding, provided that (a) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (b) the rights of the holders of such Senior
Indebtedness are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article IX of this Indenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 15.03 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article IX of this Indenture. Nothing in Section 15.02 or in this Section
15.03 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.06 of this Indenture.

          Section 15.04 SUBROGATION.

          Subject to the payment in full of all Senior Indebtedness of the
Company, the Securityholders shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of cash, property
or securities of the Company, applicable to such Senior Indebtedness until the
principal of (and premium, if any) and interest on the Debt Securities shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property
or securities to which the Securityholders or the Trustee would be entitled
except for the provisions of this

                                       56


Article XV, and no payment over pursuant to the provisions of this Article XV to
or for the benefit of the holders of such Senior Indebtedness by Securityholders
or the Trustee, shall, as between the Company, its creditors other than holders
of Senior Indebtedness of the Company, and the holders of the Debt Securities be
deemed to be a payment or distribution by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Article XV are
and are intended solely for the purposes of defining the relative rights of the
holders of the Debt Securities, on the one hand, and the holders of such Senior
Indebtedness, on the other hand.

          Nothing contained in this Article XV or elsewhere in this Indenture,
any Additional Provisions or in the Debt Securities is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness of the Company, and the holders of the Debt Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Debt Securities the principal of (and premium, if any) and
interest on the Debt Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Debt Securities and creditors of the
Company, other than the holders of Senior Indebtedness of the Company, nor shall
anything herein or therein prevent the Trustee or the holder of any Debt
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
XV of the holders of such Senior Indebtedness in respect of cash, property or
securities of the Company, received upon the exercise of any such remedy.

          Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.

          Section 15.05 TRUSTEE TO EFFECTUATE SUBORDINATION.

          Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.

          Section 15.06 NOTICE BY THE COMPANY.

          The Company shall give prompt written notice to a Responsible Officer
of the Trustee at the Principal Office of the Trustee of any fact known to the
Company that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Debt Securities pursuant to the provisions of this
Article XV. Notwithstanding the provisions of this

                                       57


Article XV or any other provision of this Indenture or any Additional
Provisions, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Debt Securities pursuant to the provisions of this
Article XV, unless and until a Responsible Officer of the Trustee at the
Principal Office of the Trustee shall have received written notice thereof from
the Company or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Article VI of this Indenture, shall be entitled in
all respects to assume that no such facts exist; PROVIDED, HOWEVER, that if the
Trustee shall not have received the notice provided for in this Section 15.06 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (or premium, if any) or interest on any Debt
Security), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purposes for which they were received, and shall not be affected
by any notice to the contrary that may be received by it within two Business
Days prior to such date.

          The Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness of the Company (or a trustee or representative on behalf of such
holder), to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of such
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article XV, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article XV, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.

          Section 15.07 RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS.

          The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture or any Additional Provisions shall deprive the
Trustee of any of its rights as such holder.

          With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XV, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture or any Additional Provisions against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of such Senior Indebtedness and, subject to the provisions of Article VI
of this Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Securityholders, the Company or
any other Person money or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article XV or otherwise.

                                       58


          Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.

          Section 15.08 SUBORDINATION MAY NOT BE IMPAIRED.

          No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company, or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company, with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof that any such holder may
have or otherwise be charged with.

          Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Company may, at any time and from time
to time, without the consent of or notice to the Trustee or the Securityholders,
without incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Debt Securities to the holders of such Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (d) exercise or refrain from
exercising any rights against the Company, and any other Person.

          The Bank of New York in its capacity as trustee hereby accepts the
trusts in this Indenture declared and provided, upon the terms and conditions
herein above set forth.

                                       59


                  IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed by their respective officers thereunto duly
authorized, as of the day and year first above written.

                                           /s/ KENNETH L. DONAHUE
                                           ------------------------------------

                                           By Kenneth L. Donahue
                                             ----------------------------------
                                             Name:
                                             Title: SUP/Chief Financial Officer


                                           THE BANK OF NEW YORK, as Trustee


                                           By /s/ MARY La GUMINA
                                             ----------------------------------
                                             Name:
                                             Title: Vice President

                                       60


                                                                       EXHIBIT A
                    FORM OF JUNIOR SUBORDINATED DEBT SECURITY

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

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
(EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN,
UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE
UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,
95-60, 91-38, 90-1 OR 84-14

                                   Exhibit A-1


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

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE 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.

          THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED
STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE "FDIC"). THIS OBLIGATION IS SUBORDINATED TO THE
CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE
COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY AND IS NOT
SECURED.

                                   Exhibit A-2


                 Floating Rate Junior Subordinated Debt Security

                                       of

                           UNITED SECURITY BANCSHARES


          United Security Bancshares, a bank holding company incorporated in
California (the "Company"), for value received promises to pay to
[______________] (the "Holder") or registered assigns, the principal sum of
[___________] ($[__________]) on July 25, 2031, and to pay interest on said
principal sum from January 25, 2002, or from the most recent interest payment
date (each such date, an "Interest Payment Date") to which interest has been
paid or duly provided for, semi-annually (subject to deferral as set forth
herein) in arrears on January 25th and July 25th of each year commencing January
25, 2002, at a variable per annum rate equal to LIBOR (as defined in the
Indenture) plus 3.75% (the "Interest Rate") (PROVIDED, that the applicable
Interest Rate may not exceed 12.50% through the Interest Payment Date in July
2011) until the principal hereof shall have become due and payable, and on any
overdue principal and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at an annual rate equal to the Interest Rate in effect for each such
Extension Period compounded semi-annually. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the relevant interest period. In the event that
any date on which the principal or interest is payable on this Debt Security is
not a Business Day, then payment payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Debt Security (or one or more
Predecessor Securities, as defined in said Indenture) is registered at the close
of business on the Record Date for such interest installment, which shall be the
close of business on the 15th day next preceding such Interest Payment Date. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered holders on such Record Date and
may be paid to the Person in whose name this Debt Security (or one or more
Predecessor Debt Securities) is registered at the close of business on a special
record date to be fixed by the Trustee for the payment of such defaulted
interest, notice whereof shall be given to the registered holders of the Debt
Securities not less than 10 days prior to such special record date, all as more
fully provided in the Indenture. The principal of and interest on this Debt
Security shall be payable at the office or agency of the Trustee (or other
paying agent appointed by the Company) maintained for that purpose in any coin
or currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; PROVIDED, HOWEVER, that payment
of interest may be made at the option of the Company by check mailed to the
registered holder at such address as shall appear in the Debt Security Register
or by wire transfer to an account appropriately designated by the holder hereof.
Notwithstanding the foregoing, so long as the holder of this Debt Security is
the Institutional Trustee, the payment of the principal of and interest on this
Debt Security will be made in

                                   Exhibit A-3


immediately available funds at such place and to such account as may be
designated by the Trustee.

          So long as no Event of Default has occurred and is continuing, the
Company shall have the right, from time to time, to defer payments of interest
on the Debt Securities by extending the interest payment period on the Debt
Securities at any time and from time to time during the term of the Debt
Securities, for up to 10 consecutive semi-annual periods (each such extended
interest payment period, an "Extension Period"), during which Extension Period
no interest shall be due and payable (except any Additional Interest that may be
due and payable). During any Extension Period, interest will continue to accrue
on the Debt Securities and interest on such accrued interest (such accrued
interest and interest thereon referred to herein as "Deferred Interest") will
accrue at the Interest Rate, compounded semi-annually from the date such
Deferred Interest would have been payable were it not for the Extension Period,
both to the extent permitted by law. No Extension Period may end on a date other
than an Interest Payment Date. At the end of any such Extension Period the
Company shall pay all Deferred Interest then accrued and unpaid on the Debt
Securities; PROVIDED HOWEVER, that no Extension Period may extend beyond the
Maturity Date and PROVIDED FURTHER HOWEVER, during any such Extension Period,
the Company may not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Company's capital stock or (ii) make any payment of principal of or interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Company that rank PARI PASSU in all respects with or junior in interest to the
Debt Securities (other than (a) repurchases, redemptions or other acquisitions
of shares of capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, in connection with a
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Company (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 Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (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 Company may
further extend such period, provided that such period together with all such
previous and further consecutive extensions thereof shall not exceed 10
consecutive semi-annual periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all Deferred
Interest, the Company may commence a new Extension Period, subject to the
foregoing requirements. No interest or Deferred Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Deferred Interest. The Company must give the
Trustee notice of its

                                   Exhibit A-4


election to begin such Extension Period at least one Business Day prior to the
earlier of (i) the date interest on the Debt Securities would have been payable
except for the election to begin such Extension Period or (ii) the date such
interest is payable, but in any event not less than one Business Day prior to
such record date.

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

          The Company waives demand, presentment for payment, notice of
nonpayment, notice of protest, and all other notices.

          This Debt Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by or on
behalf of the Trustee.

          The provisions of this Debt Security are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.

                                   Exhibit A-5


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

                                            UNITED SECURITY BANCSHARES


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

Dated:  [_____], [_____]

                          CERTIFICATE OF AUTHENTICATION

          This is one of the Debt Securities referred to in the within-mentioned
Indenture.

                                            THE BANK OF NEW YORK, as the Trustee

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

Dated:  [_____], [_____]

                                      Exhibit A-6


                          [FORM OF REVERSE OF SECURITY]

          This Debt Security is one of a duly authorized series of Debt
Securities of the Company, all issued or to be issued pursuant to an Indenture
(the "Indenture") dated as of July 16, 2001, duly executed and delivered between
the Company and The Bank of New York, as Trustee (the "Trustee"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the Debt
Securities (referred to herein as the "Debt Securities") of which this Debt
Security is a part. The summary of the terms of this Debt Security contained
herein does not purport to be complete and is qualified by reference to the
Indenture.

          Upon the occurrence and continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event, this Debt Security may become due
and payable, in whole but not in part, at any time, within 90 days following the
occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event (the "Special Redemption Date"), as the case may be, at the Special
Redemption Price. The Company shall also have the right to redeem this Debt
Security at the option of the Company, in whole or in part, on any January 25th
or July 25th on or after July 25, 2006 (a "Redemption Date"), at the Redemption
Price.

          Any redemption pursuant to the preceding paragraph will be made,
subject to the receipt by the Company of prior approval from the Board of
Governors of the Federal Reserve System (the "Federal Reserve") if then required
under applicable capital guidelines or policies of the Federal Reserve, upon not
less than 30 days' nor more than 60 days' notice. If the Debt Securities are
only partially redeemed by the Company, the Debt Securities will be redeemed PRO
RATA or by lot or by any other method utilized by the Trustee.

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




                   Year Beginning                 Percentage
                   --------------                 ----------
                                                
                    July 25, 2006                  107.6875%
                    July 25, 2007                  106.1500%
                    July 25, 2008                  104.6125%
                    July 25, 2009                  103.0750%
                    July 25, 2010                  101.5375%
               July 25, 2011 and after             100.0000%


          plus accrued and unpaid interest on such Debentures to the Redemption
Date or Special Redemption Date, as the case may be.

                                      Exhibit A-7


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

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

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

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

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

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

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

          "Treasury Rate" means (i) the yield, under the heading which
represents the average for the week immediately prior to the date of
calculation, appearing in the most recently published statistical release
designated H.15 (519) or any successor publication which is

                                   Exhibit A-8


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

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

          In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debt Securities may be
declared due and payable, and upon such declaration of acceleration shall become
due and payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.

          The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities at the time outstanding
affected thereby, as specified in the Indenture, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the
Debt Securities; PROVIDED, HOWEVER, that no such supplemental indenture shall,
among other things, without the consent of the holders of each Debt Security
then outstanding and affected thereby (i) extend the fixed maturity of the Debt
Securities, or reduce the principal amount thereof or any redemption premium
thereon, or reduce the rate or extend the time of payment of interest thereon,
or make the principal of, or interest or premium on, the Debt Securities payable
in any coin or currency other than that provided in the Debt Securities, or
impair or affect the right of any holder of Debt Securities to institute suit
for the payment thereof, or (ii) reduce the aforesaid percentage of Debt
Securities, the holders of which are required to consent to any such
supplemental indenture. The Indenture also contains provisions permitting the
holders of a majority in aggregate principal amount of the Debt Securities at
the time outstanding affected thereby as provided in the Indenture, on behalf of
all of the holders of the Debt Securities, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its consequences, except a default in the payment
of the principal of or premium, if any, or interest on any of the Debt
Securities. Any such consent or waiver by the registered holder of this Debt
Security (unless revoked as provided in the Indenture) shall be conclusive and
binding upon such holder and upon all future holders and owners of this Debt
Security and of any Debt Security issued in exchange herefor or in place hereof
(whether by registration of transfer or otherwise), irrespective of whether or
not any notation of such consent or waiver is made upon this Debt Security.

                                   Exhibit A-9


          No reference herein to the Indenture and no provision of this Debt
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debt Security at the time and place and at
the rate and in the money herein prescribed.

          As provided in the Indenture and subject to certain limitations herein
and therein set forth, this Debt Security is transferable by the registered
holder hereof on the Debt Security Register of the Company, upon surrender of
this Debt Security for registration of transfer at the office or agency of the
Trustee in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the registered holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Debt Securities of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be made for any
such registration of transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.

          Prior to due presentment for registration of transfer of this Debt
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and the Debt Security registrar may deem and treat the
registered holder hereof as the absolute owner hereof (whether or not this Debt
Security shall be overdue and notwithstanding any notice of ownership or writing
hereon) for the purpose of receiving payment of or on account of the principal
hereof and interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any Authenticating Agent nor any paying agent nor
any transfer agent nor any Debt Security registrar shall be affected by any
notice to the contrary.

          No recourse shall be had for the payment of the principal of or the
interest on this Debt Security, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.

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

          All terms used in this Debt Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.

          THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE
DEBT SECURITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.

                                  Exhibit A-10