-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WT8iySPEcSkSjvSBIPi9j7GWEq4EoHyoKJlTuBQOWBPojtj/RUWEM8hbe8JmkYbG rkh30XiUAbsrBZA6C/IUyA== 0000020520-95-000025.txt : 19951024 0000020520-95-000025.hdr.sgml : 19951024 ACCESSION NUMBER: 0000020520-95-000025 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19951023 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS UTILITIES CO CENTRAL INDEX KEY: 0000020520 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 060619596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-63615 FILM NUMBER: 95583366 BUSINESS ADDRESS: STREET 1: HIGH RIDGE PK BLDG 3 STREET 2: P O BOX 3801 CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2033298800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS UTILITIES TRUST CENTRAL INDEX KEY: 0001002609 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-63615-01 FILM NUMBER: 95583367 BUSINESS ADDRESS: STREET 1: HIGH RIDGE PARK BLDG NUMBER 3 CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2033298800 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS UTILITIES CAPITAL L P CENTRAL INDEX KEY: 0001002612 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-63615-02 FILM NUMBER: 95583368 BUSINESS ADDRESS: STREET 1: HIGH RIDGE PARK BUILDING NUMBER 3 STREET 2: P O BOX 3801 CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2033295073 S-3 1 As filed with the Securities and Exchange Commission on , 1995 - --------------------------------------------------------------------- File Nos. 33-[ ], 33-[ ] and 33-[ ] - ----------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 CITIZENS UTILITIES CITIZENS UTILITIES CITIZENS UTILITIES COMPANY CAPITAL L.P. TRUST (Exact name of registrant (Exact name of registrant (Exact name of registrant as specified in charter) as specified in as specified in certificate of limited certificate of trust) partnership) DELAWARE DELAWARE DELAWARE (State or other (State or other (State or other jurisdiction of jurisdiction of jurisdiction of incorporation or incorporation or incorporation or organization) organization) organization) 06-0619596 [To Be Applied For] [To Be Applied For] (I.R.S. employer (I.R.S. employer (I.R.S. employer identification number) identification number) identification number) High Ridge Park, Bldg. No. 3, Stamford, Connecticut 06905 (203) 329-8800 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) Robert J. DeSantis Vice President and Treasurer Citizens Utilities Company High Ridge Park, Bldg. No. 3 P.O. Box 3801 Stamford, Connecticut 06905 Tel. No. (203) 329-8800 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Jonathan H. Churchill, Esq. Vincent Pagano, Jr., Esq. Boulanger, Hicks & Churchill Simpson Thacher & Bartlett 135 East 57th Street 425 Lexington Avenue New York, New York 10022 New York, New York 10017 Tel. No. (212) 838-5600 Tel. No. (212) 455-2000 ____________________________________________ Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box. [] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [] ____________________________________________
CALCULATION OF REGISTRATION FEE Title of each class Amount to be Proposed maximum Proposed maximum Amount of of securities to be registered (5) offering price aggregate registration registered per unit (3) offering price fee - ------------------- --------------- ---------------- ---------------- ------------ Convertible Preferred $201,250,000 $____________ $201,250,000 $69,396.55 Securities of Citizens (1)(2)(4) Utilities Trust ("Trust") (1)(2); Partnership Preferred Securities of Citizens Utilities Capital L.P. ("Citizens Capital")(1)(4); Common Stock Series A and B ($.25 par value) of Citizens Utilities Company ("Citizens") (1)(4); Citizens Guarantee with respect to Trust's Convertible Preferred Securities (4); Citizens Guarantee with respect to Citizens Capital's Partnership Preferred Securities(4); Citizens Convertible Debentures (4) Common Stock Series A and B ($.25 par value) of Citizens $40,000,000 $40,000,000 $13,793.10
(1) There are being registered hereunder an indeterminate number of (a) Convertible Preferred Securities with an aggregate liquidation value of up to $201,250,000, (b) Partnership Preferred Securities into which such Convertible Preferred Securities can be converted, (c) Convertible Debentures having a principal amount of up to $201,250,000 into which Partnership Preferred Securities can be converted, (d) shares of Common Stock Series A of the Company into which such Convertible Debentures can be converted, and (e) shares of Common Stock Series B of the Company into which such Series A shares can be converted. (2) Includes $26,250,000 of Convertible Preferred Securities which may be sold pursuant to an over-allotment option granted to the Underwriters. (3) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. (4) No separate consideration will be received for Citizens' Guarantees, Convertible Debentures or Common Stock Series A or B, or Citizens Capital's Partnership Preferred Securities. (5) This Registration Statement shall be deemed to cover additional securities to be issued in connection with or as a result of stock splits, stock dividends or similar transactions. _____________________ The registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED PROSPECTUS _____________________, 1995 - ---------- $175,000,000 Convertible Preferred Securities CITIZENS UTILITIES TRUST ____% Citizens Utilities Convertible Preferred Securities (liquidation preference $50 per security) Equity Providing Preferred Income Convertible Securities ("EPPICS") (servicemark) [COMPANY LOGO HERE] ----------------------------- The Equity Providing Preferred Income Convertible Securities (servicemark) ("Convertible Preferred Securities") offered hereby represent preferred undivided beneficial interests in the assets of Citizens Utilities Trust, a statutory Delaware business trust (the "Trust"). The undivided common beneficial interests in the Trust owned by Citizens Utilities Company, a Delaware corporation ("Citizens" or the "Company"), are called the "Convertible Common Securities" and, together with the Convertible Preferred Securities, are called the "Trust Securities." The Trust exists for the sole purpose of issuing the Trust Securities, investing the proceeds as described below and engaging in those activities necessary thereto. (Continued on next page) ----------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------------------------- Initial Public Underwriting Proceeds to the Offering Price Commission(1) Trust(2)(3) -------------- ------------- --------------- Per Convertible Preferred Security $ (2) $ - ---------------------------------------------------------------------------- Total(4) $175,000,000 (2) $ ============================================================================ (1) The Trust, Citizens Capital and Citizens have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (2) Proceeds from the offering will be contributed by the Trust to Citizens Capital and will be used by Citizens Capital to purchase the Convertible Debentures of Citizens. Therefore, the Underwriting Agreement provides that Citizens, as borrower with respect to the Convertible Debentures, will pay to the Underwriters, as compensation ("Underwriters' Compensation"), $____ per Convertible Preferred Security (or $_________ in the aggregate). See "Underwriting." (3) Expenses of the offering, which are payable by Citizens, are estimated to be $__________. (4) Does not include the $40,000,000 of shares of Common Stock of Citizens included in the Registration Statement which may be received and either sold by Citizens Capital or distributed as quarterly distributions to holders of Convertible Preferred Securities. Such shares represent approximately the first three and one half years of such distributions. The Trust, Citizens Capital and Citizens have granted the Underwriters an option for 30 days to purchase up to an additional $26,250,000 in liquidation value of Convertible Preferred Securities at the initial public offering price per Convertible Preferred Security solely to cover over-allotments. Citizens will pay to the Underwriters, as Underwriters' Compensation, $___ per Convertible Preferred Security purchased pursuant to this option. If such option is exercised in full, the total initial public offering price, underwriting commission and proceeds to the Trust will be $___________, $__________ and $_____________, respectively. See "Underwriting." The Convertible Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Convertible Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company ("DTC") on or about ________________, 1995. --------------------------------- See "Risk Factors" for a discussion of certain material risks to be considered in connection with an investment in the Convertible Preferred Securities, including certain federal income tax consequences. --------------------------------- [Underwriters] --------------------------------- The date of this Prospectus is ___________, 1995 - ---------------------- Equity Providing Preferred Income Convertible Securities and EPPICS are servicemarks which have been applied for by Citizens Utilities Company. (Continued from previous page) The proceeds from the offering of the Convertible Preferred Securities and the sale of the Convertible Common Securities will be contributed by the Trust to Citizens Utilities Capital L.P., a Delaware limited partnership ("Citizens Capital" or the "Partnership"), which will issue to the Trust limited partnership interests (the "Partnership Preferred Securities") in Citizens Capital. The undivided beneficial general partnership interest in the Partnership will be owned, directly or indirectly, by Citizens, which general partnership interest, together with the Partnership Preferred Securities, are called the "Partnership Securities." Such proceeds will be used by the Partnership to purchase from Citizens its __% Convertible Subordinated Debentures due 2035 (the "Convertible Debentures") having the terms described herein. In the event of default under the Declaration (as defined herein), the Convertible Preferred Securities will have a preference with respect to quarterly distributions and amounts payable on liquidation and redemption over the Convertible Common Securities. Holders of the Convertible Preferred Securities will be entitled to receive cumulative distributions from the Trust, at an annual rate of __% of the liquidation preference of $50 per Convertible Preferred Security (the "Rate"), accruing from the date of original issuance and payable quarterly in arrears on January 31, April 30, July 31, and October 31, (each, a "Distribution Payment Date"), commencing _________________, 199_. Distributions are payable in shares of Citizens Common Stock Series A ("Common Stock" or "Common Stock Series A") or, at the option of either Citizens or the holder, in cash. See "Convertible Preferred Securities - Distributions." The Distribution Payment Dates correspond to the dates scheduled for the payment of interest on the Convertible Debentures, so such dates are also sometimes referred to as "Interest Payment Dates." Interest payment periods on the Convertible Debentures are quarterly. So long as no Indenture Event of Default (as defined herein) has occurred and is continuing, Citizens has the right to, and may, at any time and from time to time, elect to defer the payment of each quarterly interest payment to a date subsequent to the regularly scheduled Interest Payment Date, in which event quarterly distribution payments on the Partnership Preferred Securities and on the Convertible Preferred Securities would be deferred (but would be compounded quarterly at the Rate and continue to accrue and accumulate). No such deferral may exceed 20 consecutive quarters nor extend the stated maturity date of the Convertible Debentures. It is an event of default under the Indenture (as defined herein) if, at the end of such deferral of interest payments, Citizens does not pay all accrued or deferred and unpaid interest. Upon such payment at the end of a deferral, the Trust must pay all accrued or deferred and unpaid distributions on the Convertible Preferred Securities. See "Convertible Preferred Securities - Distributions" and "Convertible Debentures - Option to Defer Interest Payments." Each Convertible Preferred Security is convertible in the manner described herein at the option of the holder, unless previously redeemed, into shares of Common Stock Series A of Citizens, at a conversion price of $____ per share of Common Stock Series A (equivalent to a conversion rate of ____ shares of Common Stock Series A for each $50 of liquidation preference of Convertible Preferred Securities), subject to adjustment. See "Convertible Preferred Securities - Conversion Rights." The Common Stock Series A is listed under the symbol "CZNA" on the New York Stock Exchange ("NYSE"). The last reported sale price per share of Common Stock Series A on the NYSE on October 18, 1995 was $10 7/8. See "Common Stock Price Range." The Convertible Debentures are redeemable by Citizens, at its option, in whole or in part, from time to time, on or after _________________, 199_, at 100% of the principal amount being redeemed, together with all accrued or deferred and unpaid interest (including any compound interest resulting from the deferral of interest payments), or at any time in certain circumstances, as specified in the next paragraph below. For purposes hereof, wherever this Prospectus speaks to "interest" or "distributions" payable on or with respect to any security offered hereunder, such terms include compound interest arising from any deferral of interest or distributions on such securities. If Citizens' Convertible Debentures are redeemed, the Trust must redeem Convertible Preferred Securities and Convertible Common Securities, on a pro rata basis, having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed at $50 per Trust Security payable in cash plus accrued or deferred and unpaid distributions thereon. See "Convertible Preferred Securities - Optional Redemption" and "Convertible Debentures - Optional Redemption." See also "Convertible Preferred Securities - Redemption on Maturity or Upon Acceleration" and "Convertible Debentures - Indenture Events of Default." Upon the occurrence of certain events (subject to the conditions described elsewhere herein) the Trust and/or the Partnership may be liquidated and the holders of the Convertible Preferred Securities could receive either Partnership Preferred Securities or Convertible Debentures in lieu of any liquidating cash distribution. If the conditions for such liquidation(s) are not met, or upon the occurrence of other special events (also subject to certain conditions described elsewhere herein), the Convertible Debentures are redeemable, in whole or in part, at the Page 2 (continued from previous page) option of Citizens, together with all accrued or deferred but unpaid interest, which would result in the redemption of the Partnership Preferred Securities and the Trust Securities. See "Convertible Preferred Securities - Special Events Redemption and Distribution." In the event of the liquidation, dissolution or winding up of the Trust, investors will be entitled to receive for each Convertible Preferred Security held a liquidation preference of $50 payable in cash, plus accrued or deferred and unpaid distributions payable in either cash or Common Stock, to the date of payment. See "Convertible Preferred Securities - Liquidation Rights." Under the Convertible Debentures, Citizens' payment obligation is absolute and unconditional. In addition, Citizens has payment obligations under the Partnership Guarantee (as hereafter defined) and the Trust Guarantees (as hereafter defined) (collectively, the "Guarantees"). Citizens will irrevocably and unconditionally guarantee, on a subordinated basis and to the extent set forth therein, with respect to each of the Trust Securities and the Partnership Preferred Securities, the payment of distributions, the redemption price, including all accrued or deferred and unpaid distributions, and payments on liquidation, but only to the extent of Common Stock and/or cash on hand. Each of the Guarantees will be unsecured and each will be subordinate to all Senior Indebtedness of Citizens (as defined below). See "Guarantees." The Convertible Debentures are subordinated in right of payment to all of Citizens' Senior Indebtedness. See "Convertible Debentures - Subordination". Application will be made to list the Convertible Preferred Securities on the NYSE under the symbol "___." The Convertible Preferred Securities will be represented by a global certificate or certificates registered in the name of DTC or its nominee. Beneficial interests in the Convertible Preferred Securities will be shown on, and transfers thereof will be effected only through, records maintained by the participants in DTC. Except as described herein, Convertible Preferred Securities in certificated form will not be issued in exchange for the global certificate or certificates. See "Convertible Preferred Securities - Book-Entry-Only Issuance - The Depository Trust Company." $40,000,000 of Citizens Utilities Company Common Stock This Prospectus may also be used by Citizens Capital, which may receive the Common Stock Series A covered by this Prospectus in connection with Citizens' interest payments on the Convertible Debentures and which may sell such stock in the open market. See "Convertible Preferred Securities - Distributions." Such sales of Common Stock Series A may be made from time to time in one or more transactions (which may involve crosses or block transactions) on the NYSE or otherwise pursuant to and in accordance with the rules of the NYSE, in the over-the-counter market, in negotiated transactions, or a combination of such methods of sale, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Citizens Capital will effect such transactions by selling shares of Common Stock Series A to or through broker-dealers. Such broker-dealers may receive compensation in the form of underwriting discounts, concessions or commissions from Citizens Capital and/or purchasers of shares of Common Stock Series A for whom they may act (which compensation may be in excess of customary commissions). Citizens Capital and broker-dealers that participate with Citizens Capital in the distributions of shares of Common Stock Series A may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933 (the "1933 Act"), and any commissions received by them and any profit on the resale of shares of Common Stock Series A may be deemed to be underwriting compensation. This Prospectus may also be used by the holders of the Convertible Preferred Securities, who may receive the Common Page 3 Stock Series A covered by this Prospectus as quarterly distributions on their Convertible Preferred Securities and who may sell such stock under circumstances requiring or making desirable its use. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CONVERTIBLE PREFERRED SECURITIES OFFERED HEREBY AND COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Page 4 Table of Contents Page - ----------------- ---- AVAILABLE INFORMATION 5 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 5 PROSPECTUS SUMMARY 7 Citizens Utilities Company 7 Citizens Utilities Capital L.P. 7 Citizens Utilities Trust 7 Structural Overview 8 Consolidated Summary Financial Information 9 The Offering 10 Use Of Proceeds 15 RISK FACTORS 16 Subordinate Obligations Under Guarantees and Convertible Debentures 16 Dependence on Convertible Debenture Payments 16 Enforcement of Certain Rights by Holders of Convertible Preferred Securities 17 Option to Defer Payment of Distributions 17 Certain Tax Consequences of Deferral of Interest Payments on Convertible Debentures 17 Tax and Market Consequences of Special Events Redemption or Distribution 18 Limited Voting Rights 19 Trustee Conflicts of Interest 19 Trading Price and Taxes 20 No Prior Market for the Convertible Preferred Securities; Market Risk on Distributions in Common Stock 20 CITIZENS UTILITIES COMPANY 20 USE OF PROCEEDS 22 CAPITAL REQUIREMENTS AND FINANCING 22 DESCRIPTION OF COMMON STOCK SERIES A AND SERIES B 23 DIVIDENDS ON COMMON STOCK SERIES A AND SERIES B 23 COMMON STOCK TRANSFER AGENT 24 COMMON STOCK PRICE RANGE 24 FINANCIAL INFORMATION 25 CITIZENS UTILITIES CAPITAL L.P. 32 CITIZENS UTILITIES TRUST 33 DESCRIPTION OF THE SECURITIES 34 CONVERTIBLE PREFERRED SECURITIES 34 General 35 Distributions 35 How Distributions are Computed 35 Holders Can Elect Distributions in Common Stock or Cash 36 Distributions Flow From Citizens to Holders 36 How Distributions are Made 37 Record Dates 37 Other 38 Deferrals 38 Additional Interest 39 Conversion Rights 39 General 39 Conversion Price Adjustments - General 40 Conversion Price Adjustments - Merger, Consolidation or Sale of Assets of Citizens 41 Special Events Redemption and Distribution 42 Ministerial Action 45 Optional Redemption 46 Redemption on Maturity or Upon Acceleration 46 Redemption Procedures; Generally 46 Liquidation Rights 47 Amendment to the Declaration 48 Merger, Consolidation or Sale of Assets of the Trust 48 Declaration Events of Default 49 Voting Rights 49 Book-Entry-Only Issuance - The Depository Trust Company 50 Information Concerning the Property Trustee 53 Transfer Agent, Paying Agent, Registrar and Conversion Agent 53 PARTNERSHIP PREFERRED SECURITIES 53 General 54 Distributions 54 Conversion Rights 54 Special Events Redemption and Distribution 55 Optional Redemption 55 (i) PARTNERSHIP PREFERRED SECURITIES (continued) Redemption on Maturity or Upon Acceleration 55 Redemption Procedures; Generally 55 Liquidation Rights 56 Merger, Consolidation or Sale of Assets of Citizens Capital 56 Limited Partnership Agreement Event of Default 56 Voting Rights 56 Amendment to the Limited Partnership Agreement 58 Transfer Agent, Paying Agent, Registrar and Conversion Agent 58 GUARANTEES 59 General 59 Certain Covenants of Citizens 60 Subordination 61 Amendments and Assignment 61 Termination 62 Events of Default 62 CONVERTIBLE DEBENTURES 63 General 63 Optional Redemption 63 Special Events Redemption and Distribution 64 Interest 64 Option to Defer Interest Payments 64 Additional Interest 64 Subordination 65 Certain Covenants of Citizens 67 Conversion of the Convertible Debentures 68 Indenture Events of Default 69 Modification of the Indenture 71 Governing Law 71 Information Concerning the Debenture Trustee 72 Miscellaneous 72 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS 72 General 72 Classification of the Convertible Debentures 73 Classification of Citizens Capital 73 Classification of the Trust 73 Potential Deferral of Interest Payments and Original Issue Discount 74 Holders Making a Stock Distribution Election 74 Receipt of Partnership Preferred Securities, Convertible Debentures or Cash Upon Liquidation of Citizens Capital and the Trust 75 Disposition of Convertible Preferred Securities 76 Exchange of Convertible Preferred Securities for Common Stock 77 Adjustment of Conversion Price 77 United States Alien Holders 77 Information Reporting and Backup Withholding 78 UNDERWRITING 79 LEGAL OPINIONS 81 EXPERTS 81 INDEX OF DEFINED TERMS 82 (ii) AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 ("1934 Act") and in accordance therewith files reports, proxy statements and other information (collectively, "1934 Act Reports") with the Securities and Exchange Commission (the "SEC"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices at Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and Suite 1300, 7 World Trade Center, New York, New York 10048. Copies of such material can also be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D. C. 20549, at prescribed rates. Certain securities of the Company are listed on the New York Stock Exchange, 20 Broad Street, New York, New York 10005, and reports, proxy material and other information concerning the Company may be inspected at the office of that Exchange. The Company hereby undertakes to provide, without charge, to (i) each person to whom a copy of this Prospectus is delivered, and (ii) any owner of Convertible Preferred Securities, upon written or oral request of such person, a copy of any of the Company's 1934 Act Reports. Requests for such copies should be directed to Office of the Secretary, Citizens Utilities Company, High Ridge Park, Bldg. No. 3, Stamford, Connecticut 06905 (telephone 203-329-8800). Citizens, the Trust and the Partnership have filed with the SEC a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the 1933 Act. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information, reference is hereby made to the Registration Statement. No separate financial statements of either the Partnership or the Trust have been included herein. Citizens, the Trust and the Partnership do not consider that such financial statements would be material to holders of Convertible Preferred Securities because the Trust and the Partnership are newly organized special purpose entities, have no operating history and no independent operations and are not engaged in, and do not propose to engage in, any activity other than as described under "Citizens Utilities Trust" and "Citizens Utilities Capital L.P." Further, Citizens believes that financial statements of the Trust and the Partnership are not material to the holders of the Convertible Preferred Securities since Citizens will guarantee the Convertible Preferred Securities and the Partnership Preferred Securities such that the holders of the Convertible Preferred Securities, with respect to the payment of distributions and amounts upon liquidation, dissolution and winding-up, are at least in the same position vis-a-vis the assets of Citizens as a preferred stockholder of Citizens. See "Citizens Utilities Trust," "Citizens Utilities Capital L.P.," "Convertible Preferred Securities," "Guarantees" and "Convertible Debentures." Citizens beneficially owns directly or indirectly all of Citizens Capital's partnership interests (other than the Partnership Preferred Securities, which are held by the Property Trustee (as defined herein) for the benefit of the holders of Convertible Preferred Securities) and beneficially owns directly or indirectly all of the undivided beneficial interests in the assets of the Trust (other than the beneficial interests represented by the Convertible Preferred Securities). ---------------------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the SEC pursuant to the 1934 Act are incorporated into this Prospectus by reference: The Company's Annual Report on Form 10-K for the year ended December 31, 1994. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 and on Forms 10-Q and 10-QA for the quarter ended June 30, 1995. Page 5 The Company's Current Reports on Form 8-K relating to the acquisitions of certain telecommunications properties filed on July 5, August 9, and December 7, 1994, and June 1, 1995. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to the termination of the offering of the Convertible Preferred Securities shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. The Company hereby undertakes to provide, without charge, to each person to whom a copy of this Prospectus is delivered, upon written or oral request of such person, a copy of any or all of the documents referred to above which have been or may be incorporated by reference in this Prospectus, other than exhibits to such documents not specifically incorporated by reference herein. Requests for such copies should be directed to Office of the Treasurer, Citizens Utilities Company, High Ridge Park, Bldg. No. 3, Stamford, Connecticut 06905 (telephone 203-329-8800). Page 6 PROSPECTUS SUMMARY Citizens Utilities Company ("Citizens" or the "Company") Citizens Utilities Company is a diversified operating public utility which provides, either directly or through subsidiaries, telecommunications, natural gas transmission and distribution, electric distribution, water or wastewater services to customers in areas of eighteen states. Citizens holds a significant investment interest in Centennial Cellular Corp., a cellular telephone company, and also owns Electric Lightwave, Inc., an alternative telecommunications service provider operating in five western states. Beginning with 1945, the Company has increased its revenues, net income and earnings per share (adjusted for subsequent stock dividends and stock splits) every year without interruption. As a result of its diversification, the Company is not dependent upon any single geographic area or any one type of utility service for its revenues. Because of this diversity, no single regulatory body regulated or will regulate a utility service of the Company accounting for more than 12% of its revenues for the twelve months ended June 30, 1995, pro forma for the acquisitions of certain telecommunications properties described hereafter. The Company is not aware of any other utility company as fully diversified in both geographic areas served and variety of services provided. The Company's operations are conducted principally in small and medium-sized communities. No material part of the Company's business is dependent upon a single customer or a small group of customers. The loss of any single customer or a small group of customers would not have a materially adverse effect upon the Company. The Company's consumer connections have increased from 26,150 in 1945, to 225,389 in 1965, to 610,585 in 1985, and to approximately 1,500,000 as of July 31, 1995. The Company continually considers and is carrying out expansion through acquisitions and joint ventures in the rapidly evolving telecommunications and cable television industries and in traditional public utility and related businesses. Citizens Utilities Capital L.P. ("Citizens Capital" or the "Partnership") Citizens Utilities Capital L.P. is a special purpose limited partnership formed under the laws of the State of Delaware. All of its partnership interests (other than the Partnership Preferred Securities and the interests of any Special Representative, as defined herein) will be beneficially owned directly or indirectly by Citizens (the "General Partnership Security" and, together with the Partnership Preferred Securities, the "Partnership Securities"). Citizens or one of its wholly owned subsidiaries will be the sole general partner of Citizens Capital and will contribute capital to the extent required to establish and maintain a General Partnership Security equal to at least 3% of the total capital of the Partnership. Citizens Capital exists for the sole purposes of (i) issuing its Partnership Securities, (ii) investing the proceeds thereof in the Convertible Debentures, (iii) administering the distribution of the interest payments thereon and (iv) engaging in only those other activities necessary or incidental thereto. The Partnership will hold title to the Convertible Debentures and will have the power to exercise all rights, powers and privileges under the Indenture (as defined herein) as the holder of the Convertible Debentures. Citizens Utilities Trust (the "Trust") Citizens Utilities Trust, the issuer of the Convertible Preferred Securities, is a statutory business trust formed under the Delaware Business Trust Act (the "Trust Act") pursuant to (i) a declaration of trust, dated as of October 13, 1995, executed by Citizens, as sponsor, and the trustees specified therein. The declaration Page 7 of trust will be qualified as an indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act"). Citizens owns and will own, directly or indirectly, all of the Convertible Common Securities of the Trust, which will amount to at least 3% of the total capital of the Trust. The Trust exists for the sole purposes of (i) issuing its Trust Securities, (ii) contributing the proceeds thereof to the Partnership to acquire the Partnership Preferred Securities and (iii) engaging in only those other activities necessary or incidental thereto. Structural Overview (Diagram) Diagram represents a structural overview of the component elements of the transactions which are the subject of this Prospectus. Page 8 Consolidated Summary Financial Information (In millions, except percentages, ratios and per share amounts) Twelve Months Ended June 30, 1995 Years Ended December 31, ---------------------- ------------------------ STATEMENT OF INCOME DATA Pro Forma(1) Actual 1994 1993 1992 ------------- ------ ---- ---- ---- Revenues $1,155 $1,020 $910 $619 $580 Operating Expenses 864 776 682 458 429 ------------- ------ ---- ---- ---- Income from Operations 291 244 228 161 151 Other Income 48 57 53 54 47 Interest Expense 82 89 73 37 39 ------------- ------ ---- ---- ---- Income before Income Taxes 257 212 208 178 159 Income Taxes 83 62 64 52 44 Income before Dividends ------------- ------ ---- ---- ---- on Convertible Preferred Securities 174 150 144 126 115 Dividends on Convertible Preferred Securities (2) 5 - - - - ------------- ------ ---- ---- ---- Net Income $ 169 $150 $144 $126 $115 ============= ====== ==== ==== ==== Earnings Per Share (3) $.79(4) $.74(4) $.74 $.65 $.61 Ratio of Earnings to Fixed Charges (5) 4.0 3.3 3.7 5.3 4.8 Ratio of Earnings to Combined Fixed Charges and Dividends on Convertible Preferred Securities (6) 3.7 3.3 3.7 5.3 4.8 At June 30, 1995 ------------------------------------------ CAPITALIZATION DATA Pro Forma(7) Actual ---------------------- --------------- Long-Term Debt $ 1,141 40% $ 1,070 42% Equity(8) 1,677 60% 1,502 58% ------- ----- ------- ----- Total Capitalization $ 2,818 100% $ 2,572 100% ======= ===== ======= ===== - ----------------------------- (1) The Pro Forma Statement of Income Data reflects the combined results of operations of Citizens and certain Telecommunications Properties (see "Pro Forma Financial Statements") acquired subsequent to June 30, 1994 and properties to be acquired (as of June 30, 1995) as if such properties had been acquired on July 1, 1994. This information should be read in conjunction with the Pro Forma Condensed Statements of Income beginning on page 28 of this Prospectus. The Pro Forma Statement of Income Data is not necessarily indicative of what the actual financial results would have been for the period had the transactions occurred on the date indicated and does not purport to indicate the financial results of future periods. (2) Presented net of Income Taxes. (3) Common Stock Series A and Series B per-share amounts have been adjusted retroactively for subsequent stock dividends and stock splits through June 30, 1995. No adjustment has been made for the 1.6% 1995 third quarter dividend as this adjustment is immaterial. (4) Reflects the discontinuance of subsidy contract revenues received through the end of 1994 from Pacific Bell. For the twelve months ended June 30, 1995 on both an Actual and Pro Forma basis this discontinuance had the effect of reducing, by $19 million, Income before Income Taxes and related Earnings Per Share as compared to prior periods. (5) "Earnings" consist of Income Before Income Taxes plus fixed charges. "Fixed Charges" consist of interest charges and an amount representing the interest factor included in rentals. (6) The Company intends to pay the dividends on the Convertible Preferred Securities in the form of Common Stock as opposed to cash. Accordingly, the difference between the Ratio of Earnings to Fixed Charges and the Ratio of Earnings to Combined Fixed Charges and Dividends on Preferred Securities is attributable to the non-cash dividend. (7) The Pro Forma Capitalization Data reflects the permanent financings of the Telecommunications Properties as if such financings were in place on June 30, 1995. This information should be read in conjunction with the Pro Forma Condensed Balance Sheet beginning on page 26 of this Prospectus. The Pro Forma Capitalization Data is not necessarily indicative of what the actual capitalization would have been for the period had the transaction occurred on the date indicated and does not purport to indicate the capitalization of future periods. (8) Includes Common Equity and Convertible Preferred Securities. Page 9 The Offering Issuer Citizens Utilities Trust, a statutory Delaware business trust. Securities Offered $175,000,000 of Convertible Preferred Securities representing preferred undivided beneficial interests in the assets of the Trust, with a liquidation preference of $50 per security. Additionally, the Trust, the Partnership and Citizens have granted the Underwriters an option for 30 days to purchase up to an additional $26,250,000 of Convertible Preferred Securities at the initial public offering price solely to cover over-allotments, if any. Distributions Distributions on the Convertible Preferred Securities will be cumulative from the date of original issuance of the Convertible Preferred Securities at the Rate. Distributions will be paid quarterly in arrears on the Distribution Payment Dates (which are January 31, April 30, July 31 and October 31 of each year) commencing ______________, 199_. Distributions on the Convertible Preferred Securities may not be made unless the Trust receives corresponding distributions on the Partnership Preferred Securities from the Partnership, which in turn may not make such distributions unless it receives corresponding interest payments on the Convertible Debentures from Citizens. Holders of Convertible Preferred Securities may make an annual election to receive their distributions in either Common Stock or cash (a "Distribution Election"). While Citizens intends to elect to pay interest on the Convertible Debentures in Common Stock, Citizens may also elect to pay interest on the Convertible Debentures in cash. At Citizens' election, interest payments may be deferred as described below under "Interest and Distribution Deferral Provisions." The coordination of these election opportunities require that the elections be made within specific time periods. The following summary describes this time-table. So that the summary may be read without frequent cross-referencing of terms defined elsewhere in this Prospectus, some terms which may be defined elsewhere in this Prospectus are re-defined herein for convenience. - - Concurrent with the offering, initial holders of Convertible Preferred Securities can make a Distribution Election: * To receive stock (a "Stock Distribution Election"), or * To receive cash (a "Cash Distribution Election"). * If no Distribution Election is made, the initial holder is deemed to have made a Cash Distribution Election. - - Holders other than initial holders are not entitled to make a Distribution Election until an Election Period (as defined below). Such holders, before such Election Period, will be deemed to have made a Cash Distribution Election. - - The "Distribution Declaration Date" will occur on or before December 9, March 13, June 13 and September 12 of each year (which date will be at least ten calendar days prior to the scheduled Record Date). On or prior to such date, Citizens must declare by written notice (the "Distribution Declaration Notice") whether it will: * Make the next interest payment, or Page 10 * Defer the next interest payment. * If the scheduled Distribution Declaration Date falls on a day which is not a Business Day, the Distribution Declaration Date shall be the next preceding day that is a Business Day. - - If the Distribution Declaration Notice states that interest will be paid and not deferred on the next Distribution Payment Date: * Since Citizens intends to pay interest on the Convertible Debentures in the form of Common Stock, such notice will ordinarily state that payment will be made in Common Stock (a "Stock Payment Election") having an Equivalent Value (as defined hereafter) to the interest payment which has accrued for the period at the Rate; however * Such notice can alternatively state that Citizens will pay interest in cash (a "Cash Payment Election"). In such case, a holder who makes a timely Stock Distribution Election will instead receive cash. * Such notice will also state the Record Date and the Share Transfer and Valuation Date (as defined hereafter). Such notice, if it relates to the January 31 Distribution Payment Date, will additionally inform holders of the Election Period procedures. - - The Record Date will occur on or before December 19, March 23, June 23 and September 22 of each year (which will be at least 10 calendar days after the Distribution Declaration Date). As of this date, the official list of holders entitled to payment will be generated from information supplied by brokerage houses and nominees and others holding accounts for investors and DTC. - - During an "Election Period" (which, starting in 1996, will be the ten Business Days in each year commencing at least two Business Days after the scheduled Record Date relating to the January 31 Distribution Payment Date), a holder can change his Distribution Election by submitting an election form to the broker, nominee or other entity which holds such holder's account. Elections will continue in effect until another election is timely made in a subsequent annual Election Period. Late Distribution Elections will not be effective. * Election forms will be sent on or about the first day of the Election Period to beneficial holders of Convertible Preferred Securities by the brokers, nominees or other entities which hold such holders' account. - - If Citizens makes a Stock Payment Election, the Share Transfer and Valuation Date will occur on or before January 18, April 17, July 18 and October 18 of each year (which date will be at least 9 Business Days before the Distribution Payment Date). * On each Share Transfer and Valuation Date, the Equivalent Value per share will be determined, and * Shares of Common Stock with an Equivalent Value will be delivered by Citizens to the Partnership. - - In the period from the Share Transfer and Valuation Date to the Distribution Payment Date: * The Partnership will sell Common Stock in amounts sufficient to pay cash to holders who have made a Cash Distribution Election. * To the extent cash proceeds from the sale of Common Stock are insufficient to satisfy Cash Distribution Elections, Citizens, as General Partner of the Partnership, will provide the additional cash requirement to the Partnership. Page 11 * Citizens may purchase from the Partnership some or all of the Common Stock transferred to the Partnership as an interest payment. If all such Common Stock is purchased, holders making timely Stock Distribution Elections will receive their distributions in cash. - - The Distribution Payment Dates will be January 31, April 30, July 31 and October 31 of each year. * If Citizens has made a Stock Payment Election, on the Distribution Payment Date the Partnership will transfer to the Trust the appropriate number of shares of Common Stock and appropriate amount of cash to satisfy the Stock and Cash Distribution Elections of the holders of the Convertible Preferred Securities. * If Citizens has made a Cash Payment Election, Citizens will transfer cash to the Partnership in payment of interest, at the Rate, and the Partnership will transfer such cash to the Trust, all on the Distribution Payment Date. * If the scheduled Distribution Payment Date falls on a day which is not a Business Day, the Distribution Payment Date shall be the next day that is a Business Day. If the Trust should be dissolved or liquidated by reason of the occurrence of a Trust Event (as hereinafter defined) and the Partnership Preferred Securities are distributed to the public investors, the time-table described above will remain applicable with the substitution of Partnership Preferred Securities for the Convertible Preferred Securities, and such other changes resulting from the elimination of the Trust. However, in the event that the Partnership is dissolved or liquidated by reason of the occurrence of a Partnership Event (as hereinafter defined), the right of (i) a holder to make Distribution Elections and (ii) Citizens to make Stock Payment Elections will terminate. In such event, distributions will be made only in cash. See "Convertible Preferred Securities - Special Events Redemption and Distribution." Interest and Distribution Deferral Provisions Citizens has the right to, and may, at any time and from time to time, elect to defer the payment of each quarterly interest payment to a date subsequent to the regular Interest Payment Date; provided that no such deferral, including extensions, if any, may exceed 20 consecutive quarters nor extend the stated maturity date of the Convertible Debentures. As a consequence, quarterly distributions on the Partnership Preferred Securities and on the Convertible Preferred Securities would be deferred during any such deferral of interest payments. At the end of any such deferred periods, Citizens shall make all interest payments then accrued or deferred and unpaid (including any compounded interest). Upon the payment of all accrued or deferred and unpaid interest payments on the Convertible Debentures, the Partnership will pay in full all accrued or deferred and unpaid distributions to holders of the Partnership Preferred Securities, i.e., the Trust, and the Trust will pay in full all accrued or deferred and unpaid distributions to holders of the Convertible Preferred Securities. Citizens shall give the Regular Trustees (as defined herein) written notice of its selection of a deferred interest payment on or before the date the Regular Trustees are required to give notice of the record or payment date of any distribution payable on the Convertible Preferred Securities to the NYSE, the National Association of Securities Dealers Automated Quotation ("NASDAQ") system or other applicable self-regulatory organization, or to the holders of the Convertible Preferred Securities. See the discussion of the Distribution Declaration Notice and Distribution Declaration Date immediately above under "- Distributions." Citizens shall also give written notice of any deferred interest payment to the holders of the Convertible Preferred Securities. See "Risk Factors - Option to Defer Payment of Distributions," "Convertible Preferred Securities - Distributions," "Convertible Debentures - Option to Defer Interest Payments." Should a deferral of interest payments occur, the holders of the Partnership Preferred Securities and the holders of the Convertible Preferred Securities would, except in very limited circumstances, continue to accrue income for United States federal income tax purposes even though no interest payments or distributions would in fact be paid. Citizens Page 12 may not elect to defer interest payments while an Indenture Event of Default has occurred and is continuing. See "Risk Factors - Certain Tax Consequences of Deferral of Interest Payments on Convertible Debentures," "Certain Federal Income Tax Considerations - Potential Deferral of Interest Payments and Original Issue Discount," and "Convertible Preferred Securities - - Deferrals." Liquidation Preference $50 per Convertible Preferred Security in cash, plus an amount equal to any accrued or deferred and unpaid distributions in cash or Common Stock. Conversion into Citizens Common Stock Series A Each Convertible Preferred Security is convertible in the manner described below at the option of the holder (unless previously redeemed) into shares of Common Stock Series A of Citizens, at a conversion price of $______ per share of Common Stock Series A (equivalent to a conversion rate of _____ shares of Common Stock Series A for each $50 of liquidation preference of Convertible Preferred Securities), subject to adjustment, as specified below. A holder of Convertible Preferred Securities wishing to exercise its conversion right as to all or a portion of such Convertible Preferred Securities shall, in effect, surrender such Convertible Preferred Securities, or portion thereof, by submitting an irrevocable conversion notice to Chemical Bank who will, among other things, serve as the conversion agent (the "Conversion Agent"). See "Convertible Preferred Securities - Conversion Rights." Commencing in 1990, Citizens has followed the policy of paying quarterly dividends on its Common Stock in shares of Common Stock. The conversion price of the Convertible Preferred Securities will be adjusted downward to reflect the declaration of each future quarterly stock dividend. The conversion price is also subject to adjustment in other circumstances. See "Convertible Preferred Securities - Conversion Rights." Optional Redemption The Convertible Debentures are redeemable by Citizens, in cash, at its option, in whole or in part, from time to time, on or after _________________, 199_, at 100% of the principal amount being redeemed, together with accrued or deferred but unpaid interest, or at any time in certain circumstances, as specified below. If Citizens redeems Convertible Debentures, the Trust must redeem Convertible Preferred Securities and Convertible Common Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed at $50 per Trust Security in cash, plus accrued or deferred and unpaid distributions thereon in either cash or Common Stock. See "Convertible Preferred Securities - Optional Redemption" and "Convertible Debentures - Optional Redemption." Special Events Redemption and Distribution Upon the occurrence of certain events (and subject to certain conditions), the Trust will be liquidated and the holders of the Convertible Preferred Securities will receive Partnership Preferred Securities in lieu of any cash distribution. Also upon the occurrence of certain events (and subject to certain conditions), both the Partnership and the Trust may be liquidated and the holders of the Convertible Preferred Securities may receive Convertible Debentures in lieu of any cash distribution. If such certain conditions for such liquidation(s) are not met upon the occurrence of such events, or upon the occurrence of other special events (also subject to certain conditions), the Convertible Debentures are redeemable, in whole or in part, at the option of Citizens, together with all accrued or deferred but unpaid interest, which would result in the redemption of the Partnership Preferred Securities and the Trust Securities, each in the same liquidation value as the principal amount of the Convertible Debentures so redeemed. See "Convertible Preferred Securities - Special Events Redemption and Distribution." Page 13 Redemptions Terminate Convertibility If Convertible Preferred Securities are called for redemption, whether through the exercise by Citizens of its option after ________, 199_, upon the occurrence of a Special Event, or upon maturity or acceleration upon default, the conversion rights of holders with regard to the Convertible Preferred Securities will terminate five (5) Business Days prior to the redemption date. Redemption on Maturity or Upon Acceleration In addition, unless previously redeemed, Convertible Preferred Securities will be redeemed at maturity (on _____________, 2035) or as a result of acceleration upon default of the Convertible Debentures. See "Convertible Preferred Securities - Redemption on Maturity or Upon Acceleration" and "Convertible Debentures - Events of Default." Guarantees Under the Convertible Debentures, Citizens' payment obligation is absolute and unconditional. In addition, Citizens has payment obligations under the Partnership Guarantees and the Trust Guarantees. Pursuant to the Convertible Preferred Securities Guarantee Agreement (the "Convertible Preferred Securities Guarantee") and the Partnership Preferred Securities Guarantee Agreement (the "Partnership Guarantee"), Citizens will irrevocably and unconditionally agree, on a subordinated basis, to pay in full (a) the distributions by the Trust on the Convertible Preferred Securities and by the Partnership on the Partnership Preferred Securities, (b) the redemption price (including all accrued or deferred and unpaid distributions) of the Convertible Preferred Securities and the Partnership Preferred Securities and (c) payments on liquidation with respect to the Convertible Preferred Securities and the Partnership Preferred Securities, in each case, only to the extent Common Stock and/or cash are on hand and available (and, in the case of Partnership Preferred Securities, legally available) therefor. A holder of Convertible Preferred Securities may enforce Citizens' obligations under the Guarantees directly against Citizens. See "Guarantees - General." The Guarantees will be unsecured and each will be subordinated to all Senior Indebtedness of Citizens. In the event of the bankruptcy, liquidation or winding-up of Citizens, its obligations under the Guarantees will rank junior to all Senior Indebtedness and, therefore, funds may not be available for payment under the Guarantees. See "Risk Factors - Subordinate Obligations Under Guarantees and Convertible Debentures," "Risk Factors - Dependence on Convertible Debenture Payments" and "Guarantees." Voting Rights Holders of the Convertible Preferred Securities will have limited voting rights. See "Convertible Preferred Securities - Voting Rights." Convertible Debentures The Convertible Debentures issued to the Partnership will have a maturity of 40 years and will bear interest at the Rate payable quarterly in arrears, payable in either an Equivalent Value of shares of Common Stock or cash, at the option of Citizens. Citizens has the right to, and may, defer the payment of each quarterly interest payment (See "Interest and Distribution Deferral Provisions" above); Citizens will have the right to make payment of some, but need not make all, of such deferred quarterly interest payments during a deferral of interest payments. The absence of interest payments during a deferral of interest payments would not constitute a default or an event of default under the Indenture or any other of Citizens' currently outstanding indebtedness. Unless previously redeemed, the Convertible Debentures are convertible into shares of Common Stock Series A at the option of the holders thereof. Page 14 The Convertible Debentures are redeemable at the option of Citizens, in whole or in part, from time to time on or after _________, 199_, or at any time upon the occurrence of certain events (and generally subject to certain conditions). See "Convertible Debentures - Special Events Redemption and Distribution." The payment of the principal and interest in cash on the Convertible Debentures will be subordinated in right of payment to all Senior Indebtedness of Citizens, which is hereafter defined to generally include all indebtedness except trade accounts payable and liabilities incurred in the ordinary course of business. See "Risk Factors - Subordinate Obligations Under Guarantees and Convertible Debentures," and "Risk Factors - Dependence on Convertible Debenture Payments." Use Of Proceeds The proceeds to be received by the Trust from the sale of the Convertible Preferred Securities and the Convertible Common Securities will be contributed by the Trust to the Partnership to be invested thereby in the Convertible Debentures of Citizens, which, after paying the expenses associated with this offering, will use such funds to repay outstanding commercial paper issued to temporarily and partially fund the purchase price of certain acquired telecommunications properties described herein and to permanently fund a portion of the to-be-acquired telecommunications properties described herein. See "Use of Proceeds." See "Risk Factors" for a discussion of certain material risks to be considered in connection with an investment in the Convertible Preferred Securities. Page 15 RISK FACTORS Prospective purchasers of Convertible Preferred Securities should carefully review the information contained elsewhere in this Prospectus and should particularly consider the following matters: Subordinate Obligations Under Guarantees and Convertible Debentures Citizens' obligations under the Convertible Debentures and its obligations under the Guarantees are subordinate and junior in right of payment to all Senior Indebtedness of Citizens. As of June 30, 1995, there was $1,235,844,000 of Senior Indebtedness outstanding (not including certain other obligations, see "Convertible Debentures Subordination"). The Convertible Debentures are also effectively subordinate to all existing and future liabilities, including trade payables, to Citizens' subsidiaries and affiliates. There are no terms in the Convertible Preferred Securities, the Partnership Preferred Securities, the Convertible Debentures or the Guarantees that limit Citizens' ability to incur additional indebtedness, including indebtedness that ranks senior to the Convertible Debentures and the Guarantees, or the ability of its subsidiaries to incur additional indebtedness. The Convertible Preferred Securities Guarantee guarantees payment to the holders of the Convertible Preferred Securities of accrued and unpaid quarterly distributions, amounts payable on redemption, and amounts payable on liquidation of the Trust. However, such amounts are guaranteed only to the extent that the Trust has cash and/or Common Stock on hand available therefor and the payments thereof do not otherwise violate applicable law. If Citizens were to default on its obligation to pay interest or amounts payable on redemption or maturity of the Convertible Debentures, the Trust would lack available cash and/or Common Stock for the payment of distributions or amounts payable on redemption of the Convertible Preferred Securities. In such event, holders of the Convertible Preferred Securities would not be able to rely upon the Convertible Preferred Securities Guarantee for payment of such amounts. On the bankruptcy, liquidation or winding-up of Citizens, its obligations under the Convertible Preferred Securities Guarantee will rank junior to all Senior Indebtedness and, therefore, funds may not be available for payment under the Convertible Preferred Securities Guarantee. See "Guarantees" and "Convertible Debentures - Subordination." Dependence on Convertible Debenture Payments The Trust's ability to pay amounts due on the Convertible Preferred Securities is solely dependent upon Citizens Capital's ability to pay amounts due on the Partnership Preferred Securities, which is in turn solely dependent upon Citizens' ability to make payments on the Convertible Debentures as and when required. Since Citizens is also the guarantor of the Convertible Preferred Securities, in the event that Citizens is unable to make payments on the Convertible Debentures, or the Trust is unable to make payments on the Convertible Preferred Securities as and when required, there is a substantial likelihood that Citizens will be unable to make payments on the Convertible Preferred Securities Guarantee as and when required. See "Convertible Preferred Securities - Distributions" and "Guarantees - General." Page 16 Enforcement of Certain Rights by Holders of Convertible Preferred Securities If a Declaration Event of Default (as defined herein) occurs and is continuing, then the holders of Convertible Preferred Securities would rely on the enforcement by the Property Trustee (as defined herein) of its rights as a limited partner of Citizens Capital (the holder of the Convertible Debentures) against Citizens. In addition, the holders of a majority in aggregate liquidation amount of the Convertible Preferred Securities will have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration (as defined herein), including the right to direct the Property Trustee to exercise the remedies available to it as a limited partner of Citizens Capital. If the Property Trustee fails to enforce its right, a holder of Convertible Preferred Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against Citizens to enforce the Property Trustee's rights as a limited partner of Citizens Capital, without first instituting any legal proceeding against the Property Trustee, Citizens Capital or any other person or entity. See "Convertible Preferred Securities - Declaration Events of Default," and "- Voting Rights." Option to Defer Payment of Distributions Citizens has the right to defer the payment of each quarterly interest payment on the Convertible Debentures for no longer than 20 consecutive quarters. As a consequence, quarterly distributions on the Partnership Preferred Securities and on the Convertible Preferred Securities would be deferred during any such deferral of interest payments. However, unpaid distributions would be compounded quarterly at the Rate. In the event that Citizens exercises this right, Citizens shall not (i) declare or pay any dividend or distribution on any of its capital stock (other than dividends payable in capital stock), (ii) redeem, purchase, otherwise acquire or make a liquidation payment with respect to, any of its capital stock, except in the form of capital stock, (iii) pay interest, principal or any premium (if any), on or repay, repurchase or redeem any indebtedness for borrowed money which is expressly junior in subordination to the Convertible Debentures, except in the form of capital stock, or (iv) make any guarantee payment with respect to the foregoing (other than payments under the Guarantees), during any such deferral period and until all distribution arrearages have been paid in full; provided, however, that during such deferral periods, Citizens may reacquire from the Partnership any securities the Partnership has received from Citizens and continues to hold. No deferral of interest payments may extend the stated maturity date of the Convertible Debentures. See "Convertible Debentures - Option to Defer Interest Payments" and "- Certain Covenants of Citizens." Certain Tax Consequences of Deferral of Interest Payments on Convertible Debentures Should a deferral of interest payments occur, the holders of the Convertible Preferred Securities would, except in very limited circumstances, continue to accrue income for United States federal income tax purposes which will be allocated, but not distributed, to holders of record of Convertible Preferred Securities. As a result, each such holder will include such Page 17 interest in gross income for United States federal income tax purposes in advance of the receipt of cash or shares of Common Stock and will not receive the cash or shares of Common Stock related to such income if such holder disposes of its Convertible Preferred Securities prior to the record date for payment of distributions. See "Certain Federal Income Tax Considerations - Potential Deferral of Interest Payments and Original Issue Discount." Citizens has no current intention of exercising its right to defer payments of interest on the Convertible Debentures. However, should Citizens determine to exercise such right in the future, the market price of the Convertible Preferred Securities is likely to be affected. A holder that disposes of its Convertible Preferred Securities during such a deferral of interest payments, therefore, might not receive the same return on its investment as a holder that continues to hold its Convertible Preferred Securities. In addition, as a result of the existence of Citizen's right to defer interest payments, the market price of the Convertible Preferred Securities (which represent an undivided beneficial interest in the Convertible Debentures through the Partnership Preferred Securities) may be more volatile than other securities on which original issue discount accrues that do not have such rights. See "Certain Federal Income Tax Considerations - - Potential Deferral of Interest Payments and Original Issue Discount." Tax and Market Consequences of Special Events Redemption or Distribution At any time upon the occurrence of certain events, the Convertible Debentures are redeemable, in whole or in part, which would result in the redemption of the Partnership Securities and the Trust Securities. In addition, upon the occurrence of certain events, the Trust and/or the Partnership could be liquidated and the holders of the Convertible Preferred Securities may receive Partnership Preferred Securities or Convertible Debentures in lieu of any liquidating cash distribution. See "Convertible Preferred Securities - Special Events Redemption and Distribution." If any such redemption or liquidation of the Trust which resulted in the distribution of cash as described herein occurred within the first three years following the date of this Prospectus, such event would have the effect of causing holders of Convertible Preferred Securities to lose their conversion rights, which loss of rights might materially adversely impact the perceived value of such securities. Under current United States federal income tax law, a distribution of Partnership Preferred Securities or Convertible Debentures upon the liquidation of the Trust would not be a taxable event to holders of the Convertible Preferred Securities. However, upon occurrence of an event leading to a liquidation, in which holders of the Convertible Preferred Securities did receive cash, such liquidation would be a taxable event to such holders. See "Certain Federal Income Tax Considerations - Receipt of Partnership Preferred Securities, Convertible Debentures or Cash Upon Liquidation of Citizens Capital and the Trust." There can be no assurance as to the market prices for the Convertible Preferred Securities, or the Partnership Preferred Securities or the Convertible Debentures that may be distributed in exchange for the Convertible Preferred Securities, if a dissolution or liquidation of any kind were to occur. Accordingly, the Convertible Preferred Securities that an investor Page 18 may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Partnership Preferred Securities or Convertible Debentures that a holder of Convertible Preferred Securities may receive on some dissolution and liquidation, may trade at a discount to the price that the investor paid to purchase the Convertible Preferred Securities offered hereby. Because holders of Convertible Preferred Securities may receive Partnership Preferred Securities or Convertible Debentures upon the occurrence of certain events, prospective purchasers of Convertible Preferred Securities are also making an investment decision with regard to the Partnership Preferred Securities and Convertible Debentures and should carefully review all the information regarding the Partnership Preferred Securities and Convertible Debentures contained herein. See "Convertible Preferred Securities - Special Events Redemption and Distribution," "Partnership Preferred Securities" and "Convertible Debentures." Limited Voting Rights Holders of the Convertible Preferred Securities will have limited voting rights and, except for the right of holders of Convertible Preferred Securities to enforce rights of the Property Trustee upon the occurrence of certain events described herein, will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, Trust Trustees, which voting rights are vested exclusively in the holder of the Convertible Common Securities. See "Convertible Preferred Securities - Voting Rights." Trustee Conflicts of Interest Chemical Bank is the Property Trustee (as hereafter defined) for the Trust, and is also the Trustee under the Indenture governing the Convertible Debentures. In addition, Chemical Bank is the trustee under certain of the Company's outstanding debentures which qualify as Senior Indebtedness for purposes of the Convertible Debentures offered hereby. The bank is also a participant in the Company's current lines of credit, of which no amount is outstanding as of the date hereof. In certain circumstances, Chemical Bank is authorized to act on behalf of the holders of the Convertible Debentures (and so, consequently, the Partnership Preferred Securities and Convertible Preferred Securities) in enforcing their rights and entitlements as described in this Prospectus. See "Convertible Preferred Securities - Declaration Events of Default." Chemical Bank is also authorized to act on behalf of certain holders of Citizens' Senior Indebtedness, and may be a creditor in its own right under the Company's bank lines of credit. In the event of a future default under the Company's Senior Indebtedness, line of credit or the securities offered hereby, Chemical Bank might have to resign its role as a trustee under any such Senior Indebtedness, or as the Trustee under the Convertible Debentures. In such event, a replacement would have to be appointed. Any such replacement Trustee would succeed to all of the rights, powers and duties of Chemical Bank vis-a-vis holders of the Convertible Preferred Securities, Partnership Securities and Convertible Debentures offered hereby. See "Convertible Debentures - Information Concerning the Debenture Trustee." Page 19 Trading Price and Taxes The Convertible Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Convertible Debentures. A holder who disposes of his Convertible Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Convertible Debentures as a result of the original issue discount ("OID") requirements of the Internal Revenue Code of 1986, as amended (the "Code") through the date of disposition in income as ordinary income. The holder will also be required to add such amount to his adjusted tax basis on his pro-rata share of the underlying Convertible Debentures deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See "Certain Federal Income Tax Considerations - Potential Deferral of Interest Payments and Original Issue Discount" and "- Sales of Convertible Preferred Securities." No Prior Market for the Convertible Preferred Securities; Market Risk on Distributions in Common Stock The Convertible Preferred Securities constitute a new issue of securities with no established trading market. Application will be made to list the Convertible Preferred Securities on the NYSE. Listing on the NYSE will be subject to meeting the requirements of the NYSE. Even if approval for listing is received, there can be no assurance that an active market for the Convertible Preferred Securities will develop or be sustained in the future on the NYSE. Although the Underwriters have indicated to Citizens that they intend to make a market in the Convertible Preferred Securities, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue any such market-making at any time without notice. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Convertible Preferred Securities. The shares of Common Stock that a holder of Preferred Securities will receive as a result of making a Stock Distribution Election will have an Equivalent Value (as determined on the Share Transfer and Valuation Date on which they were deposited with the Partnership) equal to the cash amount that would be payable to a holder who has made a Cash Distribution Election. However, the value of such shares will be subject to market fluctuations and there can be no assurance that the market price of such shares will not thereafter decline. CITIZENS UTILITIES COMPANY Citizens Utilities Company is a diversified operating public utility which provides, either directly or through subsidiaries, telecommunications, natural gas transmission and distribution, electric distribution, water or wastewater services to customers in areas of eighteen states. Page 20 Operating divisions of Citizens provide electric distribution and natural gas transmission and distribution public utility services, purchasing most of the electric power needed and all gas supplies. Telecommunications, water and wastewater public utility services are provided either by divisions of Citizens or by its subsidiaries. Citizens holds a significant investment interest in Centennial Cellular Corp., a cellular telephone company, and also owns Electric Lightwave, Inc., an alternative telecommunications service provider operating in five western states. Beginning with 1945, the Company has increased its revenues, net income and earnings per share (as adjusted for subsequent stock dividends and stock splits) every year without interruption. The Company, with administrative offices at High Ridge Park, Stamford, Connecticut 06905 (telephone 203-329-8800), was incorporated in Delaware in 1935 to acquire the assets and business of a predecessor corporation. Since then, the Company has grown as a result of investment in its own utility operations and the acquisition of numerous additional utility operations. As a result of its diversification, the Company is not dependent upon any single geographic area or any one type of utility service for its revenues. Because of this diversity, no single regulatory body regulated or will regulate a utility service of the Company accounting for more than 12% of its revenues for the twelve months ended June 30, 1995, pro forma for the acquisition of the telecommunications properties described hereafter. The Company is not aware of any other utility company as fully diversified in both geographic areas served and variety of services provided. The Company's operations are conducted principally in small and medium-sized communities. No material part of the Company's business is dependent upon a single customer or a small group of customers. The loss of any single customer or a small group of customers would not have a materially adverse effect upon the Company. The Company's consumer connections have increased from 26,150 in 1945, to 225,389 in 1965, to 610,585 in 1985, and to approximately 1,500,000 as of July 31, 1995. The Company continually considers and is carrying out expansion through acquisitions and joint ventures in the rapidly evolving telecommunications and cable television industries and in traditional public utility and related businesses. On November 29, 1994, Citizens and ALLTEL Corporation ("ALLTEL") announced the signing of definitive agreements pursuant to which Citizens agreed to acquire from ALLTEL, for a total purchase price of $292 million, certain telephone properties serving approximately 110,000 local telephone access lines and certain cable television systems serving approximately 7,000 subscribers. The properties are located in eight states: Arizona, California, Nevada, New Mexico, Oregon, Tennessee, Utah and West Virginia ("ALLTEL Telecommunications Properties"). On June 30, 1995, 35,662 local telephone access lines in Oregon and West Virginia were transferred to the Company. On September 30, 1995, approximately 19,000 local telephone access lines in Tennessee were transferred to the Company. The remaining ALLTEL Telecommunications Properties are expected to be transferred to the Company by early 1996. Page 21 The purchases require the approval of the regulatory commissions of the states in which the properties are located. USE OF PROCEEDS The proceeds to be received by the Trust from the sale of the Convertible Preferred Securities and the Convertible Common Securities will be contributed by the Trust to the Partnership to be invested thereby in the Convertible Debentures. Citizens, after payment of the Underwriters' Compensation (as defined under "Underwriting") and other expenses of the offering, will use the net proceeds from the sale of such Convertible Debentures to the Partnership of approximately $______________ (approximately $________ if the Underwriters' overallotment option is exercised in full) to repay outstanding commercial paper issued to temporarily and partially fund the purchase price of certain acquired telecommunications properties described herein and to permanently fund a portion of the to-be-acquired telecommunications properties described herein. CAPITAL REQUIREMENTS AND FINANCING The purchase price for the ALLTEL Telecommunications Properties, net of property to be transferred to ALLTEL valued at $10 million, is $282 million. The Company intends to permanently finance the acquisition of the ALLTEL Telecommunications Properties approximately one-third ($94 million) from the issuance of equity securities, one-third ($94 million) from the issuance or assumption of debt securities, and one-third ($94 million) from Company cash and investments. As of June 30, 1995, approximately $80 million of the purchase price of other telecommunications properties acquired by the Company in 1994 remained temporarily financed with commercial paper classified as short-term debt pending the issuance of equity securities. The proceeds from the sale of the Convertible Preferred Securities will be used to satisfy the foregoing $174 million of permanent equity funding requirements. The purchase price for the ALLTEL Telecommunications Properties transferred as of June 30, 1995 had been partially and temporarily financed with $11 million of commercial paper which was classified as long-term debt since the Company intended to refinance such commercial paper with long-term debt securities. As of June 30, 1995, the Company had an additional $68 million of outstanding commercial paper classified as long-term debt. The foregoing $79 million of commercial paper classified as long-term debt was refinanced with part of the proceeds from the $150 million Debenture issuance on October 20, 1995 (see "Pro Forma Condensed Balance Sheet" on page 26 herein). The Company carries out a continuous construction program to maintain reliable and safe service and to meet future customer service requirements. The Company estimates that expenditures for construction, extension and improvement of service relating to existing properties, including the acquired Telecommunications Properties, will require approximately $262 million in 1995. The Company's construction program is under continuous review and may be revised depending on business and economic conditions, regulatory action, governmental Page 22 mandates, customer demand and other factors. Capital requirements are being financed from internally generated funds, the issuance of taxable and tax-exempt long-term debt, short-term borrowings, customer advances, and contributions in aid of construction. The Company maintains $600 million of committed bank lines of credit for general corporate purposes under which there were no amounts outstanding as of October 18, 1995. DESCRIPTION OF COMMON STOCK SERIES A AND SERIES B Citizens' common stock consists of two series: Common Stock Series A and Common Stock Series B. The Company has authorized 200,000,000 shares of Common Stock Series A and 300,000,000 shares of Common Stock Series B. As of September 30, 1995 the Company had outstanding 155,794,853 shares of Common Stock Series A and 69,478,417 shares of Common Stock Series B. As of September 30, 1995 there were 25,589 record holders of Common Stock Series A and 20,521 record holders of Common Stock Series B. The holders of Common Stock Series A and Common Stock Series B are entitled to one vote for each share on all matters voted on by stockholders. Pursuant to Citizens' Restated Certificate of Incorporation, the holders of Common Stock Series A and the holders of Common Stock Series B vote together as a single class on all matters to be voted on by stockholders, unless otherwise expressly required by applicable law. Common Stock Series A is convertible, on a share-for-share and tax-free basis, into Common Stock Series B at all times. Common Stock Series B is not convertible into Common Stock Series A. The Board of Directors of Citizens may, in its sole discretion and at any time, require all of the holders of Common Stock Series A to exchange all of their shares of Common Stock Series A for shares of Common Stock Series B on a share-for-share basis. The holders of Common Stock Series A and Series B participate ratably in liquidation. The holders of Common Stock Series A and B have no preemptive rights. DIVIDENDS ON COMMON STOCK SERIES A AND SERIES B The holders of Common Stock Series A and B are entitled to receive dividends when and as declared by the Board of Directors of Citizens out of funds legally available therefor. Dividends have been paid to holders of Common Stock every year without interruption beginning in 1939 and, although there can be no assurances as to the amount of any future dividends, the Company has increased cash dividends and/or cash value equivalents every year without interruption beginning in 1946. Beginning in 1956, when the two- series common stock capitalization of Citizens was initiated, through 1989, only stock dividends were paid on Common Stock Series A and only cash dividends were paid on Common Stock Series B. Commencing in 1990, Citizens has declared and paid quarterly stock dividends at the same rate on shares of both Common Stock Series A and Common Stock Series B. The stock dividend rate is based on an underlying cash equivalent. The Company expects that under present federal tax law, stock dividends on Common Stock Series A and Common Stock Series B, if paid and received pro-rata and otherwise in the same manner as they have been since 1990, will be free of current federal income taxation on receipt. Such stock dividends are treated as capital transactions when and if sold. Gain or loss is based on the difference between sales price and adjusted basis per share. Page 23 To the extent that stock dividends are declared on the Common Stock Series B, the same stock dividend must be declared on the Common Stock Series A. To the extent that cash dividends are paid out of funds that are legally available on the Common Stock Series B, stock dividends with an equivalent fair value must be paid during the same calendar year on the Common Stock Series A, unless cash dividends are declared on the Common Stock Series A at the same time and in an equal amount as on the Common Stock Series B. COMMON STOCK TRANSFER AGENT The transfer agent for the Company's Common Stock is IST. COMMON STOCK PRICE RANGE Citizens trades on the New York Stock Exchange under the symbols CZNA and CZNB for Common Stock Series A and Common Stock Series B, respectively. The table below indicates the high and low prices per share for the periods shown. The high and low prices per share were taken from the daily quotations published in The Wall Street Journal during the periods indicated. ----------------------- Prices have been adjusted retroactively for subsequent stock dividends and the August 31, 1993 2-for-1 stock split, and the July 24, 1992, 3-for-2 stock split, rounded to the nearest 1/8th. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- High Low High Low High Low High Low ---- --- ---- --- ---- --- ---- --- 1995 - ---- Series A $13.875 $11.875 $12.625 $10.375 $11.750 $10.750 $ - $ - Series B 13.875 12.000 12.625 10.750 11.750 10.875 - - 1994 - ---- Series A 16.375 13.375 15.125 12.650 13.875 12.625 13.250 12.000 Series B 16.500 13.250 15.125 12.650 13.875 12.625 13.250 12.000 1993 - ---- Series A 16.000 12.250 16.750 14.500 16.625 12.125 18.125 14.625 Series B 16.000 12.250 16.750 14.250 16.625 12.000 18.000 14.625 1992 - ---- Series A 11.250 9.500 11.000 10.000 12.375 9.750 13.250 10.875 Series B 11.000 9.500 11.000 9.750 12.375 9.750 13.250 11.000 The reported high and low prices for October 2, 1995 through October 18, 1995 were $11 1/4 and $10 3/4 per share of Common Stock Series A and $11 1/4 and $10 3/4 per share of Common Stock Series B, respectively. The reported last sale prices on the New York Stock Exchange on October 18, 1995 were $10 7/8 per share of Common Stock Series A and $11 per share of Common Stock Series B. Page 24 FINANCIAL INFORMATION The following financial information, including pro forma financial information reflecting the acquisition of certain telecommunications properties, is qualified in its entirety by, and should be read in conjunction with, the information appearing elsewhere herein and the documents and financial statements incorporated by reference herein. Revenues Twelve Months Ended June 30, 1995 --------------------------------- (In Thousands) Business Sector Pro Forma Actual - ------------------ ----------------------- ------------------------- Telecommunications $ 714,369 61.8% $ 579,147 56.8% Natural Gas 195,938 17.0% 195,938 19.2% Electric 168,963 14.6% 168,963 16.6% Water/Wastewater 75,747 6.6% 75,747 7.4% ----------- --------- ----------- --------- Total $ 1,155,017 100.0% $ 1,019,795 100.0% =========== ========= =========== ========= Page 25 PRO FORMA FINANCIAL STATEMENTS Citizens Utilities Company and Telecommunications Properties Pro Forma Condensed Balance Sheet (In thousands) The following Pro Forma Condensed Balance Sheet represents the historical condensed balance sheet of Citizens at June 30, 1995, giving effect to the acquisitions of the yet to be acquired Telecommunications Properties (as defined in Note 1 on page 27) following the purchase method of accounting, as well as the completion of the permanent financings for the acquired Telecommunications Properties as if such acquisitions and financings were closed on June 30, 1995. The Pro Forma Condensed Balance Sheet should be read in conjunction with the historical financial statements and related notes thereto of Citizens which are incorporated by reference herein. The Pro Forma Condensed Balance Sheet is not necessarily indicative of what the actual financial position would have been had the transactions occurred at the date indicated and does not purport to indicate future financial position. As at June 30, 1995 ------------------------------------------- Pro Forma ---------------------------- Citizens Adjustments(1) Adjusted ----------- -------------- --------- Assets - ------ Current Assets: Cash $ 17,572 $340,912 (2) $ 27,784 (330,700)(3) Accounts Receivable 172,055 172,055 Other 35,034 35,034 ----------- ---------- Total Current Assets 224,661 234,873 ----------- ---------- Net Property, Plant and Equipment 2,680,332 170,100 (3) 2,850,432 ----------- ---------- Investments 328,332 (99,700)(2) 228,632 Regulatory Assets 178,263 178,263 Deferred Debits and Other Assets 203,984 203,984 ----------- -------------- ---------- $3,615,572 $ 80,612 $3,696,184 =========== ============== ========== Liabilities and Equity - ---------------------- Current Liabilities: Long-Term Debt Due Within One Year $ 4,788 $ (4,788)(2) $ 0 Short-Term Debt 160,600 (160,600)(3) 0 Other 294,440 294,440 ----------- ---------- Total Current Liabilities 459,828 294,440 Regulatory Liabilities 29,817 29,817 Deferred Credits and Other Liabilities 72,637 72,637 Deferred Income Taxes 262,932 262,932 Customer Advances for Construction and Contributions in Aid of Construction 217,676 217,676 Long-Term Debt 1,070,456 150,000 (2) (79,000)(2) 1,141,456 Convertible Preferred Securities 175,000 (2) 175,000 Common Equity 1,502,226 1,502,226 ----------- -------------- ---------- $3,615,572 $ 80,612 $3,696,184 =========== ============== ========== See Notes to Pro Forma Condensed Balance Sheet on page 27. Page 26 PRO FORMA FINANCIAL STATEMENTS (continued) Citizens Utilities Company and Telecommunications Properties Notes to Pro Forma Condensed Balance Sheet (1) In May 1993, Citizens and GTE Corp. ("GTE") signed definitive agreements pursuant to which Citizens agreed to acquire from GTE, for approximately $1.1 billion in cash, certain GTE telephone properties ("GTE Telephone Properties") serving approximately 500,000 local telephone access lines in eight states. On December 31, 1993, 189,123 local telephone access lines in Idaho, Tennessee, Utah and West Virginia were transferred to the Company. On June 30, 1994, 270,883 access lines in New York were transferred to the Company. On November 30, 1994, 37,802 access lines in Arizona and Montana were transferred to the Company and on December 30, 1994, 5,440 local telephone access lines in California were transferred to the Company. In November 1994, Citizens and ALLTEL signed definitive agreements pursuant to which Citizens agreed to acquire from ALLTEL, for $292 million, certain ALLTEL telecommunications properties ("ALLTEL Telecommunications Properties") serving approximately 110,000 local telephone access lines and certain cable television systems serving approximately 7,000 subscribers in eight states. The purchase price of the ALLTEL Telecommunications Properties (net of 3,600 Citizens telephone access lines which have been valued at $10 million and are to be transferred to ALLTEL in a tax free exchange) is $282 million. On June 30, 1995, 35,662 local telephone access lines in West Virginia and Oregon were transferred to the Company. On September 30, 1995, approximately 19,000 local telephone access lines in Tennessee were transferred to the Company. The remaining local telephone access lines and the cable television systems are expected to be transferred to the Company by early 1996. The GTE Telephone Properties and the ALLTEL Telecommunications Properties are collectively referred to as the "Telecommunications Properties." (2) Through June 30, 1995, the purchase price for the Telecommunications Properties had been permanently financed with approximately $357.6 million of cash and investments, $279.8 million of equity securities issued through an underwritten public offering, the Company's Direct Stock Purchase and Sale Plan and employee benefit plans, and $402 million of debt securities. The remainder of the purchase price of the Telecommunications Properties transferred as of June 30, 1995 had been temporarily financed with commercial paper, $160.6 million of which is classified as Short-Term Debt (to be repaid from cash and investments and the issuance of equity securities) and $11 million which is classified as Long-Term Debt (to be refinanced with Long-Term Debt). As of June 30, 1995, the Company had an additional $68 million in commercial paper outstanding classified as Long-Term Debt. When added to the $357.6 million of cash and investments used, $279.8 million of equity securities issued and the $402 million of debt securities which have been issued or assumed to permanently finance the acquisitions of the Telecommunications Properties, these adjustments reflect the anticipated permanent financing of the $1.381 billion purchase price (net of the property valued at $10 million to be transferred to ALLTEL) for the Telecommunications Properties with approximately equal components of cash and investments ($458 million), debt securities ($469 million), and equity securities ($454 million). These adjustments also reflect the use of a portion of the proceeds from the issuance of $150 million of debentures on October 20, 1995 to repay the above-described $79 million of commercial paper classified as Long-Term Debt, permanently fund a portion of the Telecommunications Properties to be acquired, refund Long-Term Debt Due Within One Year and for other general corporate purposes. (3) Reflects the use of permanent financing proceeds to pay the purchase price of the Telecommunications Properties to be transferred to Citizens after June 30, 1995 (net of the property valued at $10 million to be transferred to ALLTEL) and to repay all Short-Term Debt. Page 27 PRO FORMA FINANCIAL STATEMENTS (continued) Citizens Utilities Company and Telecommunications Properties Pro Forma Condensed Statement of Income (In thousands, except for per-share amounts) The following Pro Forma Condensed Statement of Income for the twelve months ended June 30, 1995 combines the historical statements of income of Citizens and the Telecommunications Properties as if the acquisitions and the permanent financings had been closed July 1, 1994. The Pro Forma Condensed Statement of Income should be read in conjunction with the historical financial statements and related notes thereto of Citizens and those of the Telecommunications Properties that have been audited and which are incorporated by reference herein. The Pro Forma Condensed Statement of Income is not necessarily indicative of what the actual financial results would have been for the period had the transactions occurred at the date indicated and does not purport to indicate the financial results of future periods. Twelve Months Ended June 30, 1995 --------------------------------- Pro Forma ---------------------- Citizens Acquisitions*(1) Adjustments Combined -------- ---------------- ----------- -------- Revenues $1,019,795 $135,222 $1,155,017 Expenses: Operating Expenses 633,539 57,470 691,009 Depreciation and Amortization 142,653 28,645 $1,800 (3) 173,098 --------- ---------------- ----------- --------- Total Operating Expenses 776,192 86,115 1,800 864,107 Income from Operations 243,603 49,107 (1,800) 290,910 Other Income, net 57,358 1,007 (10,500)(4) 47,865 Interest Expense 88,485 5,715 (12,400)(5) 81,800 --------- ---------------- ----------- --------- Income Before Income Taxes 212,476 44,399 100 256,975 Income Taxes 62,308 14,827 5,300 (6) 82,435 --------- ---------------- ----------- --------- Income before Dividends on Convertible Preferred Securities 150,168 29,572 (5,200) 174,540 Dividends on Convertible Preferred Securities -- -- 5,400 (7) 5,400 --------- ---------------- ----------- --------- Net Income $ 150,168 $29,572 $(10,600) $169,140 ========= ================ =========== ========= Earnings Per Share of Common Stock Series A and Series B** $.74(8)(9) $.79(8)(9) Weighted Average Common Shares** 203,155 215,283(8) - --------------------------------- *Represents the financial results from July 1, 1994 to the dates of acquisition for all the Telecommunications Properties acquired from July 1, 1994 through June 30, 1995 and the financial results for the entire twelve month period for the yet to be acquired Telecommunications Properties (as of June 30, 1995) net of the financial results for the property to be transferred to ALLTEL. Financial results for the Telecommunications Properties acquired from their dates of acquisition, or from July 1, 1994 if acquired prior thereto, through June 30, 1995 are included in Citizens' twelve months ended June 30, 1995 financial results. **No adjustment has been made for the 1.6% 1995 third quarter stock dividend as this adjustment is immaterial. See Notes to Pro Forma Condensed Statements of Income on page 30. Page 28 PRO FORMA FINANCIAL STATEMENTS (continued) Citizens Utilities Company and Telecommunications Properties Pro Forma Condensed Statements of Income (In thousands, except for per-share amounts) The following Pro Forma Condensed Statement of Income for the year ended December 31, 1994 combines the historical statements of income of Citizens and the Telecommunications Properties as if the acquisitions and the permanent financings had been closed January 1, 1994. The Pro Forma Condensed Statement of Income should be read in conjunction with the historical financial statements and related notes thereto of Citizens and those of the Telecommunications Properties that have been audited and which are incorporated by reference herein. The Pro Forma Condensed Statement of Income is not necessarily indicative of what the actual financial results would have been for the period had the transactions occurred at the date indicated and does not purport to indicate the financial results of future periods. Twelve Months Ended December 31, 1994 ------------------------------------- Pro Forma ---------------------- Citizens Acquisitions*(1) Adjustments Combined -------- ---------------- ----------- -------- Revenues $ 910,369 $254,815 $1,165,184 Expenses: Operating Expenses 567,070 123,170 $(8,600)(2) 681,640 Depreciation and Amortization 115,175 49,095 4,200 (3) 168,470 --------- ---------------- ----------- --------- Total Operating Expenses 682,245 172,265 (4,400) 850,110 Income from Operations 228,124 82,550 4,400 315,074 Other Income, net 52,940 847 (17,300)(4) 36,487 Interest Expense 72,744 13,172 (10,300)(5) 75,616 --------- ---------------- ----------- --------- Income Before Income Taxes 208,320 70,225 (2,600) 275,945 Income Taxes 64,323 24,137 7,100 (6) 95,560 --------- ---------------- ----------- --------- Income before Dividends on Convertible Preferred Securities 143,997 46,088 (9,700) 180,385 Dividends on Convertible Preferred Securities -- -- 5,400 (7) 5,400 --------- ---------------- ----------- --------- Net Income $ 143,997 $46,088 $(15,100) $174,985 ========= ================ =========== ========= Earnings Per Share of Common Stock Series A and Series B** $.74 $.81(8) Weighted Average Common Shares** 194,638 215,438(8) - ---------------------------- *Represents the financial results from January 1, 1994 to the dates of acquisition for all the Telecommunications Properties acquired from January 1, through December 31, 1994 and the financial results for the entire twelve month period for the yet to be acquired Telecommunications Properties (as of December 31, 1994) net of the financial results for the property to be transferred to ALLTEL. Financial results for the Telecommunications Properties acquired from their dates of acquisition through December 31, 1994 are included in Citizens' twelve months ended December 31, 1994 financial results. **Restated through the second quarter 1995 stock dividend. No adjustment has been made for the 1.6% 1995 third quarter stock dividend as this adjustment is immaterial. See Notes to Pro Forma Condensed Statements of Income on page 30. Page 29 PRO FORMA FINANCIAL STATEMENTS (continued) Citizens Utilities Company and Telecommunications Properties Notes to Pro Forma Condensed Statements of Income (1) In May 1993, Citizens and GTE Corp. ("GTE") signed definitive agreements pursuant to which Citizens agreed to acquire from GTE, for approximately $1.1 billion in cash, certain GTE telephone properties ("GTE Telephone Properties") serving approximately 500,000 local telephone access lines in eight states. On December 31, 1993, 189,123 local telephone access lines in Idaho, Tennessee, Utah and West Virginia were transferred to the Company. On June 30, 1994, 270,883 access lines in New York were transferred to the Company. On November 30, 1994, 37,802 access lines in Arizona and Montana were transferred to the Company and on December 30, 1994, 5,440 local telephone access lines in California were transferred to the Company. In November 1994, Citizens and ALLTEL signed definitive agreements pursuant to which Citizens agreed to acquire from ALLTEL, for $292 million, certain ALLTEL telecommunications properties ("ALLTEL Telecommunications Properties") serving approximately 110,000 local telephone access lines and certain cable television systems serving approximately 7,000 subscribers in eight states. The purchase price of the ALLTEL Telecommunications Properties (net of 3,600 Citizens telephone access lines which have been valued at $10 million and are to be transferred to ALLTEL in a tax free exchange) is $282 million. On June 30, 1995, 35,662 local telephone access lines in West Virginia and Oregon were transferred to the Company. On September 30, 1995, approximately 19,000 local telephone access lines in Tennessee were transferred to the Company. The remaining local telephone access lines and the cable television systems are expected to be transferred to the Company by early 1996. The GTE Telephone Properties and the ALLTEL Telecommunications Properties are collectively referred to as the "Telecommunications Properties." (2) Elimination of certain corporate overhead expenses allocated to certain of the Telecommunications Properties which will not have a continuing impact on the combined entity. (3) Represents amortization of $253 million of excess purchase price over net book value of assets acquired or to be acquired. Pursuant to Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation," the remaining $138 million of excess of purchase price over net book value of assets acquired will be deferred. The Company intends to seek from the public utilities commissions maximum recovery of the excess of purchase price over net book value in future rate proceedings. (4) Represents an adjustment to reflect the elimination from Other Income of all tax-exempt investment income associated with the $458 million of Company cash and investments which have been or are expected to be used to partially finance the acquisition of the Telecommunications Properties. The Company used $357.6 million of cash and investments from December 31, 1993 through June 30, 1995 to permanently finance the Telecommunications Properties acquisitions. (5) Represents an adjustment to reflect the inclusion in Interest Expense of all the interest expense on $469 million of debt securities which have been or are expected to be issued or assumed to partially finance the acquisition of the Telecommunications Properties, net of the elimination of interest expense on the temporary borrowings used to finance the acquisitions and on the debt securities which are associated with the Telecommunications Properties and which were not or will not be assumed by the Company. Through June 30, 1995, the purchase price for the Telecommunications Properties had been permanently financed with approximately $402 million of debt securities. (6) Adjustment to Income Taxes based on Income Before Income Taxes using the applicable incremental income tax rate. Page 30 (7) The Dividend on Convertible Preferred Securities net of income taxes using the applicable incremental income tax rate. (8) The Pro Forma Earnings Per Share calculation and Pro Forma Weighted Average Common Shares are based on the weighted average number of common shares outstanding for the periods indicated including the number of additional shares issued or assumed to be issued to permanently finance the Telecommunications Properties, assuming such additional shares were outstanding for the entire twelve month periods. Through June 30, 1995, the Company financed $279.8 million of the acquisition of the Telecommunications Properties from the issuance of equity securities pursuant to the Company's Direct Stock Purchase and Sale Plan, employee benefit plans and an underwritten public offering. The shares issuable upon conversion of the Convertible Preferred Securities to be issued in this offering are not included in Pro Forma Weighted Average Common Shares since the Convertible Preferred Securities are not considered to be Common Stock Equivalents for purposes of the earnings per share calculation. Fully diluted earnings per share is not presented because the effect is immaterial. (9) Reflects the discontinuance of subsidy contract revenues received through the end of 1994 from Pacific Bell. For the twelve months ended June 30, 1995 on both an Actual and Pro Forma basis this discontinuance had the effect of reducing, by $19 million, Income Before Income Taxes and related Earnings Per Share as compared to prior periods. Page 31 CITIZENS UTILITIES CAPITAL L.P. Citizens Utilities Capital L.P. is a special purpose limited partnership formed on October 13, 1995 under the laws of the State of Delaware. All of its partnership interests (other than the Partnership Preferred Securities and any interests of any Special Representative) will be beneficially owned directly or indirectly by Citizens. Citizens or one of its wholly owned subsidiaries will be the sole general partner in Citizens Capital (in such capacity, the "General Partner"). Citizens Utilities Capital Corp., a Delaware corporation and a wholly-owned subsidiary of Citizens ("CUC Capital"), initially will be sole limited partner in Citizens Capital. Upon issuance of the Partnership Preferred Securities to the Trust, the Trust will become a limited partner in Citizens Capital and CUC Capital will withdraw as a limited partner. The General Partner will contribute capital to the extent required to ensure that its capital contributions are equal to at least 3% of all capital contributed to Citizens Capital. Citizens Capital exists for the sole purposes of (i) issuing its Partnership Securities, (ii) investing the proceeds thereof in the Convertible Debentures and in Eligible Investments (as described below), (iii) administering the sale of shares of Common Stock Series A received as interest payments and the distribution of the interest payments, (iv) effecting the conversion of the Partnership Preferred Securities into Common Stock Series A and (v) engaging in only those other activities necessary or incidental thereto. The General Partner will invest 99% of the total contributions in Citizens Capital in the Convertible Debentures and the remaining 1% in Eligible Investments, as defined in and provided for in the Amended and Restated Agreement of Limited Partnership of Citizens Capital (the "Limited Partnership Agreement"). To the extent that aggregate interest payments on the Convertible Debentures to Citizens Capital and on Eligible Investments exceed aggregate distributions required on the Partnership Preferred Securities and such distributions have been paid in full, Citizens Capital may at times have excess funds or securities, which shall be allocated to and may, in the General Partner's sole discretion, be distributed to the General Partner. Citizens Capital will exist for a maximum term of 45 years, unless earlier dissolved. The Limited Partnership Agreement provides that the General Partner will have liability for the debts and obligations of the Partnership, including taxes imposed on the Partnership but excluding taxes imposed on holders of Partnership Preferred Securities (in their capacities as holders) and withholding taxes. Certain obligations of the Partnership to the holders of the Partnership Preferred Securities are being separately guaranteed pursuant to the Partnership Guarantee. All of Citizens Capital's business and affairs will be conducted by the General Partner. Citizens Capital will hold title to the Convertible Debentures and will have the power to exercise all rights, powers, and privileges under the Indenture as the holder of the Convertible Debentures. The location of the principal executive offices of the General Partner is c/o Office of the Treasurer, Citizens Utilities Company, High Ridge Park, Building No. 3, Stamford, Connecticut 06905, telephone number (203) 329-8800. Page 32 CITIZENS UTILITIES TRUST Citizens Utilities Trust is a statutory business trust formed under the Trust Act pursuant to (i) a declaration of trust, dated as of October 13, 1995, executed by Citizens, as sponsor (the "Sponsor"), and the trustees of the Trust (the "Trust Trustees") and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on October 13, 1995. Such declaration will be amended and restated in its entirety (as so amended and restated, the "Declaration"). Citizens will own, directly or indirectly, all of the Convertible Common Securities, which will amount to at least 3% of the total capital of the Trust. The Trust exists for the sole purposes of (i) issuing its Trust Securities,(ii) contributing the proceeds thereof to Citizens Capital to acquire the Partnership Preferred Securities and (iii) engaging in only those other activities necessary or incidental thereto. The Trust has a term of approximately 45 years but may terminate earlier, as provided in the Declaration. The Trust's business and affairs will be conducted by the Trust Trustees appointed by Citizens as the direct or indirect holder of all the Convertible Common Securities. The duties and obligations of the Trust Trustees shall be governed by the Declaration. Pursuant to the Declaration, the number of Trust Trustees will initially be four. Two of the Trust Trustees ("Regular Trustees") will be persons who are employees or officers of or who are affiliated with Citizens. The third Trust Trustee will be a financial institution that is not affiliated with Citizens and has a specified minimum amount of aggregate capital and surplus of at least $50,000,000, which shall act as property trustee under the Declaration and as indenture trustee for the purposes of the Trust Indenture Act (the "Property Trustee"). Initially, Chemical Bank, a New York banking corporation, will be the Property Trustee until removed or replaced by the holder of the Convertible Common Securities. Chemical Bank will also act as indenture trustee under each of the Guarantees (the "Guarantee Trustee"). See "Guarantees." In addition, a fourth Trust Trustee will have a principal place of business or reside in the State of Delaware (the "Delaware Trustee"). Initially, Chemical Bank Delaware will be the Delaware Trustee. The Property Trustee will hold title to the Partnership Preferred Securities for the benefit of the holders of the Trust Securities. The Property Trustee will have the power to exercise all rights, powers, and privileges as the holder of the Partnership Preferred Securities. In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments made in cash or securities in respect of the Partnership Preferred Securities for the benefit of the holders of the Trust Securities. The Property Trustee will make payments of distributions and payments on liquidation, redemption and otherwise to the holders of the Convertible Preferred Securities out of funds from or securities held in the Property Account. The Guarantee Trustee will hold the Convertible Preferred Securities Guarantee for the benefit of the holders of the Convertible Preferred Securities. Citizens, as the direct or indirect holder of all the Convertible Common Securities, will have the right to vote to appoint, remove or replace any Trust Trustees, including the Property Trustee, and to increase or decrease the number of Trust Trustees; provided, that, (i) if the Property Trustee does not act as Delaware Trustee, the number of Trust Trustees shall be at least four and (ii) at least two Trust Trustees shall be Regular Trustees. Citizens will pay all fees and expenses related to the Trust and the offering of the Convertible Preferred Securities. Citizens will have liability for debts and obligations, including taxes imposed on the Trust but Page 33 excluding taxes imposed on the holders of Convertible Preferred Securities (in their capacities as holders) and withholding taxes. Certain obligations of the Trust to the holders of the Trust Securities are being separately guaranteed under the Trust Guarantees. The Declaration does not permit the issuance by the Trust of any securities other than the Trust Securities or the incurrence of any indebtedness by the Trust. The rights of the holders of the Convertible Preferred Securities, including economic rights and rights to information, are set forth in the Declaration, the Trust Act and the Trust Indenture Act. See "Convertible Preferred Securities." The office of the Delaware Trustee for the Trust is 1201 Market Street, Wilmington, Delaware 19801. The location of the principal executive offices of the Trust is c/o Office of the Treasurer, Citizens Utilities Company, High Ridge Park, Building No. 3, Stamford, Connecticut 06905, telephone number (203) 329-8800. DESCRIPTION OF THE SECURITIES The securities offered hereby are: (i) __% Citizens Utilities Convertible Preferred Securities, with a liquidation preference of $50 per security; (ii) the Partnership Preferred Securities into which such Convertible Preferred Securities can be converted; (iii) the Guarantees pursuant to which Citizens will guarantee, to the extent described therein, certain payments with respect to the Convertible Preferred Securities and the Partnership Preferred Securities; (iv) the Convertible Debentures; (v) the Common Stock Series A into which the Convertible Preferred Securities may be converted; (vi) the Common Stock Series A which will be issued in payment of interest on the Convertible Debentures; and (vii) the Common Stock Series B into which the Common Stock Series A can be converted. CONVERTIBLE PREFERRED SECURITIES The Convertible Preferred Securities will be issued pursuant to the terms of the Declaration. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Property Trustee, Chemical Bank, will act as the indenture trustee for purposes of compliance with the provisions of the Trust Indenture Act. The terms of the Convertible Preferred Securities will include those stated in the Declaration and those made part of the Declaration by the Trust Indenture Act. The Convertible Common Securities rank pari passu, and payments will be made thereon on a pro rata basis, with the Convertible Preferred Securities, except that upon the occurrence of a Declaration Event of Default, the rights of the holders of the Convertible Common Securities to receive payment of periodic distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Convertible Preferred Securities. Therefore, the following summary of the principal terms and provisions of the Convertible Preferred Securities also relates to the principal terms and provisions of the Convertible Common Securities in the absence of a Declaration Event of Default. Page 34 General The Convertible Preferred Securities and Convertible Common Securities represent undivided beneficial interests in the assets of the Trust. All of the Convertible Common Securities will be owned, directly or indirectly, by Citizens. The Declaration does not permit the issuance by the Trust of any securities other than the Trust Securities or the incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee will own the Partnership Preferred Securities purchased by the Trust for the benefit of the holders of the Trust Securities. The payment of distributions by the Trust, and payments upon redemption of the Convertible Preferred Securities or liquidation of the Trust, are guaranteed by Citizens to the extent described under "Guarantees". The Trust Guarantees do not cover payment of distributions when the Trust does not have sufficient available cash and/or Common Stock to pay such distributions. In such event, the remedy of a holder of Convertible Preferred Securities is to vote to direct the Property Trustee to enforce the Property Trustee's rights as limited partner of Citizens Capital. For United States federal income tax purposes, Convertible Preferred Security holders will recognize interest income as it accrues. So long as interest periods are not deferred, the distributions will approximately equal the accruals of such quarterly interest. Capital income and distributions on Convertible Preferred Securities are not eligible for the corporate dividends-received deduction for United States federal income tax purposes. Holders of Convertible Preferred Securities will not have the right to remove or replace the Regular Trustees or the Property Trustee. Holders of the Convertible Preferred Securities will have no preemptive rights. Distributions Recipients of this Prospectus are encouraged to also review carefully the section entitled "Prospectus Summary - Distributions," which section contains a brief outline in summary form of the subject discussed below. How Distributions are Computed. Holders of the Convertible Preferred Securities will be entitled to receive cumulative distributions from the Trust in the forms of payment described below, accruing at the Rate from the date of original issuance and payable quarterly in arrears on the scheduled Distribution Payment Dates. When, as and if available for payment, distributions will be made by the Property Trustee. The amount of distributions payable for any period will be computed on the basis of twelve 30-day months and a 360-day year and, for any period shorter than a full quarter, will be computed on the basis of the actual number of days elapsed in such period. Page 35 Holders Can Elect Distributions in Common Stock or Cash. In anticipation of the continuing use of Citizens' shares of Common Stock to satisfy the interest requirements on the Convertible Debentures, each holder of a Convertible Preferred Security may elect annually during a designated period of ten Business Days how distributions from the Trust will be paid to him (a "Distribution Election"). If he makes an election to receive distributions in Common Stock (a "Stock Distribution Election"), he will receive his distributions in Common Stock, unless the Trust only has cash available for making distributions.(1) If he makes an election to receive distributions in cash (a "Cash Distribution Election"), he will receive his distribution in cash. If a holder makes no Distribution Election, he will automatically be deemed by the Trust to have made a Cash Distribution Election. Once made, Distribution Elections will stand as long as a holder owns his Convertible Preferred Security unless and until he makes a new Distribution Election by completing an election form and delivering the same to the broker, nominee or other entity which holds such holder's account during the annual Election Period (the procedures for which will be specified in the Distribution Declaration Notice). If a holder does not deliver a new election form within this period, then such holder's new election will not be effective. Any election by a holder of Convertible Preferred Securities will be canceled by a transfer of the Convertible Preferred Securities and the new holder will be entitled to make an election in the next Election Period. Prior to such Election Period, such new holder will be deemed to have made a Cash Distribution Election. In the event that the Partnership is dissolved or liquidated by reason of the occurrence of a Partnership Event, the right of (i) a holder to make a Stock Distribution Election, and (ii) Citizens to make Stock Payment Elections will terminate. In such event, distributions will be made only in cash. See "Prospectus Summary - Distributions." Distributions Flow From Citizens to Holders. Currently, Citizens intends to make interest payments on the Convertible Debentures in shares of Common Stock with an Equivalent Value on the Share Transfer and Valuation Date equal to the Rate.(2) The "Share Transfer and Valuation Date" will be the date specified by Citizens in a written notice (the "Distribution Declaration Notice") to the Trust, the Partnership and the holders of the Convertible Preferred Securities, which Share Transfer and Valuation Date shall also be the date on which shares of Common Stock are transferred by Citizens to the Partnership (as the holder of the Convertible Debentures) to satisfy the interest payment obligation on the Convertible Debentures. Currently, Citizens contemplates setting the Share Transfer and Valuation Date at least seventeen (17) Business Days after the Record Date, but such time-frame may be subject to change to reflect - ---------------------- (1) As noted above, Citizens may make a Cash Payment Election and pay interest on the Convertible Debentures in cash to the Partnership and, as General Partner of the Partnership, would then cause such cash to be distributed by the Partnership to the Trust. In such event, even though a holder may have made a Stock Distribution Election, he will receive cash as the Trust will only have cash with which to pay him. (2) For purposes hereof, the term "Equivalent Value" means the numbers of shares of Common Stock having a fair market value on the Share Transfer and Valuation Date equivalent to the next scheduled interest payment at the Rate. Page 36 evolving market practices and settlement procedures. How Distributions are Made. If Citizens pays interest on the Convertible Debentures in shares of its Common Stock and delivers the same to the Partnership in payment of its interest obligations on the Convertible Debentures, holders of Trust Securities who have not made a Stock Distribution Election or who have revoked their Stock Distribution Election will receive cash at the Rate because the Partnership will sell sufficient shares of Common Stock on the open market (or otherwise raise cash) so that the Partnership can pay the Trust (i) such number of shares and (ii) such amount of cash as will satisfy the Trust's obligation to make payments in stock and cash to holders in accordance with their elections. Pursuant to the Limited Partnership Agreement, if shares are sold by the Partnership for less than the Equivalent Value, the General Partner will pay any shortfall to insure that each holder of the Convertible Preferred Securities who has made a Cash Distribution Election receives cash distributions in an amount equal to the Rate. Citizens also has the right on the Distribution Declaration Date to elect to make interest payments on the Convertible Debentures in whole or in part by check or bank wire in immediately available funds. Also, after a Distribution Declaration Date on which it had elected to pay interest to the Partnership in shares of Common Stock for the next succeeding interest payment, Citizens may exercise its right to thereafter substitute cash for such payment. In such case, all holders will receive cash distributions at the Rate. Further, at any time after the Share Transfer and Valuation Date, Citizens will also have the right to purchase some or all of the shares of Common Stock deposited with Citizens Capital for cash at a price equal to the Equivalent Value. In such case, holders who have made a Stock Distribution Election may receive their distributions in cash at the Rate. If a Distribution Declaration Notice has specified that the distribution will be made in Common Stock, and Citizens thereafter expects either to pay the distribution entirely in cash or to purchase some or all of the shares deposited with the Partnership, Citizens shall notify the Partnership and the Trust in writing (which writing is also referred to herein as a "Cash Payment Election"). Distributions on the Convertible Preferred Securities must be paid to the extent that the Trust has funds or securities, as the case may be, available for and on hand to make the payment of such distributions. It is anticipated that the Trust's funds and securities on hand will be limited to funds and securities received from distributions on the Partnership Preferred Securities. If Citizens fails to make interest payments on the Convertible Debentures, the Partnership would not have funds or securities, as the case may be, to pay distributions to the Trust on the Partnership Preferred Securities, and the Trust would not have funds or securities, as the case may be, to pay distributions on the Convertible Preferred Securities. See "Risk Factors - Dependance on Convertible Debenture Payments," and "Guarantees." Record Dates. Distributions declared (as opposed to deferred) on the Convertible Preferred Securities will be payable to the holders thereof as they appear on the books and records of the Trust on the relevant Record Dates. Such distributions will be paid through the Property Trustee who will hold funds and securities received in respect of the Partnership Page 37 Preferred Securities in the Property Account for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the Declaration, each such payment will be made as described under "Convertible Preferred Securities - Book-Entry-Only Issuance - The Depository Trust Company" below. In the event that any date on which distributions are payable on the Convertible Preferred Securities is not a Business Day, then payment of the distributions will be made on the next succeeding Business Day (and without any additional interest in respect of such delay). If such Business Day is in the next succeeding calendar year, however, the payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" means any day other than a Saturday or a Sunday or a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. Other. Initial purchasers in the offering of the Convertible Preferred Securities may make their Distribution Elections during a period of seven calendar days after the offering. The Election Period will commence on or before December 21 of each year (a date which will be at least two Business Days after the scheduled Record Date relating to the January 31 distribution payment), beginning in 1996, and will end at the close of business ten Business Days later. Election forms and prospectuses will be sent to beneficial holders of Convertible Preferred Securities on the Record Date relating to the January 31 distribution payment each year on or about the first day of the Election Period. Timely Distribution Election forms should be delivered by beneficial holders of the Convertible Preferred Securities to the broker, nominee or other entity which holds such holder's account so that they are received by such broker, nominee or other entity on or before the close of business on the last day of the Election Period. The brokerage houses holding accounts for holders, nominees and other participants in DTC will transmit the same to DTC to the extent reasonably required to implement such elections. The Trust will be relying on information supplied through these procedures in determining how many shares of Common Stock or how much cash to distribute on each Distribution Payment Date. While the Company, the Partnership and the Trust believe that such procedures are not dissimilar from those used in similar situations, each purchaser and holder of a Convertible Preferred Security is urged to consult with his broker to insure that his election is properly recorded. Questions may be addressed to the Company at the phone number and address appearing elsewhere herein. Deferrals Unless deferred, interest and distributions are payable in arrears on the Interest Payment Date and the Distribution Payment Date, respectively. Under the Indenture, Citizens has the right to, and may, at any time and from time to time, defer the payment of each quarterly interest payment on the Convertible Debentures to a date subsequent to the regular Interest Payment Date; provided that no such deferral, including any extension thereof, may exceed 20 consecutive quarters nor extend the stated maturity date of the Convertible Debentures; and, provided, further, that in the event of such deferral, any interest so deferred shall not be deemed to have become due and payable until after such deferral period has ended. As a consequence, distributions on the Convertible Preferred Securities would be deferred by the Trust during any Page 38 such deferral of interest payments. If Citizens exercises this deferral right, it will be restricted from making certain distributions and payments (other than in shares of its capital stock) to holders of its capital stock, or to holders of indebtedness where such indebtedness ranks junior to the Convertible Debentures, and from making certain guarantee payments. Upon any such deferrals, interest will be compounded on each Interest Payment Date and accrued until paid at the Rate on any interest so deferred until the amount of such deferred interest (including compounded interest thereon) is paid in full. Citizens shall give the Regular Trustees written notice of its election to defer an interest payment on or before the Distribution Declaration Date. Citizens shall also give written notice of any deferred interest payment (and the consequential deferral of their distributions) to the holders of the Convertible Preferred Securities. See "Risk Factors - Option to Defer Payment of Distributions," and "Convertible Debentures - Option to Defer Interest Payments." If interest payments are deferred, the resulting deferred distributions and accrued and accumulated distributions thereon shall be paid to holders of record of the Convertible Preferred Securities as they appear on the books and records of the Trust on the record date established for payment, as opposed to any record date for purposes of any notice relating to the deferral of interest payments or distributions. As a result, any holder who sells Convertible Preferred Securities during a deferral period will transfer to the buyer his entitlement to any payment made at the end of any such deferral period. Any failure by Citizens to make interest payments on the Convertible Debentures in the absence of a deferral would constitute an Indenture Event of Default. Citizens may not elect to defer interest payments while an Indenture Event of Default has occurred and is continuing. Additional Interest Citizens is required to pay either (i) directly to such taxing authority, the Trust or the Partnership, as the case may be or (ii) to the Trust or Partnership, as the case may be, as additional interest ("Additional Interest") on the Convertible Debentures, any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon either the Trust or Citizens Capital. See "Convertible Debentures - Additional Interest." Conversion Rights General. The Convertible Preferred Securities will be convertible, unless previously redeemed, at the option of the holder thereof and in the manner described below, into shares of Common Stock Series A of Citizens at a conversion price of $_______ per share of Common Stock Series A (equivalent to a conversion rate of____ shares of Common Stock Series A for each $50 of liquidation preference of Convertible Preferred Securities), subject to adjustment as described under "- Conversion Price Adjustments" below. A holder of Convertible Preferred Securities wishing to exercise its conversion right as to all or a portion of such Convertible Preferred Securities shall, in effect, surrender such Convertible Preferred Securities, or a portion thereof, by giving an irrevocable written Notice of Conversion, to the Conversion Agent. The Conversion Agent shall then, on behalf of such holder, cause the Convertible Preferred Securities to be exchanged for Partnership Preferred Securities, and in turn cause the Partnership Page 39 Preferred Securities to be exchanged for Convertible Debentures, and immediately cause the Convertible Debentures to be converted into Common Stock Series A. Holders may obtain copies of the Notice of Conversion from the Conversion Agent. Convertible Preferred Securities that have been called for redemption will not be convertible after the close of business five (5) Business Days preceding the date fixed for redemption and no Convertible Preferred Security will be convertible after the close of business five (5) Business Days preceding ________________, 2035. Holders of Convertible Preferred Securities at the close of business on a Record Date will be entitled to receive the distribution payable on such securities on the corresponding Distribution Payment Date notwithstanding the conversion of such Convertible Preferred Securities following such Record Date. Except as provided in the immediately preceding sentence, the Trust will make no payment or allowance for accrued, deferred or otherwise unpaid distributions on converted Convertible Preferred Securities, or for any dividends or distributions on the shares of Common Stock Series A. Holders of shares of Common Stock Series A which are received upon such conversion prior to or on a record date for any dividend or distribution on such shares shall be entitled to receive the same dividend or distribution as other holders of record of Common Stock Series A. Each conversion will be deemed to have been effected immediately prior to the close of business on the day on which the Notice of Conversion was received by the Trust. No fractional share of Common Stock Series A will be issued as a result of conversion; in lieu thereof such fractional interest will be settled in cash. Citizens will, subject to compliance with the requirements of any regulatory authority claiming jurisdiction over Citizens' business, reserve for issuance enough shares of Common Stock Series A so as to have sufficient shares legally available to effect such conversions. Conversion Price Adjustments - General. Commencing in 1990, Citizens has followed the policy of paying quarterly dividends on its Common Stock in shares of Common Stock. The conversion price of the Convertible Preferred Securities will be adjusted downward to reflect the declaration of each such stock dividend. The conversion price is also subject to adjustment in certain events, including (a) the issuance of shares of Common Stock as a dividend or a distribution with respect to its Common Stock, (b) subdivisions, combinations and reclassification of Common Stock, (c) the issuance to all holders of Common Stock of rights or warrants entitling them (for a period not exceeding 45 days) to subscribe for shares of Common Stock at less than the current market price, (d) the distribution to all holders of Common Stock of evidences of indebtedness of the Company, securities or capital stock, cash or assets (including securities, but excluding those rights, warrants, dividends and distributions referred to above and dividends and distributions paid exclusively in cash), (e) the payment of dividends (and other distributions) on Common Stock paid exclusively in cash, excluding cash dividends if the annualized per share amount thereof does not exceed 15% of the current market price of Common Stock as of the Trading Day immediately preceding the date of declaration of such dividend, and (f) payment to holders of Common Stock in respect of a tender or exchange offer Page 40 (other than an odd-lot offer) by Citizens or any subsidiary of Citizens for Common Stock at a price in excess of 110% of the current market price of Common Stock as of the Trading Day next succeeding the last date tenders or exchanges may be made pursuant to such tender or exchange offer. A "Trading Day" means any day on which the NYSE (or any other market used for the determination of fair market value) is open for the trading of securities. Citizens from time to time may reduce the conversion price of the Convertible Debentures (and thus the conversion price of the Convertible Preferred Securities) by any amount selected by Citizens for any period of at least 20 days, in which case Citizens shall give at least 15 days' notice of such reduction. Citizens may, at its option, make such reductions in the conversion price, in addition to those set forth above, as the Citizens Board of Directors deems advisable to avoid or diminish any income tax to holders of Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. See "Certain Federal Income Tax Considerations - Adjustment of Conversion Price". No adjustment of the conversion price will be made upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of Citizens and the investment of additional optional amounts in shares of Common Stock under any such plan. No adjustment in the conversion price will be required unless such adjustment would require a change of at least one percent (1%) in the price then in effect; provided, however, that any adjustment that would not be required to be made shall be carried forward and taken into account in any subsequent adjustment. If any action would require adjustment of the conversion price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the holder of the Convertible Preferred Securities. Conversion Price Adjustments - Merger, Consolidation or Sale of Assets of Citizens. In the event that Citizens shall be a party to any transaction (including, without limitation, and with certain exceptions, (a) recapitalization or reclassification of the Common Stock Series A, (b) consolidation of Citizens with, or merger of Citizens into, any other Person, or any merger of another Person into Citizens, (c) any sale or transfer of all or substantially all of the assets of Citizens or (d) any compulsory share exchange pursuant to which the Common Stock Series A is converted into the right to receive other securities, cash or other property, (each of the foregoing being referred to as a "Transaction"), then the holders of Convertible Preferred Securities then outstanding shall have the right to convert the Convertible Preferred Securities into the kind and amount of securities, cash and other property receivable upon the consummation of such Transaction by a holder of the number of shares of Common Stock Series A issuable upon conversion of such Convertible Preferred Securities immediately prior to such Transaction. In the case of a Transaction, each Convertible Preferred Security would become convertible into the securities, cash or property receivable by a holder of the number of shares Page 41 of Common Stock Series A into which such Convertible Preferred Security was convertible immediately prior to such Transaction. This change could substantially lessen or eliminate the value of the conversion privilege associated with the Convertible Preferred Securities in the future. For example, if Citizens were acquired in a cash merger, each Convertible Preferred Security would become convertible solely into cash and would no longer be convertible into securities whose value would vary depending on the future prospects of Citizens and other factors. Special Events Redemption and Distribution "Trust Investment Company Act Event" means that Citizens shall have (i) requested and received and (ii) delivered to the Regular Trustees, an opinion of a nationally recognized independent counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act") (an "Investment Company Act Opinion") that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is a more than an insubstantial risk that the Trust is or will be considered an investment company which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the first date of issuance of the Convertible Preferred Securities. "Trust Tax Event" means that Citizens shall have (i) requested and received and (ii) delivered to the Regular Trustees, an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Tax Event Opinion") to the effect that, as a result of (a) any 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, (b) any change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which change is enacted, promulgated, issued or effective or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of this Prospectus, there is more than an insubstantial risk that (i) the Trust may be subject to United States federal income tax with respect to distributions accrued or received on the Partnership Preferred Securities or (ii) the Trust is subject to more than a de minimis amount of taxes, duties or other governmental charges. (For purposes hereof, the circumstances described in subsections (a) through (d) above are sometimes hereafter referred to as a "Change in Tax Law".) A Trust Tax Event and a Trust Investment Company Act Event are sometimes herein collectively or individually referred to as "Trust Events". "Partnership Tax Event" means that the General Partner shall have received a Tax Event Page 42 Opinion to the effect that, as a result of a Change in Tax Law, there is more than an insubstantial risk that (i) Citizens Capital may be subject to United States federal income tax with respect to interest accrued or received on the Convertible Debentures or (ii) Citizens Capital is subject to more than a de minimis amount of taxes, duties or other governmental charges. "Partnership Investment Company Act Event" means that the General Partner shall have received an Investment Company Act Opinion that as a result of the occurrence of a Change in 1940 Act Law, there is more than an insubstantial risk that the Partnership is or will be considered an investment company which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the first date of issuance of the Partnership Preferred Securities. A Partnership Tax Event and a Partnership Investment Company Act Event are sometimes herein collectively or individually referred to as "Partnership Events". A "No Recognition Opinion" means an opinion of a nationally recognized independent tax counsel experienced in such matters, which opinion may rely on published revenue rulings or any other available pronouncements, determinations or available authority of the Internal Revenue Service, or any judicial decisions, to the effect that the holders of the Convertible Preferred Securities or Partnership Preferred Securities, as the case may be, will not recognize any income, gain or loss for United States federal income tax purposes as a result of the liquidation and distribution of Convertible Debentures or Partnership Preferred Securities, as the case may be. "Company Event" means that Citizens shall have obtained a Tax Event Opinion to the effect that, as a result of a Change in Tax Law, there is more than an insubstantial risk that interest payable to the holders of the Convertible Debentures would not be deductible by Citizens for United States federal income tax purposes. A Trust Event, Partnership Event, and Company Event are sometimes herein collectively or individually referred to as "Special Events". "Rating Agency Event" shall occur when, and if, (i) any nationally recognized securities rating agency lowers its rating of the Company's senior, long-term debt to a rating less than ____ or ____ or the equivalent, and (ii) Citizens has elected to transmit notice thereof to the Trust. If at any time a Trust Event shall occur and be continuing, the Trust will (except as set forth under Ministerial Action below) cause the Trust to be liquidated with the result that Partnership Preferred Securities will be distributed to holders of the Trust Securities in liquidation of such holders' interests in the Trust, on a pro rata basis; provided, however, that such liquidation and distribution shall be conditioned upon the receipt by Citizens of a No Recognition Opinion with regard to such distribution of Partnership Preferred Securities. If a Partnership Event has also occurred and is continuing and a No Recognition Opinion is received with respect to such Partnership Preferred Securities distribution, then Citizens may also cause Page 43 the Partnership to be liquidated as well with the result that Convertible Debentures (and not Partnership Preferred Securities) will ultimately be received by the holders of the Trust Securities in liquidation of such holders' interests in the Trust, on a pro rata basis; provided, however, that such liquidation and distribution shall be conditioned upon the receipt by Citizens of a No Recognition Opinion with regard to such distribution of Convertible Debentures. In the further event that Citizens cannot obtain, with respect to the liquidation of the Trust, a No Recognition Opinion with regard to the distribution of Partnership Preferred Securities or the Convertible Debentures, as the case may be, then Citizens may redeem the Convertible Debentures in whole or in part, for cash, with the result that (i) Partnership Preferred Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed will be redeemed by the Partnership, (ii) Trust Securities with an aggregate liquidation amount equal to the aggregate liquidation amount of Partnership Preferred Securities so redeemed will be redeemed by the Trust, and (iii) holders of the Trust Securities will ultimately receive cash for the Trust Securities so redeemed, on a pro rata basis. If at any time a Partnership Event shall occur and be continuing, the Partnership may (except as set forth under Ministerial Action below) cause the Partnership to be liquidated with the result that Convertible Debentures will be distributed to the Trust in liquidation of its interests in the Partnership; provided, however, that such liquidation and distribution shall be conditioned upon the receipt by Citizens of a No Recognition Opinion with regard to such distribution of Convertible Debentures. Following a Partnership liquidation, holders of Convertible Preferred Securities would lose their right to make Distribution Elections, Citizens will lose its right to make Stock Payment Elections, and distributions to holders of Convertible Preferred Securities will be made only in cash. If Citizens cannot obtain, with respect to the liquidation of the Partnership, a No Recognition Opinion with regard to the distribution of Convertible Debentures, then Citizens may redeem the Convertible Debentures in whole or in part, for cash, with the result that (i) Partnership Preferred Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed will be redeemed by the Partnership, (ii) Trust Securities with an aggregate liquidation amount equal to the aggregate liquidation amount of Partnership Preferred Securities so redeemed will be redeemed by the Trust, and (iii) holders of the Trust Securities will ultimately receive cash for the Trust Securities so redeemed, on a pro rata basis. The conditions precedent to the Company's right to bring about the redemption for cash of the Convertible Preferred Securities described in the preceding two paragraphs shall not restrict Citizens' right to bring about the redemption for cash, in whole or in part, of the Convertible Preferred Securities at any time after ___________, 199_, as described in "-Optional Redemption" below. Upon the occurrence of a Company Event (except as set forth in the next paragraph), Citizens shall also have the right, upon not less than thirty (30) nor more than sixty (60) days notice, to redeem the Convertible Debentures, in whole or in part, for cash, together with any accrued or deferred and unpaid interest payments. Following any such redemption, Partnership Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Page 44 Convertible Debentures so redeemed shall be redeemed by Citizens Capital, and Trust Securities with an aggregate liquidation amount equal to the Partnership Securities so redeemed shall be redeemed by the Trust, each at the Redemption Price on a pro rata basis. Ministerial Action. If at the time of any such Special Event, Citizens, the Partnership or the Trust are actually aware of an opportunity to eliminate the adverse effect of the Special Event on the Trust, Citizens or the Partnership by taking some ministerial action (such as filing a form or making an election or pursuing some other similar reasonable measure) where the taking of such action does not involve a material cost, then neither Citizens, the Partnership nor the Trust shall (i) liquidate the Partnership or the Trust by reason of such Special Event or (ii) on or before __________, 199_, redeem any securities at any time such opportunity exists, without first having pursued such ministerial action. If, at any time, a Rating Agency Event shall occur and be continuing, the Trust will be liquidated with the result that Partnership Preferred Securities will be distributed to the holders of the Trust Securities in liquidation of such holders' interests in the Trust, on a pro rata basis. In addition, Citizens may advise the Trustees that it will liquidate the Partnership with the result that Convertible Debentures (and not Partnership Preferred Securities) will be ultimately distributed to holders of Trust Securities, on a pro rata basis. After the date for any distribution of Partnership Preferred Securities or Convertible Debentures, as the case may be, upon dissolution and liquidation of the Trust (i) the Convertible Preferred Securities will be deemed to be no longer outstanding, (ii) the Depositary or its nominee, as the record holder of the Convertible Preferred Securities, will receive a registered global certificate or certificates representing the Partnership Preferred Securities or Convertible Debentures, as the case may be, and (iii) any certificates representing Convertible Preferred Securities not held by the Depositary or its nominee will be deemed to represent (a) Partnership Preferred Securities having an aggregate liquidation amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued or deferred and unpaid distributions equal to accrued or deferred and unpaid distributions on such Convertible Preferred Securities, or (b) Convertible Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued or deferred and unpaid interest equal to accrued or deferred and unpaid distributions on such Convertible Preferred Securities, as the case may be, until such certificates are presented to Citizens or its agent for transfer or reissuance. There can be no assurance as to the market prices for the Convertible Preferred Securities, or the Partnership Preferred Securities or Convertible Debentures that may be distributed in exchange for the Convertible Preferred Securities, if a dissolution and liquidation of the Trust were to occur. Accordingly, the Convertible Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Partnership Preferred Securities or Convertible Debentures, as the case may be, that an investor may receive if a dissolution and liquidation of the Trust were to occur, may trade at a discount or a premium to the price that the investor paid to purchase the Convertible Preferred Securities Page 45 offered hereby. Upon the distribution of the Convertible Debentures or the Partnership Preferred Securities, the Company will use its best efforts to list such securities on the exchange that the Convertible Preferred Securities are then listed. Optional Redemption The Convertible Debentures are also subject to redemption by Citizens, at its option, in whole or in part, from time to time, on or after _________________, 199_ at 100% of the principal amount being redeemed, together with accrued or deferred and unpaid interest to the redemption date. If Citizens redeems Convertible Debentures, the Trust must redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed, at $50 per Trust Security in cash, plus accrued or deferred and unpaid distributions in either cash or Common Stock (the "Redemption Price"). Redemption on Maturity or Upon Acceleration Additionally, Convertible Preferred Securities are also subject to redemption in whole, but not in part, upon any redemption of the Partnership Preferred Securities occurring upon the repayment at maturity (on _____________, 2035) or as a result of acceleration of the Convertible Debentures upon the occurrence of an Indenture Event of Default described under "Convertible Debentures - Events of Default." Upon the repayment of the Convertible Debentures, the proceeds from such repayment shall simultaneously be applied to redeem Convertible Preferred Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so repaid at the Redemption Price. In the case of such acceleration, the Convertible Preferred Securities will only be redeemed when repayment of the Convertible Debentures has actually been received by the Trust. Redemption Procedures; Generally If Convertible Preferred Securities are called for redemption, conversion rights with regard thereto will terminate five (5) Business Days prior to the redemption date. If the Convertible Preferred Securities are called for redemption at maturity or acceleration, or if all or any portion of the Convertible Preferred Securities are called for redemption through any Special Event or Rating Agency Event, Citizens may not redeem the Convertible Debentures called for redemption, unless all accrued or deferred and unpaid distributions have been paid in full on all Convertible Preferred Securities to be redeemed for all quarterly distribution periods terminating on or prior to the date of redemption. Notice of any redemption or exchange of Convertible Preferred Securities (which notice will be irrevocable) will be given to each record holder of Convertible Preferred Securities that are being redeemed or exchanged not fewer than thirty (30) nor more than sixty (60) days prior to the date fixed for redemption thereof. If a notice of redemption has been given, then on the redemption date, if the Partnership has paid to the Page 46 Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of Partnership Preferred Securities, the Property Trustee will irrevocably deposit such funds with the Paying Agent with irrevocable instructions to pay the applicable Redemption Price (i) to the holders of the Convertible Preferred Securities to be redeemed (in the event that such Convertible Preferred Securities are in definitive form) or (ii) to DTC (in the event that Convertible Preferred Securities are in book-entry form) with irrevocable instructions to pay the Redemption Price to the holders of the Convertible Preferred Securities to be redeemed. See "Book-Entry-Only Issuance - The Depository Trust Company." Upon satisfaction of the foregoing conditions, then immediately prior to the close of business on the date of such deposit, all rights of holders of such Convertible Preferred Securities so called for redemption will cease, except the right of the holders to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Convertible Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding Business Day (and without any interest 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 the event that payment of the Redemption Price is improperly withheld or refused and not paid by either the Property Trustee or Citizens, distributions on the Convertible Preferred Securities called for redemption will continue to accrue at the Rate, compounded quarterly, until the Redemption Price is actually paid. In the event that fewer than all of the outstanding Convertible Preferred Securities are to be redeemed, the Convertible Preferred Securities to be redeemed will be selected by lot as described under " - Book-Entry-Only Issuance - The Depositary Trust Company" below. Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), Citizens or its subsidiaries may at any time, and from time to time, purchase outstanding Convertible Preferred Securities by tender, in the open market or by private agreement. Liquidation Rights In the event of any voluntary or involuntary liquidation, dissolution, or winding-up or termination of the Trust, the holders of Convertible Preferred Securities at the time outstanding will be entitled to receive, out of the assets of the Trust, after satisfaction of liabilities to creditors, a liquidation preference of $50 per Convertible Preferred Security payable in cash, plus all accrued or deferred and unpaid distributions, payable in either cash or Common Stock, to the date of payment (the "Liquidation Distribution"), unless, in connection with such liquidation, either Partnership Preferred Securities or Convertible Debentures have been distributed on a pro rata basis to the holders of the Convertible Preferred Securities. 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 the Convertible Preferred Securities shall be paid on a pro rata basis. The holders of the Convertible Common Securities will be entitled to receive distributions upon any such dissolution pro rata with the holders of Page 47 the Convertible Preferred Securities, except that if a Declaration Event of Default has occurred and is continuing, the Convertible Preferred Securities shall have a preference over the Convertible Common Securities with regard to such distributions. If, upon any liquidation of the Trust, the holders of Convertible Preferred Securities are paid in full the aggregate Liquidation Distribution to which they are entitled, then such holders will not be entitled to receive or share in any other assets of the Trust thereafter available for distribution to any other holders of beneficial interests in the Trust. As set forth in greater detail in the Declaration, the Trust shall be dissolved and its affairs shall be wound up upon the occurrence of certain events, including the earliest to occur of: (i) _______, 2040, the expiration of the term of the Trust; (ii) the bankruptcy of Citizens, (iii) upon the filing of a certificate of dissolution or its equivalent with respect to Citizens or the revocation of the charter of Citizens or of the Trust's certificate of Trust in accordance with the terms of the Declaration, (iv) upon the distribution of Partnership Preferred Securities or Convertible Debentures upon the occurrence of any Rating Agency Event or Special Event and the dissolution and liquidation of the Trust, (v) upon the entry of a decree of a judicial dissolution of Citizens or the Trust, or (vi) upon the redemption of all the Trust Securities. Amendment to the Declaration The Declaration may be modified and amended if approved by the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees) (and in certain circumstances, by the Property Trustee or the Delaware Trustee); provided that, if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up, or termination of the Trust other than pursuant to the terms of the Declaration, then such amendment or proposal shall not be effective except with the approval of at least 66 2/3% in liquidation amount of the Trust Securities affected thereby. Notwithstanding the foregoing, no amendment may be made to the Declaration if such amendment 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 Property Trustee, or (iii) cause the Trust to be deemed an investment company which is required to be registered under the 1940 Act. Merger, Consolidation or Sale of Assets of the Trust 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 entity, except as described below. The Trust may, with the consent of a majority of the Regular Trustees and without the consent of the holders of the Trust Securities, the Delaware Trustee or Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as Page 48 such under the laws of any state of the United States of America, subject to certain conditions set forth in the Declaration. The Trust shall not, except with the consent of the holders of 100% in liquidation amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if such consolidation, amalgamate, merger or replacement would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. Declaration Events of Default An event of default under the Limited Partnership Agreement (a "Partnership Event of Default") constitutes an event of default under the Declaration with respect to the Trust Securities (a "Declaration Event of Default"), provided that, pursuant to the Declaration, the holder of the Convertible Common Securities will be deemed to have waived any Declaration Event of Default with respect to the Convertible Common Securities until all Declaration Events of Default with respect to the Convertible Preferred Securities have been cured, waived or otherwise eliminated. Until such Declaration Events of Default with respect to the Convertible Preferred Securities have been so cured, waived, or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Convertible Preferred Securities and only the holders of the Convertible Preferred Securities will have the right to direct the Property Trustee with respect to certain matters under the Declaration, and therefore the Indenture. The holders of a majority in aggregate liquidation amount of Convertible Preferred Securities may vote to waive any Declaration Event of Default, provided that if the underlying Partnership Event of Default requires the consent of a Super Majority (as defined below), a corresponding Super Majority of Convertible Preferred Securities will be required. A Partnership Event of Default may be waived as described below in "Voting Rights." A waiver of a Partnership Event of Default by the Property Trustee constitutes a waiver of the corresponding Declaration Event of Default. Upon the occurrence of a Declaration Event of Default, the Property Trustee as the sole holder of the Partnership Preferred Securities of Citizens Capital, which is the sole holder of the Convertible Debentures, will have the right under the Declaration to enforce its rights as holder of the Partnership Preferred Securities. Citizens and the Trust are each required to file annually with the Property Trustee an officer's certificate as to its compliance with all conditions and covenants under the Declaration. Voting Rights Except as described herein, under the Trust Act, the Trust Indenture Act and under "Guarantees," and as otherwise required by law and the Declaration, the holders of the Convertible Preferred Securities will have no voting rights. Subject to the requirement that the Property Trustee obtain a tax opinion in certain circumstances as set forth in the last sentence of this paragraph, the Holders of a majority in aggregate liquidation amount of the Convertible Preferred Securities voting separately as a class Page 49 may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee or exercising any trust or power conferred upon the Property Trustee under the Declaration, including, for so long as the Property Trustee shall hold the Partnership Preferred Securities, causing the Special Representative (as hereafter defined) to, or, if the Property Trustee shall hold the Convertible Debentures directly, to (i) prosecute any proceeding for any remedy available to the Indenture Trustee or exercise any power conferred on the Indenture Trustee with respect to the Convertible Debentures, (ii) waive any waivable past default and its consequences that are waivable under the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal amount of all the Convertible Debentures shall be due and payable, provided, however, that when the Indenture requires the consent of the holders of greater than a majority in aggregate principal amount of Convertible Debentures affected thereby (a "Super Majority"), a corresponding Super Majority of Convertible Preferred Securities will be required. If the Property Trustee fails to enforce its rights under the Declaration, any holder of Convertible Preferred Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other person. Other than with respect to directing the time, method and place of conducting any proceeding for a remedy as set forth above, the Property Trustee shall not take any of the above actions in accordance with the directions of the holders of the Convertible Preferred Securities unless the Property Trustee has obtained an opinion of tax counsel to the effect that, for the purposes of United States federal income tax, the Trust will continue to be classified as a grantor trust after consummation of such action. Any approval or direction of holders of Convertible Preferred Securities may be given at a separate meeting of holders of Convertible Preferred Securities convened for such purpose, at a meeting of all of the holders of Trust Securities or pursuant to written consent. No vote or consent of the holders of the Convertible Preferred Securities will be required for the Trust to redeem and cancel Convertible Preferred Securities or to distribute Partnership Preferred Securities or Convertible Debentures in accordance with the Declaration and the terms of the Trust Securities. Any Convertible Preferred Securities that are owned by Citizens, or by any entity directly or indirectly controlling or controlled by or under direct or indirect common control with Citizens shall not be entitled to vote or consent and shall, for such purposes, be treated as if they were not outstanding. Book-Entry-Only Issuance - The Depository Trust Company DTC will act as securities depository for the Convertible Preferred Securities. The information in this section concerning DTC and DTC's book- entry system is based upon information obtained from DTC. The Convertible Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (as nominee for DTC). One Page 50 or more fully-registered global Convertible Preferred Security certificates will be issued, representing in the aggregate the total number of Convertible Preferred Securities, and will be deposited with DTC. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the global Convertible Preferred Securities as represented by a global certificate. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the NYSE, the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). Purchases of Convertible Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Convertible Preferred Securities on DTC's records. The ownership interest of each actual purchaser of a Convertible Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Convertible Preferred Securities. Transfers of ownership interests in Convertible Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Convertible Preferred Securities, except upon a resignation of DTC, upon the occurrence of an Indenture Event of Default or upon a decision by the Trust to discontinue the book-entry system for the Convertible Preferred Securities. To facilitate subsequent transfers, all the Convertible Preferred Securities deposited by Participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of Convertible Preferred Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Convertible Preferred Securities; DTC's records reflect only the identity of the Page 51 Direct Participants to whose accounts such Convertible Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices with respect to the Convertible Preferred Securities shall be sent to Cede & Co. If less than all of the Convertible Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such securities to be redeemed. Although voting with respect to the Convertible Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Convertible Preferred Securities. Under its usual procedures, DTC would mail an "Omnibus Proxy" (i.e., a proxy conferring on Direct Participants the right to vote as their interests appear) to the Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Convertible Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Citizens and the Trust believe that the arrangements among DTC, Direct and Indirect Participants, and Beneficial Owners will enable the Beneficial Owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a beneficial interest in the Trust. Cash distribution payments and distribution payments in shares of Common Stock on the Convertible Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the account of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trust, Citizens Capital or Citizens, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of the Trust, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. Except as provided herein, a Beneficial Owner in a global Convertible Preferred Security will not be entitled to receive physical delivery of Convertible Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under the Convertible Preferred Securities. Page 52 DTC may discontinue providing its services as securities depositary with respect to the Convertible Preferred Securities at any time by giving reasonable notice to the Trust. Under such circumstances, in the event that a successor securities depositary is not obtained, certificates representing the Convertible Preferred Securities will be printed and delivered. If an Indenture Event of Default occurs or if the Regular Trustees decide to discontinue use of the system of book-entry transfers through DTC (or a successor depositary), certificates representing the Convertible Preferred Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Citizens and the Trust believe to be reliable, but neither Citizens nor the Trust takes responsibility for the accuracy thereof. Information Concerning the Property Trustee The Property Trustee, prior to the occurrence of a default with respect to the Trust Securities, undertakes to perform only such duties as are specifically set forth in the Declaration and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Convertible Preferred Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The holders of Convertible Preferred Securities will not be required to offer such indemnity in the event such holders direct the Property Trustee to take any action following a Declaration Event of Default. Transfer Agent, Paying Agent, Registrar and Conversion Agent Chemical Bank will act as Paying Agent, Registrar, Transfer Agent and Conversion Agent for the Convertible Preferred Securities. Registration of transfers of Convertible Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust may require) in respect of any tax or other government charges which may be imposed in relation to it. PARTNERSHIP PREFERRED SECURITIES The following summary of the principal terms and provisions of the Partnership Preferred Securities does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Limited Partnership Agreement, a copy of the form of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. Under certain circumstances involving the dissolution and liquidation of the Trust following the occurrence of a Trust Event, Partnership Preferred Securities may be distributed to the holders of the Convertible Preferred Securities. See discussion below and in "Convertible Page 53 Preferred Securities - Special Events Redemption and Distribution." General The General Partnership Security, which constitutes all of the partnership interests in Citizens Capital other than the Partnership Preferred Securities owned by the Trust (and any interests of any Special Representative), will be owned directly or indirectly by Citizens at all times while the Convertible Preferred Securities are outstanding. The Limited Partnership Agreement authorizes and creates the Partnership Preferred Securities in Citizens Capital. The Partnership Preferred Securities will have a preference with respect to quarterly distributions and amounts payable on liquidation and redemption over the General Partnership Security. The Partnership Preferred Securities do not have a par value. The Limited Partnership Agreement does not permit the issuance of other partnership interests without the prior approval of the holders of not less than 66 2/3% of the aggregate liquidation preference of the Partnership Preferred Securities then outstanding. For United States federal income tax purposes, Partnership Preferred Securities holders will recognize interest income as it accrues. So long as interest payments are not deferred, the distributions will approximately equal the accruals of such quarterly interest. Income received by Citizens Capital and distributions by the Partnership are not eligible for the corporate dividends-received deduction for United States federal income tax purposes. Holders of Partnership Preferred Securities will not have the right to remove or replace the General Partner. Holders of Partnership Preferred Securities will have no preemptive rights. Distributions The rights of holders of the Partnership Preferred Securities to receive cumulative distributions from Citizens Capital are essentially similar to those of the holders of the Convertible Preferred Securities. See "Convertible Preferred Securities - Distributions." However, the Partnership may only make distributions to the extent that there is (i) Common Stock and/or cash on hand, and (ii) such funds are "legally available" (as defined under applicable Delaware law) therefor. Conversion Rights The Partnership Preferred Securities will be convertible at the option of the holders thereof and in a manner essentially similar to that of the Convertible Preferred Securities. See "Convertible Preferred Securities - Conversion Rights." Page 54 Special Events Redemption and Distribution The Partnership Securities are subject to redemption and distribution upon the occurrence of certain Special Events and the Rating Agency Event. See "Convertible Preferred Securities - Special Events Redemption and Distribution" and "Convertible Debentures - Special Events Redemption and Distribution." After the date for any distribution of Convertible Debentures upon dissolution and liquidation of Citizens Capital, (i) the Partnership Preferred Securities will no longer be deemed to be outstanding, (ii) the record holder of the Partnership Preferred Securities will receive a certificate or certificates representing the Convertible Debentures to be delivered upon such distribution, and (iii) any certificates representing Partnership Preferred Securities will be deemed to represent Convertible Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued or deferred and unpaid interest equal to accrued or deferred and unpaid distributions on such Partnership Preferred Securities until such certificates are presented to Citizens Capital or its agent for transfer or reissuance. Optional Redemption Partnership Preferred Securities are subject to optional redemption in essentially the same manner as the Convertible Preferred Securities. See "Convertible Preferred Securities - Optional Redemption." Redemption on Maturity or Upon Acceleration Partnership Preferred Securities shall be subject to redemption upon the repayment at maturity or upon acceleration upon default of the Convertible Debentures in essentially the same manner as the Convertible Preferred Securities. See "Convertible Preferred Securities -Redemption on Maturity or Upon Acceleration." Redemption Procedures; Generally If Partnership Preferred Securities are called for redemption, the conversion right will terminate five (5) Business Days prior to the redemption date. The redemption procedures for Partnership Preferred Securities are similar to those of the Convertible Preferred Securities. See "Convertible Preferred Securities - Redemption Procedures; Generally." Upon the completion of such procedures, all rights of holders of such Partnership Preferred Securities so called for redemption will cease, except the right of the holders to receive the Redemption Price, but without interest on such Redemption Price. Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), Citizens or its subsidiaries may at any time, and from time to time, purchase outstanding Partnership Preferred Securities by tender, in the open market or by private Page 55 agreement. Liquidation Rights In the event of any voluntary or involuntary liquidation, dissolution or winding-up or termination of Citizens Capital, the holders of Partnership Preferred Securities at the time outstanding will have liquidation rights essentially similar to those of the holders of the Convertible Preferred Securities. See "Convertible Preferred Securities - Liquidation Rights." Pursuant to the Limited Partnership Agreement, Citizens Capital shall be dissolved and its affairs shall be wound up upon the earliest to occur of (i) the expiration of the term of Citizens Capital, (ii) any bankruptcy, insolvency, expulsion or dissolution of the General Partner, (iii) upon the entry of a decree of a judicial dissolution or (iv) upon the written consent of all partners of Citizens Capital. Merger, Consolidation or Sale of Assets of Citizens Capital Citizens Capital may not consolidate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any entity, except as described below. Citizens Capital may, in order to avoid 1940 Act consequences adverse to Citizens or Citizens Capital or to the holders of the Partnership Preferred Securities, and in other limited situations, without the consent of the holders of the Partnership Preferred Securities, consolidate, merge with or into, or be replaced by a limited partnership or trust organized as such under the laws of any state of the United States of America, subject to conditions set forth in the Limited Partnership Agreement. Limited Partnership Agreement Event of Default An Indenture Event of Default constitutes an event of default under the Limited Partnership Agreement with respect to the Partnership Preferred Securities (a "Partnership Event of Default"). Upon the occurrence of a Partnership Event of Default, the Special Representative of Citizens Capital, as the sole holder of the Convertible Debentures, will have the right under the Indenture to declare the principal of and interest on the Convertible Debentures to be immediately due and payable. Voting Rights Except as provided below and under "Guarantees - Amendments and Assignment," "Convertible Debentures - Modification of the Indenture" and as otherwise required by law and provided by the Limited Partnership Agreement, the holders of the Partnership Preferred Securities will have no voting rights. Page 56 If (i) an Indenture Event of Default occurs and is continuing with respect to the Convertible Debentures; or (ii) Citizens is in default under any of its payment obligations under the Guarantees (as described under "Guarantees"), then the holders of a majority in aggregate liquidation preference of the Partnership Preferred Securities will be entitled to appoint a special representative (a "Special Representative") to enforce Citizens Capital's rights under the Convertible Debentures, enforce the rights of the holders of Partnership Preferred Securities under the Partnership Guarantee and enforce the payments of distributions on the Partnership Preferred Securities. In such event, the General Partner or (after the passing of a specified period of time) the holders of 10% of the aggregate liquidation preference of the Partnership Preferred Securities will be entitled to convene a meeting. Any Special Representative so appointed shall vacate office immediately if Citizens Capital (or Citizens pursuant to the Guarantees) shall have paid in full all accrued or deferred and unpaid distributions on the Partnership Preferred Securities or such Indenture Event of Default or default, as the case may be, shall have been cured. Notwithstanding the appointment of any such Special Representative, Citizens will retain all rights as obligor under the Convertible Debentures, including the right to defer interest payments as provided under "Convertible Debentures - Option to Defer Interest Payments," and any such deferral will not constitute a default under the Indenture or enable a holder of Partnership Preferred Securities to require the payment of a distribution. In the event that any quarterly distribution payment is deferred for more than 6 consecutive quarters, holders of a majority in aggregate liquidation preference of the Partnership Preferred Securities will have the right to elect a Special Representative who will have limited rights to act on behalf of the holders of the Partnership Preferred Securities and, in effect, the Convertible Preferred Securities. Any Special Representative so appointed shall have the authority to enforce the rights of holders of Partnership Preferred Securities under the Convertible Debentures and the Partnership Guarantee and declare and pay distributions on the Partnership Preferred Securities. If any proposed amendment to the Limited Partnership Agreement provides for, or the General Partner otherwise proposes to effect, (x) any action that would materially adversely affect the powers, preferences or rights of the Partnership Preferred Securities, or (y) the dissolution, winding-up or termination of Citizens Capital (other than as described under "- Merger, Consolidation or Sale of Assets of Citizens Capital"), then such amendment or action shall require the approval of the holders of at least 66 2/3% or more of the aggregate liquidation preference of the Partnership Preferred Securities; provided, however, that no such approval shall be required if (i) the dissolution, winding-up or termination of Citizens Capital is proposed or initiated pursuant to the terms of the Limited Partnership Agreement relating to dissolution (see "- Liquidation Rights") or (ii) if Partnership Preferred Securities are distributed to the holders of Convertible Preferred Securities in exchange for such Convertible Preferred Securities in liquidation of the Trust. So long as the Convertible Debentures are held by Citizens Capital, the General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Special Representative, or exercising any trust or power conferred on the Special Page 57 Representative with respect to the Convertible Debentures, (ii) waive any past default under the Indenture, (iii) exercise any right to rescind a declaration that the principal of all the Convertible Debentures shall be due and payable, (iv) consent to any amendment, modification or termination of the Convertible Debentures or of the Indenture without, in each case, obtaining the prior approval of the holders of at least 66 2/3% or more of the aggregate liquidation preference (or a majority of the aggregate liquidation preference in the case of waiver of certain past defaults) of the Partnership Preferred Securities; provided, however, that where a consent under the Convertible Debentures would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of the Partnership Preferred Securities. The General Partner shall notify all holders of Partnership Preferred Securities of any notice of default received from the Debenture Trustee with respect to the Convertible Debentures. Any required approval of holders of Partnership Preferred Securities may be given at a meeting of such holders or pursuant to written consent. Amendment to the Limited Partnership Agreement In the event of (i) a liquidation of the Trust for any reason or (ii) any other distribution which effectively causes Partnership Preferred Securities to be distributed to holders of Trust Securities, the General Partner may, without the consent of the Limited Partners, amend the Limited Partnership Agreement to provide for (i) orderly dissemination, purchase, sale, exchange and replacement of such Partnership Preferred Securities, (ii) all other matters to the extent required by or desirable under then applicable law, and (iii) such other matters reasonably incidental or related thereto; provided, however, that no such amendment may materially adversely effect the rights, preferences and value of any class of such Partnership Preferred Securities without the consent of a majority in interest of the partners so effected. Transfer Agent, Paying Agent, Registrar and Conversion Agent While all of the Partnership Securities are held by the Trust, the General Partner will act as Paying Agent, Registrar, Transfer Agent and Conversion Agent for the Partnership Preferred Securities. Registration of transfers of Partnership Preferred Securities will be effected without charge by or on behalf of Citizens Capital, but upon payment (with the giving of such indemnity as Citizens Capital may require) in respect of any tax or other government charges which may be imposed in relation to it. Page 58 GUARANTEES The following is a description of the principal terms and provisions of the Convertible Preferred Securities Guarantee and the Convertible Common Securities Guarantee (collectively the "Trust Guarantees"), which will be executed and delivered by Citizens for the benefit of the holders from time to time of the Trust Securities, and the Partnership Guarantee (together with the Trust Guarantees, the "Guarantees"), which will be executed and delivered by Citizens for the benefit of the holders from time to time of the Partnership Preferred Securities. The following description is qualified in its entirety by reference to such agreements, copies of the forms of which are filed as exhibits to the Registration Statement of which this Prospectus is a part. General Each of the Partnership Guarantee and the Convertible Preferred Securities Guarantee will be qualified as an indenture under the Trust Indenture Act. Chemical Bank will act as indenture trustee under each such Guarantee (the "Guarantee Trustee"). The terms of each such Guarantee will be those set forth in such Guarantee and those made part of such Guarantee by the Trust Indenture Act. Pursuant to the Convertible Preferred Securities Guarantee, Citizens will irrevocably and unconditionally agree, on a subordinated basis and to the extent set forth therein, to pay in full to the holders of the Convertible Preferred Securities, the Guarantee Payments (as defined below) as and when due. The following payments, to the extent not paid by the Trust, are the "Guarantee Payments": (a) any accrued or deferred and unpaid distributions that are required to be paid on the Convertible Preferred Securities from cash and/or Common Stock available therefor; (b) the Redemption Price payable with respect to Convertible Preferred Securities called for redemption by the Trust out of cash and/or Common Stock available therefor; and (c) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Partnership Preferred Securities or Convertible Debentures to the holders of Convertible Preferred Securities or the redemption of all of the Convertible Preferred Securities) the lesser of (i) the Liquidation Distribution, to the extent that the Trust has cash and/or Common Stock available therefor and (ii) the amount of assets of the Trust available for distribution to holders of Convertible Preferred Securities in liquidation of the Trust. Pursuant to the Partnership Guarantee, Citizens will irrevocably and unconditionally agree, on a subordinated basis and to the extent set forth therein, to pay in full to the holders of the Partnership Preferred Securities, the Partnership Guarantee Payments (as defined below) as and when due. The following payments, to the extent not paid by Citizens Capital, are the "Partnership Guarantee Payments": (a) any accrued or deferred and unpaid distributions that are required to be paid on the Partnership Preferred Securities from cash and/or Common Stock legally available therefor; (b) the Redemption Price payable with respect to Partnership Preferred Securities called for redemption by Citizens Capital out of cash and/or Common Stock legally available therefor; and (c), upon a voluntary or involuntary dissolution, winding-up or termination of Citizens Capital (other than in connection with the distribution of Convertible Debentures to the holders of Partnership Preferred Securities or the redemption of all of the Partnership Preferred Securities), the lesser of (i) the Partnership Liquidation Distribution, to the extent that Citizens Capital has cash and/or Common Stock legally Page 59 available therefor and (ii) the amount of assets of Citizens Capital available for distribution to holders of Partnership Preferred Securities in liquidation of Citizens Capital. Citizens has also agreed in the Convertible Common Securities Guarantee to irrevocably and unconditionally guarantee the obligations of the Trust with respect to the Convertible Common Securities to the same extent as the Convertible Preferred Securities Guarantee, except that, upon an Indenture Event of Default, holders of Convertible Preferred Securities shall have priority over holders of Convertible Common Securities under the Convertible Common Securities Guarantee with respect to distributions and payments on liquidation, redemption or otherwise. Each Trust Guarantee will be a full and unconditional guarantee with respect to the Trust Securities issued by the Trust but will not apply to any payment of distributions except to the extent the Trust shall have cash and/or Common Stock available therefor. The Partnership Guarantee will be a full and unconditional guarantee with respect to the Partnership Preferred Securities issued by Citizens Capital from the time of issuance of such Partnership Preferred Securities but will not apply to any payment of distributions except to the extent Citizens Capital shall have cash and/or Common Stock legally available therefor. If Citizens fails to make interest payments on the Convertible Debentures purchased by Citizens Capital, Citizens Capital will have insufficient funds to pay distributions on the Partnership Preferred Securities and the Trust will have insufficient funds to pay distributions on the Convertible Preferred Securities. The Guarantees do not cover payments of distributions when the Trust or Citizens Capital do not have sufficient cash and/or Common Stock to pay such distributions. Holders of the Trust Securities and Partnership Preferred Securities may proceed to enforce such obligations directly against Citizens as guarantor, rather than having to proceed first against the Trust or Citizens Capital. Such obligations will not be discharged except by payment of the Guarantee Payments or Partnership Guarantee Payments, as the case may be, in full. Certain Covenants of Citizens In the Partnership Guarantee Citizens will covenant and agree that, so long as any Partnership Preferred Securities are outstanding, and in the Convertible Preferred Securities Guarantee Citizens will covenant and agree that, so long as any Convertible Preferred Securities are outstanding, if Citizens exercises its right to defer interest payments on the Convertible Debentures or there shall have occurred any event that would constitute an event of default under either such Guarantee, the Limited Partnership Agreement or the Declaration, then (a) Citizens will not declare or pay any dividend or distribution (other than in shares of its capital stock) on any of Citizens's capital stock, (b) neither Citizens nor any of its subsidiaries will redeem, Page 60 purchase, acquire for value or make a liquidation payment to any holder of, or with respect to, any of its capital stock or Other Subordinated Indebtedness (with certain exceptions, see "Convertible Debentures - Certain Covenants of Citizens"), (c) Citizens will not make any payment of principal, premium or interest (unless payable in shares of capital stock) on Other Subordinated Indebtedness, and (d) neither Citizens nor any of its subsidiaries will make any guarantee of payments which would be prohibited or limited by the foregoing (other than payments under the Guarantees, payments of dividends by a subsidiary, or guarantees of dividends or payments payable to Citizens). As a part of the Guarantees, Citizens will agree that it will honor all obligations described therein relating to the conversion of the Convertible Preferred Securities and Partnership Preferred Securities into or for Common Stock Series A, as described in "Convertible Preferred Securities - Conversion Rights." Subordination Each Guarantee will constitute an unsecured obligation of Citizens and will rank subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness of Citizens and will be subject to other subordination provisions substantially identical to those relating to the Convertible Debentures. See "Convertible Debentures - Subordination." The terms of the Convertible Preferred Securities and the Partnership Preferred Securities provide that each holder of Convertible Preferred Securities and Partnership Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the applicable Guarantee. On the bankruptcy, liquidation or winding-up of Citizens, its obligations under the Guarantees will rank junior to all Senior Indebtedness and, therefore, funds may not be available for payment under the Guarantees. As of June 30, 1995, Senior Indebtedness included (i) obligations in the amount of $1,235,844,000 of the nature described in clauses (a) and (b) of the definition of Senior Indebtedness, plus (ii) other obligations of Citizens of the nature described in clauses (c) through (h) of the definition of Senior Indebtedness. See "Convertible Debentures - Subordination." Amendments and Assignment Except with respect to any changes that do not adversely affect the rights of holders of the securities guaranteed therein, the terms of each Guarantee may be amended only with the prior approval of the holders of not less than 66 2/3% of the aggregate liquidation preference of the Convertible Preferred Securities or Partnership Preferred Securities, as the case may be, then outstanding. The manner of obtaining any such approval of holders of the Convertible Preferred Securities and the Partnership Preferred Securities will be as set forth in "Convertible Preferred Securities - Voting Rights" and "Partnership Preferred Securities - Voting Rights." All provisions contained in the Guarantees will bind the successors, assigns, receivers, trustees and representatives of Citizens and will inure to the benefit of the holders of the Convertible Preferred Securities or Partnership Preferred Securities, as the case may be. Page 61 Termination Citizens' obligation to make Guarantee Payments under the Convertible Preferred Securities Guarantee will terminate as to each holder of Convertible Preferred Securities and be of no further force and effect upon (a) full payment of the Redemption Price of such holder's Convertible Preferred Securities, (b) full payment of the amounts payable to such holder upon liquidation of the Trust, (c) the distribution of Common Stock Series A to such holder in respect of the conversion of all of such holder's Convertible Preferred Securities into Common Stock Series A or (d) distribution of the Partnership Preferred Securities or Convertible Debentures to such holder in respect of the exchange for all of such holder's Convertible Preferred Securities. Citizens' obligation to make Partnership Guarantee Payments under the Partnership Guarantee will terminate as to each holder of Partnership Preferred Securities and be of no further force and effect upon (a) full payment of the Partnership Redemption Price of such holder's Partnership Preferred Securities, (b) full payment of the amounts payable to such holder upon liquidation of Citizens Capital, (c) the distribution of Common Stock Series A to such holder in respect of the conversion of all of such holder's Partnership Preferred Securities into Common Stock Series A or (d) distribution of the Convertible Debentures to such holder in respect of the exchange for all of such holder's Partnership Preferred Securities. Events of Default An Event of Default under the Guarantees will occur upon the failure of Citizens to perform any of its payment or other obligations thereunder. The holders of a majority in aggregate liquidation amount of the Convertible Preferred Securities and the holders of a majority in aggregate liquidation amount of the Partnership Preferred Securities to which a Guarantee relates have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of the respective Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce such Guarantee, any holder of Convertible Preferred Securities or Partnership Preferred Securities relating to such Guarantee may, after a period of 30 days has elapsed from such holder's written request to the Guarantee Trustee to enforce the Guarantee, institute a legal proceeding directly against Citizens to enforce the Guarantees Trustee's rights under such Guarantee, without first instituting a legal proceeding against the Trust, Citizens Capital, the Guarantee Trustee or any other person. Citizens will be required to provide annually to the Guarantee Trustee an officer's certificate as to the full compliance by Citizens with its obligations under each of the Guarantees and as to any default in such obligation. Page 62 CONVERTIBLE DEBENTURES The following summary of principal terms and provisions of the Convertible Debentures in which Citizens Capital will invest the proceeds of the issuance and sale of the Trust Securities does not purport to be complete and is qualified in its entirety by reference to the Indenture (the "Base Indenture") between Citizens and Chemical Bank, as trustee (the "Debenture Trustee"), supplemented by a First Supplemental Indenture (the Base Indenture, as so supplemented, is hereinafter referred to as the "Indenture") forms of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part. Under certain circumstances involving the liquidation of the Trust following the occurrence of a Trust Event and a Partnership Event, Convertible Debentures may be distributed to the holders of the Trust Securities. See discussion below and in "Convertible Preferred Securities - Special Events Redemption and Distribution." General The Convertible Debentures will be limited in aggregate principal amount to $185,993,000, such amount being the sum of (i) the aggregate amount of the proceeds from the offering of the Convertible Preferred Securities and the issuance and sale of the Convertible Common Securities and (ii) the capital contributed to Citizens Capital by the General Partner (the "General Partner Payment"), less 1% of such sum, which amount may be increased to up to $213,895,000 upon the exercise of the Underwriters' over- allotment option. The entire principal amount of the Convertible Debentures will become due and payable, together with any accrued or deferred and unpaid interest thereon on ___________, 2035. The Convertible Debentures are not entitled to the benefit of any sinking fund. The Convertible Debentures will be issued only in fully registered form, without coupons, in denominations of $50 and any integral multiple thereof. No service charge will be made for any registration of transfer or exchange of Convertible Debentures, but Citizens may require payment of a sum sufficient from the holders to cover any tax or other governmental charge payable in connection therewith. Optional Redemption Citizens will have the right to redeem the Convertible Debentures, at its option, in whole or in part, at any time on or after _________, 199_, at 100% of the principal amount being redeemed, together with all accrued or deferred and unpaid interest on the portion being redeemed to the redemption date, plus Additional Interest, if any. Citizens may also redeem the Convertible Debentures as described in the following paragraph. Page 63 Special Events Redemption and Distribution As described elsewhere herein, the Convertible Debentures may be redeemed or distributed to holders upon the occurrence of certain Special Events or a Rating Agency Event. For a fuller discussion of this feature, see "Convertible Preferred Securities - Special Events Redemption and Distribution." However, if at the time there is available to Citizens, the Partnership or the Trust the opportunity to eliminate the adverse effect of the Special Event on the Trust, Citizens or the Partnership by taking some ministerial action, such as filing a form or making an election or pursuing some other similar reasonable measure, where the taking of such action does not involve a material cost, neither Citizens (subject to its right to redeem at any time after ___________, 199_), the Partnership nor the Trust may redeem without first having pursued such ministerial action. Interest The Convertible Debentures will bear interest at the Rate. As described elsewhere herein, interest may be payable in cash or securities. For a fuller discussion of interest, see the descriptions under "Prospectus Summary" and "Convertible Preferred Securities." Option to Defer Interest Payments As described in greater detail elsewhere herein, so long as no Indenture Event of Default has occurred or is continuing, Citizens has the right to, and may, defer the payment of each quarterly interest payment to a date subsequent to the regular Interest Payment Date. Upon any such deferrals, interest will compound on each scheduled Interest Payment Date and accrued until paid at the Rate on any unpaid interest so deferred until the amount of such deferred interest (including compounded interest thereon) is paid in full. See "Convertible Preferred Securities - Distributions" for a complete discussion of the terms and conditions governing such deferrals. Additional Interest Citizens is required to pay either (i) directly to such taxing authority, the Trust or the Partnership, as the case may be or (ii) to the Trust or Partnership, as the case may be, as Additional Interest on the Convertible Debentures, any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon either the Trust or Citizens Capital. Citizens shall be required to pay Additional Interest in an amount so that the net amounts received and retained by the Trust or Citizens Capital, as the case may be, after all such taxes, duties, assessments or governmental charges have been paid will not be less than the amount such entities would have received and retained had no such taxes, duties, assessments or governmental charges been imposed. If such taxes or duties are paid as Additional Interest to the Trust or the Partnership, then the Trust or the Partnership, as the case may be, is required to pay such amounts over to such taxing authority in satisfaction of such charges or assessments. Page 64 Subordination The Indenture provides that the Convertible Debentures are subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness (as defined below) of Citizens. Upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or liabilities or any bankruptcy, insolvency or similar proceedings of the Company, the holders of Senior Indebtedness will be entitled to receive payment in full in cash of all amounts due on or to become due on or in respect of all Senior Indebtedness, before the holders of the Convertible Debentures are entitled to receive any payment (including any payment to holders of the Convertible Debentures made in respect of any other debt subordinated to the Convertible Debentures) on account of the principal of or interest on the Convertible Debentures or on account of any purchase, redemption or other acquisition of the Convertible Debentures by the Company. The Company may not make any payments on the account of the Convertible Debentures or on account of the purchase or redemption or other acquisition of the Convertible Debentures (except, so long as the Partnership exists, in shares of capital stock), if there has occurred and is continuing a default in the payment of the principal of (or premium, if any) or interest on any Senior Indebtedness (a "Senior Payment Default"). In addition, if any default (other than a Senior Payment Default), or any event which after notice or lapse of time (or both) would become a default, with respect to certain Senior Indebtedness, permitting (after notice or lapse of time or both) the holders thereof to accelerate the maturity thereof, has occurred and is continuing (a "Senior Nonmonetary Default"), and the Company and the Debenture Trustee have received written notice thereof from the holder of such certain Senior Indebtedness, then the Company may not make any payments with respect to the Convertible Debentures (except, so long as the Partnership exists, payments in shares of capital stock), for a period (a "blockage period") commencing on the date the Company and the Debenture Trustee receive such written notice and ending on the earlier of (i) 179 days after such date or (ii) the date, if any, on which the related Senior Indebtedness is discharged or such default is waived in writing or otherwise ceases to exist and any acceleration of Senior Indebtedness to which such Senior Nonmonetary Default relates is rescinded. In any event, not more than one blockage period may be commenced during any period of 360 consecutive days, and there must be a period of at least 181 consecutive days in each period of 360 consecutive days when no blockage period is in effect. By reason of such subordination, in the event of any proceeding of the type described above involving Citizens, creditors of Citizens who are holders of Senior Indebtedness and general unsecured creditors of Citizens may recover more, ratably, than the holder or holders of the Convertible Debentures. The term "Senior Indebtedness" is defined to mean the principal of, premium, if any, interest on, and any other payment due pursuant to any of the following, whether incurred (as defined in the Indenture) on or prior to the date of execution of the Indenture or thereafter incurred: (a) all obligations of Citizens for money borrowed; (b) all obligations of Citizens evidenced by notes, debentures, bonds or other similar instruments, including obligations incurred in connection with the acquisition of Page 65 property, assets or businesses; (c) all capitalized lease obligations of Citizens; (d) all reimbursement obligations of Citizens with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of Citizens; (e) all obligations of Citizens issued or assumed as the deferred purchase price of property or services, (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business); (f) all payment obligations of Citizens under interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements at the time of determination, including any such obligations incurred by Citizens solely to act as a hedge against increases in interest rates that may occur under the terms of other outstanding variable or floating rate indebtedness of Citizens; (g) all obligations under lease transactions pursuant to which Citizens or any of its subsidiaries are treated as the owner of the subject property for federal income tax purposes; (h) all obligations of the type referred to in clauses (a) through (g) above of another person and all dividends of another person, the payment of which, in either case, Citizens has assumed or guaranteed, or for which Citizens is responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise; and (i) all amendments, modifications, renewals, extensions, refinancings, replacements and refundings by Citizens of any such indebtedness referred to in clauses (a) through (h) above (and of any such amended, modified, renewed, extended, refinanced, refunded or replaced indebtedness); provided, however, that the following shall not constitute Senior Indebtedness; (a) any trade accounts payable or accrued liabilities arising in the ordinary course of business, (b) any indebtedness owed to a person when such person is a subsidiary of Citizens, or (c) any indebtedness which by the terms of the instrument creating or evidencing the same expressly Page 66 provides that it is not superior in right of payment to the Convertible Debentures. As of June 30, 1995, Senior Indebtedness included (i) obligations in the amount of $1,235,844,000 of the nature described in clauses (a) and (b) of the above definition of Senior Indebtedness, plus (ii) other obligations of Citizens of the nautre described in clauses (c) through (h) of the above definition of Senior Indebtedness. See Convertible Debentures - Subordination." The Indenture does not limit Citizens' ability to incur Senior Indebtedness. Certain Covenants of Citizens Citizens will also covenant in the Indenture that (i) it will not declare or pay any dividend or distribution (other than in shares of capital stock) on any of the Company's capital stock, (ii) that neither it nor any of its subsidiaries will redeem, purchase, acquire for value or make a liquidation payment to any holder of, or with respect to, any of its capital stock or any of its indebtedness for borrowed money which by its terms ranks junior in subordination to the Convertible Debentures ("Other Subordinated Indebtedness") (other than (x) as an issuance of capital stock upon conversion of a convertible security or in payment of interest, premium or principal or in payment in redemption, purchase or other acquisition or liquidation of capital stock or Other Subordinated Indebtedness, (y) as a result of reclassification of such capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock, or (z) in connection with the right of the Company to purchase or reacquire shares of Common Stock under the First Supplemental Indenture, the Declaration or the Limited Partnership Agreement), (iii) that Citizens will not pay principal, interest or premium on Other Subordinated Indebtedness (unless payable in shares of capital stock) and (iv) that neither Citizens nor any of its subsidiaries will or make any guarantee of payments which would be prohibited or limited by the foregoing (other than payments under the Guarantees, payments of dividends by a subsidiary, or guarantees of dividends or payments payable to Citizens), if at such time (a) there shall have occurred any event that, with the giving of notice or the lapse of time or both would constitute an Indenture Event of Default, (b) Citizens shall be in default with respect to its payment or other obligations under the Guarantees or (c) Citizens shall have deferred the payment of interest and such deferral of interest payments or any extension thereof shall be continuing. The term "Other Subordinated Indebtedness" shall only include any indebtedness which is outstanding under an instrument which expressly permits the deferral of payment or extension of the time for payment of interest, premium or principal, or any installment thereof. The Company also will covenant (i) to remain the General Partner of the Partnership; provided that any permitted successor of the Company under the Limited Partnership Agreement may succeed to the Company's duties as General Partner, (ii) to cause at least 3% of the total value of the Partnership and at least 3% of all interests in the capital, income, gain, loss, deduction and credit of the Partnership to be held by the Company, as a General Partner of the Partnership, (iii) not to voluntarily dissolve, wind-up or liquidate the Partnership, (iv) to perform timely all of its duties as General Partner (including the duty to declare and pay distributions on the Partnership Preferred Securities), (v) to maintain direct ownership of all partnership interests Page 67 of the Partnership other than the Partnership Preferred Securities, except as may be permitted by the Limited Partnership Agreement, (vi) to use its reasonable efforts to cause the Partnership to remain a limited partnership and otherwise to continue to be treated as a partnership for United States federal income tax purposes; (vii) to issue Common Stock Series A upon an election by holders to convert the Convertible Debentures; and (viii) to own Convertible Common Securities equal to at least 3% of the total undivided beneficial interests in the assets of the Trust. The Company will also covenant that, so long as any Convertible Debentures are held by the Partnership, the General Partner shall not (i) exercise its option to select the form of payment of interest in violation of instructions of the Special Representative, (ii) direct the time, method and place of conducting any proceeding for any remedy available to the Special Representative, or exercising any trust or power conferred on the Special Representative with respect to the Convertible Debentures, (iii) waive any past default which is waivable under the Indenture, (iv) exercise any right to rescind or annul a declaration that the principal of all the Convertible Debentures shall be due and payable or (v) consent to any amendment, modification or termination of the Convertible Debentures or of the Indenture without, in each case, obtaining the prior approval of the Property Trustee after having received the prior consent of the holders of at least 66 2/3% or more of the aggregate liquidation preference (or a majortiy of the aggregate liquidation preference in the case of waiver of certain past defaults) of the Convertible Preferred Securities then outstanding, provided, however, that where a consent under the Convertible Debentures would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of such Property Trustee, who has received prior consent from each holder of the Convertible Preferred Securities. The General Partner shall not revoke any action previously authorized or approved by a vote of the Property Trustee after having received the prior consent of the holders of the Convertible Preferred Securities, without the approval of the holders of Convertible Preferred Securities representing 66 2/3% or more (or 100% where the consent of each holder affected thereby is required) of the aggregate liquidation preference of the Convertible Preferred Securities. The Company will further covenant that in the event of a merger, consolidation or transfer of assets of the Company with or to another corporation or entity, in which the Company is not the surviving corporation, the surviving entity shall assume the obligations of the Company for the Debentures under the Indenture by execution of a supplemental indenture. Conversion of the Convertible Debentures The Convertible Debentures will be convertible into Common Stock Series A at the option of the holders of the Convertible Debentures, in whole or in part, until and including five (5) Business Days prior to __________, 2035, at a conversion price of $________ per share of Common Stock Series A for each Convertible Debenture, subject to the conversion price adjustments described under "Convertible Preferred Securities - Conversion Rights." If Convertible Debentures are called for redemption, the conversion right will terminate five (5) Business Days prior to the redemption date. Page 68 In order to exercise the conversion privilege, the holder of any Convertible Debenture to be converted shall surrender such Debenture to the Conversion Agent with a written Notice of Conversion. Upon a delivery of the Convertible Preferred Securities and Notice of Conversion to the Conversion Agent, the Conversion Agent will convert such Convertible Debentures to Common Stock Series A on behalf of such holder. Citizens' delivery to the holders of the Convertible Debentures (through the Conversion Agent) of the fixed number of shares of Common Stock Series A into which the Convertible Debentures are convertible (together with the cash payment, if any, in lieu of fractional shares) will be deemed to satisfy Citizens' obligation to pay the principal amount of the Convertible Debentures and any accrued and unpaid interest attributable to the period from the last date to which interest has been paid or duly provided for. See "Convertible Preferred Securities - Conversion Rights." Indenture Events of Default If one or more of the following events (each an "Indenture Event of Default") shall occur and be continuing: (a) failure to pay any principal of the Convertible Debentures when due, and such failure continues for a period of 15 days; (b) failure to pay any interest, other than Additional Interest (if any), on the Convertible Debentures when due and such failure continues for a period of 60 days; provided that a valid deferral of an interest payment by Citizens shall not constitute a default; (c) failure by Citizens to deliver shares of Common Stock Series A upon an election to convert Convertible Debentures for Common Stock Series A, and such failure continues for a period of five days; (d) failure by Citizens to perform in any material respect any other covenant in the Indenture for the benefit of the holders of Convertible Debentures continued for a period of 90 days after written notice to Citizens from the Debenture Trustee or the holders of a majority in principal or liquidation amount of Convertible Debentures, Partnership Preferred Securities or Convertible Preferred Securities; (e) the dissolution, winding-up, liquidation or termination of Citizens Capital (except as a result of a Special Event or Rating Agency Event, as permitted the Limited Partnership Agreement); (f) the dissolution, winding-up, liquidation or termination of the Trust (except as a result of a Special Event or Rating Agency Event, as permitted in the Declaration); or Page 69 (g) certain events of bankruptcy, insolvency or liquidation of Citizens, Citizens Capital or the Trust; then either the Debenture Trustee or the holders of a majority in aggregate principal amount of the Convertible Debentures then outstanding will have the right to declare the principal of and the interest on the Convertible Debentures and any other amount payable under the Convertible Debentures to be forthwith due and payable and to enforce the holders' other rights as creditors with respect to the Convertible Debentures; provided, however, that if upon an Indenture Event of Default, the Debenture Trustee or the holders of a majority in aggregate principal amount of the Convertible Debentures then outstanding fail to declare the payment of all amounts on the Convertible Debentures to be immediately due and payable, the trustee for the holders of a majority in aggregate liquidation preference of Convertible Preferred Securities then outstanding shall have such right; provided further, however, that after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding Convertible Debentures, or the holders of the Convertible Preferred Securities if they accelerated such payment, may, under certain circumstances, rescind and annul such acceleration if all Indenture Events of Default, other than the non-payment of accelerated principal, have been cured or waived as provided in the Indenture. For information as to waiver of defaults, see "- Modification of the Indenture." Citizens Capital is the initial holder of the Convertible Debentures. However, while the Convertible Preferred Securities are outstanding, the General Partner of Citizens Capital has agreed not to waive an Indenture Event of Default without the consent of holders of 66 2/3% in aggregate liquidation preference of the Convertible Preferred Securities then outstanding. Additionally, under the terms of the Partnership Preferred Securities, the holders of outstanding Partnership Preferred Securities will have the rights described above under "Partnership Preferred Securities - Voting Rights," including the right to appoint a Special Representative, which shall be authorized to exercise the right of Citizens Capital, as the holder of Convertible Debentures, to accelerate the principal amount of the Convertible Debentures and accrued interest thereon and to enforce the other rights of holders of the Convertible Debentures as creditors under the Convertible Debentures. A default under any other indebtedness of Citizens would not constitute an Indenture Event of Default under the Convertible Debentures. Subject to the provision of the Indenture relating to the duties of the Debenture Trustee in case an Indenture Event of Default shall occur and be continuing, the Debenture Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any holders of Convertible Debentures, unless such holders shall have offered to the Debenture Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Debenture Trustee, the holders of a majority in aggregate principal amount of the Convertible Debentures then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee or exercising any trust or power conferred on the Debenture Trustee. No holder of any Convertible Debenture will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such holder shall have Page 70 previously given to the Debenture Trustee written notice of a continuing Indenture Event of Default and, unless the holders of a majority in aggregate principal amount of the Convertible Debentures then outstanding also shall have made written request, and offered reasonable indemnity, to the Debenture Trustee to institute such proceeding as trustee, and the Debenture Trustee shall not have received from the holders of 66 2/3% in aggregate principal amount of the outstanding Convertible Debentures a direction inconsistent with such request and shall have failed to institute such proceeding within 90 days. Citizens will be required to furnish to the Debenture Trustee annually a statement as to the performance by Citizens of certain of its obligations under the Indenture and as to any default of such performance. Modification of the Indenture The Indenture may be amended by Citizens and the Debenture Trustee with the consent of the holders of not less than 66 2/3% in aggregate principal amount of the outstanding Convertible Debentures; provided, that no such modification or amendment may, without the consent of the holder of each outstanding Convertible Debenture affected thereby, (a) change the Maturity of the principal of, or any installment of interest on, any Convertible Debenture, (b) reduce the principal amount of, or interest on, any Convertible Debenture, (c) change the premium payable upon redemption of any Convertible Debenture, (d) impair the right to institute suit for the enforcement of any payment on or with respect to any Convertible Debenture, (e) adversely affect the right to convert or exchange Convertible Debentures, (f) modify the subordination provision in a manner adverse to the holders of the Convertible Debentures, (g) reduce the above-stated percentage of outstanding Convertible Debentures necessary to modify or amend the Indenture or (h) reduce the percentage of aggregate principal amount of outstanding Convertible Debentures necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults; and provided further, that so long as any of the Convertible Preferred Securities or Partnership Preferred Securities remain outstanding, no such amendment may be made that adversely affects the holders of Convertible Preferred Securities or Partnership Preferred Securities, and no termination of the Indenture may occur, and no Indenture Event of Default or compliance with any covenant under the Indenture may be waived by the holders of the Convertible Debentures, without the prior consent of at least 66 2/3% of the aggregate liquidation preference (or a majority of the aggregate liquidation preference in the case of waiver of certain past defaults) of the Convertible Preferred Securities or Partnership Preferred Securities then outstanding unless and until the Convertible Debentures and all accrued or deferred and unpaid interest thereon have been paid in full. Governing Law The Indenture and the Convertible Debentures will be governed by, and construed in accordance with, the laws of the State of New York. Page 71 Information Concerning the Debenture Trustee The Indenture contains certain limitations on the right of the Debenture Trustee should it become a creditor of Citizens, to obtain payment of claims in certain cases, or to realize for its own account on certain property received in respect of any such claim as security or otherwise. The Debenture Trustee will be permitted to engage in certain other transactions; however, if it acquires any conflicting interest and there is a default under the Convertible Debentures, it must eliminate such conflict or resign. Citizens has agreed in the Indenture to indemnify and hold harmless the Debenture Trustee against any losses or damages it may suffer as Debenture Trustee. Chemical Bank, the Debenture Trustee under the Indenture, has from time to time engaged in transactions with, or performed services for, Citizens in the ordinary course of business. Chemical is the trustee under an indenture dated August 15, 1991, as supplemented, pursuant to which $550 million of principal amount of debentures are outstanding thereunder. Chemical is also a participant lender under the Company's $600 million of committed bank lines of credit for general corporate purposes. As of September 30, 1995, no amounts were outstanding under such bank lines of credit. Miscellaneous The Indenture will provide that Citizens will pay all fees and expenses related to (i) the issuance and sale of the Trust Securities, the Partnership Securities and the Convertible Debentures, (ii) the organization, maintenance and dissolution of Citizens Capital and the Trust, and other costs and expenses of Citizens Capital and the Trust, (iii) the retention of the Regular Trustees, (iv) the enforcement by the Property Trustee of the rights of the holders of the Convertible Preferred Securities and (v) the extent contemplated by the Indenture, the taxes of the Partnership and the Trust and all liabilities, costs and expenses with respect to such taxes of the Partnership and the Trust either by payment of Additional Interest or by otherwise making funds available to the appropriate taxing authority or to the Partnership or the Trust. The payment of such fees and expenses will be fully and unconditionally guaranteed by Citizens. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS General The following is a summary of certain of the material United States federal income tax consequences of the purchase, ownership, disposition and conversion of Convertible Preferred Securities. Unless otherwise stated, this summary deals only with Convertible Preferred Securities held as capital assets by holders who purchase the Convertible Preferred Securities upon original issuance. The tax treatment of a holder may vary depending on its particular situation. This summary does not address all the tax consequences that may be relevant to holders who may be subject to special tax treatment such as, for example, banks, real estate Page 72 investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors, or except as specifically described herein, foreign taxpayers. This summary does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the Convertible Preferred Securities. This summary is based on the Code, Treasury regulations thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. Classification of the Convertible Debentures In connection with the issuance of the Convertible Debentures, Skadden, Arps, Slate, Meagher & Flom, special tax counsel to Citizens, Citizens Capital and the Trust, will render its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the Indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, the Convertible Debentures will be classified for United States federal income tax purposes as indebtedness of Citizens. Classification of Citizens Capital In connection with the issuance of the Limited Partnership Securities, Skadden, Arps, Slate, Meagher & Flom, special tax counsel to Citizens, Citizens Capital and the Trust, will render its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the Limited Partnership Agreement and the Indenture (and certain other documents), and based on certain facts and assumptions contain in such opinion, Citizens Capital will be classified for United States federal income tax purposes as a partnership and not as an association taxable as a corpora- tion. Classification of the Trust In connection with the issuance of the Convertible Preferred Securities, Skadden, Arps, Slate, Meagher & Flom, special tax counsel to Citizens, Citizens Capital and the Trust, will render its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the Declaration and the Indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for United States federal income tax purposes, each holder of Convertible Preferred Securities will generally be considered the owner of an undivided interest in the Limited Partnership Securities held by the Trust, and each holder will be required to include in its gross income its distributive share of the net income of Citizens Capital, which net income generally will be equal to the amount of OID accrued with respect to the allocable share of the Convertible Debentures represented by its undivided interest in the Limited Partnership Securities. Page 73 Potential Deferral of Interest Payments and Original Issue Discount Because Citizens has the option, under the terms of the Convertible Debentures, to defer payments of interest for up to 20 quarters, all of the stated interest payments on the Convertible Debentures (whether made in cash or Common Stock) will be treated as "original issue discount". Holders of debt instruments issued with OID must include that discount in income on an economic accrual basis without regard to the receipt of cash or Common Stock attributable to the interest, regardless of their method of tax accounting. The OID accrual rules may also accelerate the timing of a holder's recognition of income in certain situations. Actual payments and distributions of stated interest (whether made in cash or Common Stock) will not, however, be separately reported as taxable income. The amount of OID that accrues in any quarter will approximately equal the amount of the interest that accrues on the Convertible Debentures in that quarter at the stated interest rate. Accordingly, unless Citizens exercises its option to defer interest payments on the Convertible Debentures, a holder of Convertible Preferred Securities (whether it makes a Cash Distribution Election or Stock Distribution Election) should have the same adjusted tax basis in its Convertible Preferred Securities at the beginning of each quar- terly interest payment period. In the event that the interest payments on the Convertible Debentures are deferred, holders will continue to accrue OID with respect to their Convert- ible Preferred Securities on an economic accrual basis. During such period, OID will accrue at the stated interest rate on both the principal amount of the Convertible Debentures, and any accrued, but unpaid, interest. Because income on the Convertible Preferred Securities will constitute interest (in the form of OID), corporate holders of Convertible Preferred Securities will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the Convertible Preferred Securities. Holders Making a Stock Distribution Election A holder that makes a Stock Distribution Election will recognize the same amount of OID with respect to its Convertible Preferred Securities as a holder who makes a Cash Distribution Election. In addition, a holder that makes a Stock Distribution Election will not recognize any gain or loss on the receipt of the Common Stock from the Trust even though the fair market value of the Common Stock on the interest payment date may be greater or lesser than the cash equivalent amount of the interest payment. Furthermore, a holder will not recognize any additional income or loss with respect to cash it may receive in lieu of a fractional share of Common Stock. A holder's tax basis in the Common Stock it receives in lieu of a cash interest payment generally will equal Citizens Capital's tax basis in such Common Stock. Citizens Capital's tax basis in the Common Stock it receives as interest on the Convertible Debentures should equal the fair market value of the Common Stock on the Share Transfer and Valuation Date. It is antici- pated that the fair market value of the Common Stock on the Share Transfer and Valuation Page 74 Date will equal the cash equivalent amount of such interest payment. Accordingly, a holder who makes a Stock Distribution Election generally should have a tax basis in the shares of Common Stock it receives in lieu of a cash interest payment equal to the cash equivalent amount of such interest payment (less any cash received in lieu of a fractional share of Common Stock). In light of the fact that the value of a share of Common Stock can be expected to vary among interest payment dates, holders who make Stock Distribution Elections may have different tax bases in shares of Common Stock they receive on different payment dates. Holders should consult their tax advisors regarding the tax consequences of the ownership and disposition of shares of Common Stock with different tax bases. A holder's tax basis in its Convertible Preferred Securities will be (i) increased by the amount of OID accrued with respect to its Convertible Preferred Securities and (ii) reduced by the tax basis of the Common Stock (and the amount of cash received in lieu of fractional shares of Common Stock) received as interest with respect to its Convertible Preferred Securities. It is expected that the amount of OID accrued with respect to a quarterly interest payment period will approximately equal the tax basis of the Common Stock (and the amount of cash received in lieu of fractional shares of Common Stock) received as interest with respect to such interest payment period. Receipt of Partnership Preferred Securities, Convertible Debentures or Cash Upon Liquidation of Citizens Capital and the Trust. Under certain circumstances, as described under the caption "Convertible Preferred Securities - Special Events Redemption and Distribution", Convertible Debentures may be distributed to holders in exchange for their Convertible Preferred Securities and in liquidation of Citizens Capital and the Trust. Under current law, such a distribution to holders, for United States federal income tax purposes, would be treated as a nontaxable event to each holder, and each holder would receive an aggregate tax basis in the Convertible Debentures equal to such holder's aggregate tax basis in its Convertible Preferred Securities. A holder's Page 75 holding period in the Convertible Debentures so received in liquidation of Citizens Capital and the Trust would include the period during which the Convertible Preferred Securities were held by such holder. If, however, the related Special Event is a Partnership Tax Event or a Trust Tax Event which results in Citizens Capital or the Trust, respectively, being treated as an association taxable as a corporation, the distribution of the Convertible Debentures would likely constitute a taxable event to holders of the Convertible Preferred Securities. Under certain circumstances, as described under the caption "Convertible Preferred Securities - Special Events Redemption and Distribution", Limited Partnership Securities may be distributed to holders in exchange for their Convertible Preferred Securities and in liquidation of the Trust. Under current law, such a distribution to holders, for United States federal income tax purposes, would be treated as a nontaxable event to each holder, and each holder would receive an aggregate tax basis in its Limited Partnership Securities equal to such holder's aggregate tax basis in its Convertible Preferred Securities exchanged therefor. A holder's holding period in the Limited Partnership Securities so received in liquidation of the Trust would include the period during which the Convertible Preferred Securities were held by such holder. If, however, the related Special Event resulting in the liquidation of the Trust is a Trust Tax Event which results in the Trust being treated as an association taxable as a corporation, the distribution would likely constitute a taxable event to the holders of the Convertible Preferred Securities. Under certain circumstances, as described under the caption "Convertible Preferred Securities - Special Events Redemption and Distribution", the Convertible Debentures may be redeemed by Citizens for cash and the proceeds of such redemption distributed by Citizens Capital to the Trust in redemption of the Limited Partnership Securities which, in turn, will distribute such proceeds to holders in redemption of their Convertible Preferred Securities. Under current law, such a redemption would, for United States federal income tax purposes, constitute a taxable disposition of the Convertible Preferred Securities, and a holder would recognize gain or loss as if it sold such redeemed Convertible Preferred Securities for an amount of cash equal to the proceeds received upon redemption. See "Convertible Preferred Securities." Disposition of Convertible Preferred Securities A holder that sells Convertible Preferred Securities will recognize gain or loss equal to the difference between the amount realized on the sale of the Convertible Preferred Securities and the holder's adjusted tax basis in such Convertible Preferred Securities. Such gain or loss will be a capital gain or loss and will be a long-term capital gain or loss if the Convertible Preferred Securities have been held for more than one year at the time of sale. A holder's tax basis in its Convertible Preferred Securities will be in (i) increased by the amount of OID accrued with respect to its Convertible Preferred Securities and (ii) reduced by (x) the amount of cash and (y) the tax basis of any shares of Common Stock received with respect to its Convertible Preferred Securities. It is expected that the amount of OID accrued with respect to a quarterly interest payment period will approximately equal the amount of cash and the tax basis of the Common Stock, if any, received as interest with respect to such interest payment period. The Convertible Preferred Securities may trade at a price that does not accurately reflect the value of accrued but unpaid distributions and interest with respect to the underlying Limited Partnership Securities and Convertible Debentures, respectively. A holder who disposes of or converts its Convertible Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Convertible Debentures through the date of disposition in income as ordinary income, and to add such amount to the adjusted tax basis in its Convertible Preferred Securities. To the extent the selling price is less than the holder's adjusted tax basis (which basis will include, in the form of OID, all accrued but unpaid interest), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. Page 76 Exchange of Convertible Preferred Securities for Common Stock A holder of Convertible Preferred Securities will not recognize income, gain or loss upon the conversion, through the Conversion Agent, of Convertible Preferred Securities into Common Stock in the manner described under the caption "Convertible Preferred Securities - Conversion Rights." A holder of Convertible Preferred Securities will, however, recognize gain upon the receipt of cash in lieu of a fractional share of Common Stock equal to the amount of cash received less the holder's tax basis in such fractional share. A holder's tax basis in the Common Stock received upon the exchange and conversion of its Convertible Preferred Securities should generally be equal to the holder's adjusted tax basis in the Convertible Preferred Securities delivered to the Conversion Agent for exchange less the basis allocated to any fractional share for which cash is received. A holder's holding period in the Common Stock received upon exchange and conversion of its Convertible Preferred Securities should generally begin on the date such holder acquired the Convertible Preferred Securities delivered to the Conversion Agent for exchange. Adjustment of Conversion Price Treasury Regulations promulgated under Section 305 of the Code would treat holders of Convertible Preferred Securities as having received a constructive distribution from Citizens in the event the conversion ratio of the Convertible Debentures were adjusted if (i) as a result of such adjustment, the proportionate interest (measured by the quantum of Citizens Common Stock into or for which the Convertible Debentures are convertible or exchangeable) of the holders of the Preferred Securities in the assets or earnings and profits of Citizens were increased, and (ii) the adjustment was not made pursuant to a bona fide, reasonable antidilution formula. An adjustment in the conversion ratio would not be considered made pursuant to such a formula if the adjustment was made to compensate for certain taxable distributions with respect to the Citizens Common Stock. Thus, under certain circumstances, a reduction in the conversion price for the holders may result in deemed dividend income to holders to the extent of the current or accumulated earnings and profits of Citizens. Holders of the Convertible Preferred Securities would be required to include their allocable share of such deemed dividend income in gross income but will not receive any cash related thereto. An adjustment in the conversion ratio made to account for nontaxable distributions of Common Stock made with respect to Common Stock will generally not cause holders of Convertible Preferred Securities to realize a constructive dividend from Citizens. In addition, the failure to fully adjust the conversion price of the Convertible Debentures to reflect distributions of stock dividends with respect to the Common Stock may result in a taxable dividend to the holders of the Common Stock. United States Alien Holders For purposes of this discussion, a "United States Alien Holder" is any corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership, or a nonresident fiduciary of a foreign estate or trust. Page 77 Under present United States federal income tax law, (i) payments by the Trust or any of its paying agents (whether in the form of cash or Common Stock) to any holder of a Convertible Preferred Security who or which is a United States Alien Holder will not be subject to withholding of United States federal income tax; provided that, (a) the beneficial owner of the Convertible Preferred Security does not actually or constructively (including by virtue of its interest in the underlying Convertible Debentures) own 10% or more of the total combined voting power of all classes of stock of Citizens entitled to vote, (b) the beneficial owner of the Convertible Preferred Security is not a controlled foreign corporation that is related to Citizens through stock ownership, and (c) either (A) the beneficial owner of the Convertible Preferred Security certifies to the Trust or its agent, under penalties of perjury, that it is not a United States holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution"), and holds the Convertible Preferred Security in such capacity, that certifies to the Trust or its agent, under penalties of perjury, that such statement has been received from the beneficial owner by it or by a Financial Institution between it and the beneficial owner and furnishes the Trust or its agent with a copy thereof; and (ii) a United States Alien Holder of a Convertible Preferred Security will not be subject to withholding of United States federal income tax on any gain realized upon the sale or other disposition of a Convertible Preferred Security. If a United States Alien Holder is treated as receiving a deemed dividend as a result of an adjustment of the conversion price of the Convertible Debentures, as described above under "Adjustment of Conversion Price", such deemed dividend may be subject to United States federal withholding tax at a 30% (or lower treaty) rate. Information Reporting and Backup Withholding Income on the Convertible Preferred Securities will be reported to holders on Form 1099, which form should be mailed to holders of Convertible Preferred Securities by January 31 following each calendar year. Payments made on and proceeds from the sale of Convertible Preferred Securities may be subject to a "back-up" withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amount will generally be allowed as a credit against the holder's United States federal income tax, provided the required information is timely filed with the Internal Revenue Service. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CONVERTIBLE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. Page 78 UNDERWRITING The underwriters of the offering of the Convertible Preferred Securities named below (the "Underwriters"), for whom are acting as representatives (the "Representatives"), have severally agreed, subject to the terms and conditions of an Underwriting Agreement (the "Underwriting Agreement"), to purchase from the Trust Convertible Preferred Securities with the aggregate liquidation value set forth opposite their respective names below. Liquidation Value of Convertible Underwriters Preferred Securities ------------ -------------------- _____________ Total ============= The Underwriting Agreement provides that the obligations of the Underwriters to purchase Convertible Preferred Securities are subject to certain conditions. The Underwriting Agreement provides that, if any Convertible Preferred Securities are purchased pursuant to the Underwriting Agreement, all Convertible Preferred Securities agreed to be purchased pursuant to the Underwriting Agreement must be so purchased. The Trust, the Partnership and the Company have granted to the Underwriters an option to purchase up to an additional $26,250,000 aggregate liquidation value of Convertible Preferred Securities at the public offering price less the aggregate underwriting discount, solely to cover over-allotments. The option may be exercised at any time up to 30 days after the date of this Prospectus. The Underwriters propose initially to offer the Convertible Preferred Securities directly to the public at the offering price set forth on the cover page of this Prospectus, and to certain securities dealers at such public offering price less a selling concession not in excess of $ per Convertible Preferred Security. The selected dealers may reallow a discount not in excess of $ per Convertible Preferred Security on sales to certain other dealers. After the offering of the Convertible Preferred Securities, the public offering price, concession and discount may be changed. In view of the fact that the proceeds of the sale of the Convertible Preferred Securities will ultimately be used to purchase the Convertible Debentures of Citizens, the Underwriting Agreement provides that Citizens will pay as compensation ("Underwriters' Compensation") to the Underwriters arranging the investment therein of such proceeds, an amount in New York Clearing House (next day) funds of $_____ per Convertible Preferred Security (or $_____ in the aggregate) for the accounts of the several Underwriters. Page 79 The Company, the Partnership and the Trust have agreed to indemnify the Underwriters against certain liabilities which may be incurred in connection with the offering of the Convertible Preferred Securities and the exercise of the over-allotment options, including liabilities under the 1933 Act. The Trust, the Partnership and the Company have agreed, with certain exceptions, that they will not sell or otherwise dispose of any Convertible Preferred Securities, Partnership Preferred Securities, Convertible Debentures or shares of Common Stock Series A or Common Stock Series B or certain other securities, with certain designated exceptions for a period of __ days from the date of this Prospectus without the written consent of the Representatives. Application will be made to list the Convertible Preferred Securities on the NYSE. Trading of the Convertible Preferred Securities on the NYSE is expected to commence within a 30-day period after the initial delivery of the Convertible Preferred Securities. The Representatives have advised the Trust that it intends to make a market in the Convertible Preferred Securities prior to the commencement of trading on the NYSE. The Representatives will have no obligation to make a market in the Convertible Preferred Securities, however, and may cease market making activities, if commenced, at any time. Prior to this offering there has been no public market for the Convertible Preferred Securities. In order to meet one of the requirements for listing the Convertible Preferred Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or more Convertible Preferred Securities to a minimum of 400 beneficial holders. Certain of the Underwriters engage in transactions with, and, from time to time, have performed services for, Citizens and its subsidiaries in the ordinary course of business. ---------------------------- Sales of Common Stock Series A by Citizens Capital may be made from time to time in one or more transactions (which may involve crosses or block transactions) on the NYSE or otherwise, pursuant to and in accordance with the rules of the NYSE, in the over-the-counter market, in negotiated transactions, or a combination of such methods of sale, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Citizens Capital will effect such transactions by selling shares of Common Stock Series A to or through broker-dealers. Such broker-dealers may receive compensation in the form of underwriting discounts, concessions or commissions from Citizens Capital and/or purchasers of shares of Common Stock Series A for whom they may act (which compensation may be in excess of customary commissions). Citizens Capital and broker-dealers that participate with Citizens Capital in the distributions of shares of Common Stock Series A may be deemed to be "underwriters" within the meaning of Section 2(11) of the 1933 Act, and any commissions received by them and any profit on the resale of shares of Common Stock Series A may be deemed to be underwriting compensation. The holders of the Convertible Preferred Securities, Page 80 who may receive the Common Stock Series A covered by this Prospectus as quarterly distributions on their Convertible Preferred Securities, may also sell such stock. LEGAL OPINIONS The validity of the Convertible Preferred Securities, the Convertible Preferred Securities Guarantee, the Partnership Guarantee, the Convertible Debentures, the Partnership Preferred Securities and the Common Stock will be passed upon by Boulanger, Hicks & Churchill, P.C., 135 East 57th Street, New York, New York, and Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York, counsels for the Company, and by Simpson Thacher & Bartlett (a partnership which includes professional corporations), 425 Lexington Avenue, New York, New York, counsel for the Underwriters, except as to certain matters of Delaware law, as to which Boulanger, Hicks & Churchill and Simpson Thacher & Bartlett may rely upon the opinion of Skadden, Arps, Slate, Meagher & Flom. Certain United States federal income taxation matters will be passed upon for Citizens, Citizens Capital and the Trust by Skadden, Arps, Slate, Meagher & Flom. Legal matters relating to required authorization, if any, of the Convertible Preferred Securities, the Convertible Preferred Securities Guarantee, the Partnership Guarantee, the Convertible Debentures, the Partnership Preferred Securities and the Common Stock by the public utilities commissions in the various states will be passed upon by local counsel to Citizens in the states of Arizona, Colorado, Hawaii, Louisiana, Tennessee, Vermont and West Virginia. Boulanger, Hicks & Churchill, Skadden, Arps, Slate, Meagher & Flom and Simpson Thacher & Bartlett may rely upon such counsel as to certain matters governed by the laws of such states. EXPERTS The consolidated financial statements of the Company as of December 31, 1994, 1993, and 1992, and for each of the years then ended, incorporated by reference in this Prospectus from the Company's Annual Report on Form 10-K have been so incorporated by reference in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The financial statements of the Mountain State Telephone Company, Alltel Nevada, Inc., Navajo Communications Company, Inc., and Contel of New York, Inc. incorporated by reference herein, have been examined by Arthur Andersen LLP to the extent and for the periods indicated in their reports, and have been so incorporated by reference in reliance upon the reports of Arthur Andersen LLP also incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. Page 81 INDEX OF DEFINED TERMS Defined Terms Page - ------------- ---- 1933 Act 5 1934 Act 5 1934 Act Reports 5 1940 Act 42 Additional Interest 39 ALLTEL 21 ALLTEL Telecommunications Properties 21 Average Market Price 40 Base Indenture 63 Beneficial Owner 51 blockage period 65 Business Day 38 Cash Distribution Election 10 Cash Payment Election 11 Change in 1940 Act Law 42 Change in Tax Law 42 Citizens 1 Citizens Capital 2 Code 20 Common Stock 2 Common Stock Series A 2 Company 1 Company Event 43 Conversion Agent 13 Convertible Common Securities 1 Convertible Debentures 2 Convertible Preferred Securities 1 Convertible Preferred Securities Guarantee 14 CUC Capital 32 Debenture Trustee 63 Declaration 33 Declaration Event of Default 49 Delaware Trustee 33 Direct Participants 51 Distribution Declaration Date 10 Distribution Declaration Notice 10 Distribution Election 10 Distribution Payment Date 2 DTC 3 Election Period 11 Eligible Investments 32 Equivalent Value 36 Page 82 Financial Institution 78 General Partner 32 General Partner Payment 63 General Partnership Security 7 GTE 27 GTE Telecommunications Properties 27 GTE telephone properties 27 Guarantee Payments 59 Guarantee Trustee 33 Guarantees 3 Indenture 63 Indenture Event of Default 69 Indenture Trustee 63 Indirect Participants 51 Interest Payment Date 2 Investment Company Act Opinion 42 Limited Partnership Agreement 32 Liquidation Distribution 47 NASDAQ 12 No Recognition Opinion 43 NYSE 2 OID 20 Omnibus Proxy 52 Other Subordinated Indebtedness 67 Participants 51 Partnership 2 Partnership Event of Default 49 Partnership Events 42 Partnership Guarantee 14 Partnership Guarantee Payments 59 Partnership Investment Company Act Event 43 Partnership Preferred Securities 2 Partnership Securities 2 Partnership Tax Event 42 Property Account 33 Property Trustee 33 Rate 2 Rating Agency Event 43 Record Date 11 Redemption Price 46 Registration Statement 5 Regular Trustees 33 Representatives 79 Page 83 SEC 5 Senior Indebtedness 66 Senior Nonmonetary Default 65 Senior Payment Default 65 Share Transfer and Valuation Date 36 Special Events 43 Special Representative 57 Sponsor 33 Stock Distribution Election 10 Stock Payment Election 11 Super Majority 50 Tax Event Opinion 42 Telecommunications Properties 27 Trading Day 41 Transaction 41 Trust 1 Trust Act 7 Trust Events 42 Trust Guarantees 58 Trust Indenture Act 8 Trust Investment Company Act Event 42 Trust Securities 1 Trust Tax Event 42 Trust Trustees 33 Underwriters 79 Underwriters' Compensation 1 Underwriting Agreement 79 United States Alien Holder 77 Page 84 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. -------------------------------------------- Description Amount (1) ----------- ---------- Securities and Exchange Commission filing fee $ 83,190.00 Printing and engraving 60,000.00 [Rating Agency Fee] [ ] Legal Services 250,000.00 Accounting services 40,000.00 New York Stock Exchange listing fee 15,000.00 Miscellaneous 51,810.00 ----------- Total(1) $500,000.00 =========== _____________________ (1) All fees are estimated except for the Securities and Exchange Commission filing fee. Item 15. Indemnification of Directors and Officers. ------------------------------------------ Citizens Utilities Company (the "Company"), being incorporated under the Delaware General Corporation Law, is empowered by Section 145 of such law to indemnify officers and directors against certain expenses, liabilities and payments, including liabilities arising under the Securities Act of 1933, (the "Act"), as therein provided. In addition, By-Laws 24 and 24A of the Company and a resolution adopted by the Board of Directors in connection with the issuance of the Convertible Debentures provide for indemnification of specified persons, including officers and directors of the Company for liabilities, including those arising under said Act, as provided in said By- Laws and resolution. Generally, By-Laws 24 and 24A of the Company provide that, to the fullest extent permitted by applicable law, the Company shall indemnify and hold harmless, among others, any officer or director of the Company or any other entity for which he is acting at the request of the Company, from and against any loss, damage or claim incurred by such person by reason of any act or omission performed or omitted by such person in good faith on behalf of the Company and in a manner such person reasonably believed to be in the best interests of the Company. Such By-Laws, generally speaking, also provides that, to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a person in defending against any such liability shall, be advanced by the Company subject to specified conditions. The Certificate of Incorporation further provides that no director shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, with stated exceptions. II-1 The Company also maintains insurance providing coverage for the Company and its subsidiaries against obligations incurred as a result of indemnification of officers and directors. The coverage also insures the officers and directors for a liability against which they may not be indemnified by the Company or its subsidiaries but excludes specified dishonest acts. The Declaration of Trust of Citizens Capital Trust (the "Trust") provides that to the fullest extent permitted by applicable law, the Trust shall indemnify and hold harmless each of the Trustees, any Affiliate of the Trustees, any officer, director, shareholder, member, partner, employee, representative or agent of the Trustees, or any employee or agent of the Trust or its Affiliates (each a "Trust Indemnified Person"), from and against any loss, damage or claim incurred by such Trust Indemnified Person by reason of any act or omission performed or omitted by such Trust Indemnified Person in good faith on behalf of the Trust and in a manner such Trust Indemnified Person reasonably believed to be within the scope of authority conferred on such Trust Indemnified Person by the Declaration of Trust, except that no Trust Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Trust Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. The Declaration of Trust also provides that, to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Trust Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Trust prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Trust of an undertaking by or on behalf of the Trust Indemnified Person to repay such amount if it shall be determined that the Trust Indemnified Person is not entitled to be indemnified as authorized in the Declaration of Trust. The Declaration of Trust further provides that no Trust Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person (as defined therein) or for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Trust Indemnified Person in good faith on behalf of the Trust and in a manner such Trust Indemnified Person reasonably believed to be within the scope of the authority conferred on such Trust Indemnified Person by the Declaration of Trust or by law, except that a Trust Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Trust Indemnified Person's gross negligence or willful misconduct with respect to acts or omissions. The Limited Partnership Agreement of Citizens Utilities L.P. (the "Partnership") provides that to the fullest extent permitted by applicable law, the Partnership shall indemnify and hold harmless each of the General Partner, and any Special Representative, any Affiliate of the General Partner or any Special Representative, any officer, director, shareholder, member, partner, employee, representative or agent of the General Partner or any Special Representative, or any employee or agent of the Partnership or its Affiliates (each a "Partnership Indemnified Person"), from and against any loss, damage or claim incurred by such Partnership Indemnified Person by reason of any act or omission performed or omitted by such Partnership Indemnified Person in good faith on behalf of the Partnership and in a manner such Partnership Indemnified Person reasonably believed to be within the scope of authority conferred on such Partnership II-2 Indemnified Person by the Limited Partnership Agreement, except that no Partnership Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Partnership Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions. The Limited Partnership Agreement also provides that, to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Partnership Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of an undertaking by or on behalf of the Partnership Indemnified Person to repay such amount if it shall be determined that the Partnership Indemnified Person is not entitled to be indemnified as authorized in the Limited Partnership Agreement. The Limited Partnership Agreement further provides that no Partnership Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Partnership or any Covered Person (as defined therein) or for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Partnership Indemnified Person in good faith on behalf of the Partnership and in a manner such Partnership Indemnified Person reasonably believed to be within the scope of the authority conferred on such Partnership Indemnified Person by the Limited Partnership Agreement or by law, except that a Partnership Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Partnership Indemnified Person's gross negligence or willful misconduct with respect to acts or omissions. The directors and officers of the Company and the Regular Trustees of the Trust are covered by insurance policies indemnifying them against certain liabilities, including certain liabilities arising under the Act, which might be incurred by them in such capacities and against which they cannot be indemnified by the Company or the Trust. Any agents, dealers or underwriters who execute the agreement filed as Exhibit 1 of this Registration Statement will agree to indemnify the Company's directors and their officers and the Trustees who signed the Registration Statement against certain liabilities that may arise under the Securities Act with respect to information furnished to the Company or the Trust by or on behalf of any such indemnifying party. Item 16. Exhibits. --------- An Exhibit Index, containing a list of all exhibits to this registration statement, commences on page II-[ ]. Item 17. Undertakings. ------------- The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Act; II-3 (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that clauses (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those clauses is contained in periodic reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or II-4 proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford and State of Connecticut on the _____ day of __________, 1995. CITIZENS UTILITIES COMPANY By ________________________ Robert J. DeSantis Vice President and Treasurer II-6 Pursuant to the requirements of the Securities Act of 1933, this Registra- tion Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- __________________________ Chairman of the Board, _____, 1995 (Leonard Tow) Chief Executive Officer, Chief Financial Officer and Director __________________________ Vice President _____, 1995 (Robert J. DeSantis) and Treasurer __________________________ Director _____, 1995 (Norman I. Botwinik) _________________________ Director _____, 1995 (Stanley Harfenist) _________________________ Director _____, 1995 (Andrew N. Heine) _________________________ Director _____, 1995 (Aaron I. Fleischman) ________________________ Director _____, 1995 (Elwood A. Rickless) __________________________ Director _____, 1995 (John L. Schroeder) _________________________ Director _____, 1995 (Robert D. Siff) _________________________ Director _____, 1995 (Robert A. Stanger) _________________________ Director _____, 1995 (Edwin Tornberg) ________________________ Director _____, 1995 (Claire Tow) *By_____________________ Attorney-in-fact II-7 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford and State of Connecticut on the _____ day of __________, 1995. CITIZENS UTILITIES CAPITAL L.P. By Citizens Utilities Company, as General Partner By______________________________ Robert J. DeSantis Vice President and Treasurer II-8 Pursuant to the requirements of the Securities Act of 1933, this Registra- tion Statement has been signed below by the following persons in the capacities with respect to the General Partner of Citizens Utilities Capital L.P. and on the dates indicated. Signature Title Date - --------- ----- ----- __________________________ Chairman of the Board, _____, 1995 (Leonard Tow) Chief Executive Officer, Chief Financial Officer and Director __________________________ Vice President _____, 1995 (Robert J. DeSantis) and Treasurer __________________________ Director _____, 1995 (Norman I. Botwinik) _________________________ Director _____, 1995 (Stanley Harfenist) _________________________ Director _____, 1995 (Andrew N. Heine) _________________________ Director _____, 1995 (Aaron I. Fleischman) ________________________ Director _____, 1995 (Elwood A. Rickless) __________________________ Director _____, 1995 (John L. Schroeder) _________________________ Director _____, 1995 (Robert D. Siff) _________________________ Director _____, 1995 (Robert A. Stanger) _________________________ Director _____, 1995 (Edwin Tornberg) ________________________ Director _____, 1995 (Claire Tow) *By_____________________ Attorney-in-fact II-9 SIGNATURES Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford and State of Connecticut on the _____ day of __________, 1995. CITIZENS UTILITIES TRUST By ______________________ Robert J. DeSantis Regular Trustee By ______________________ Edward O. Kipperman Regular Trustee By Chemical Bank, Property Trustee By ______________________ Name: Title: By Chemical Bank Delaware, Delaware Trustee By _____________________ Name: Title: II-10 Exhibit Index Exhibit No. Description - -------- ----------- 1.1** Form of Underwriting Agreement for the offering of the Convertible Preferred Securities being registered under this Registration Statement. 3.1* Restated Certificate of Incorporation of Citizens Utilities Company, with all amendments to March 22, 1994. 4.1 Certificate of Trust dated October 13, 1995, of Citizens Utilities Trust. 4.2 Form of Amended and Restated Declaration of Trust dated __________, 1995, of Citizens Utilities Trust, as amended and restated. 4.3 Form of Indenture dated ___________, 1995, between Citizens Utilities Company and Chemical Bank, as trustee. 4.4 Form of First Supplemental Indenture dated ___________, 1995, between Citizens Utilities Company and Chemical Bank, as trustee, with regard to the issuance of the Convertible Debentures. 4.5 Form of ___% Convertible Subordinated Debenture due _______, 2035 (contained as Exhibit A to Exhibit 4.4 above). 4.6 Form of Certificate of Limited Partnership of Citizens Utilities Capital L.P. 4.7 Form of Amended and Restated Limited Partnership Agreement dated ____, 1995 of Citizens Utilities Capital L.P. 4.8 Form of Convertible Preferred Securities Guarantee Agreement dated ___________, 1995 between Citizens Utilities Company and Chemical Bank, as guarantee trustee. 4.9 Form of Partnership Preferred Securities Guarantee Agreement dated __________, 1995 between Citizens Utilities Company and Chemical Bank, as guarantee trustee. 5.1** Opinion of Boulanger, Hicks & Churchill, P.C. 5.2** Opinion of Skadden, Arps, Slate, Meagher & Flom 8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom as to certain federal income tax matters. II-11 12.1** Computation of Ratio of Earnings to Combined Fixed Charges and Distributions on Convertible Preferred Securities of Citizens Utilities Company. 23.1 Consent of KPMG Peat Marwick LLP. 23.2 Consent of Arthur Andersen LLP. 23.3** Consent of Boulanger, Hicks & Churchill (to be contained in Exhibit No. 5.1). 23.4 Consent of Skadden, Arps, Slate, Meagher & Flom (contained in Exhibit No. 8.1). 24 Powers of Attorney. 25.1 Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of Chemical Bank, under the Declaration of Trust (contained in Exhibit 4.1). 25.2 Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of Chemical Bank, under (i) the Indenture (contained in Exhibit 4.3), (ii) the Convertible Preferred Securities Gurantee Agreement (contained in Exhibit 4.8) and (iii) the Partnership Preferred Securities Guarantee Agreement (contained in Exhibit 4.9). _________________________ * Exhibit No. 3.1 is incorporated by reference to such document, bearing the designation Exhibit No. 4.100.1 filed with the Company's Registration Statement on Form S-3 No. 33-51529 filed December 16, 1993. ** To be filed by amendment. II-12 ============================== ================================== No dealer, salesman or other person has been authorized to give any information or to make any representation, other than 175,000,000 those contained in this Prospectus, in connection with the offer made CITIZENS UTILITIES LOGO by this Prospectus, and, if given or made, such information or Convertible Preferred representations must not be relied Securities upon as having been authorized by the Company. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or thereof. This Prospectus does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. --------------------- TABLE OF CONTENTS Prospectus PAGE Available Information 5 -------------------- Incorporation of Certain Documents by Reference 5 PROSPECTUS Prospectus Summary 7 ____________, 1995 Risk Factors 16 Citizens Utilities Company 20 --------------------- Use of Proceeds 22 Capital Requirements and Financing 22 Description of Common Stock Series A and Series B 23 Dividends on Common Stock Series A and Series B 23 Common Stock Transfer Agent 24 Common Stock Price Range 24 Financial Information 25 Citizens Utilities Capital L.P. 32 Citizens Utilities Trust 33 Description of the Securities 34 Convertible Preferred Securities 34 Partnership Preferred Securities 53 Guarantees 58 Convertible Debentures 63 Certain Federal Income Tax Considerations 72 Underwriting 79 Legal Opinions 81 Experts 81 Index of Defined Terms 82 ============================== ================================== EX-4 2 CERTIFICATE OF TRUST The undersigned, the trustees of Citizens Utilities Capital Trust, desiring to form a business trust pursuant to Delaware Business Trust Act, i12 Del. C. Sec. 3810, hereby certify as follows: (c) The name of business trust being formed hereby (the "Trust") is Citizens Utilities Capital Trust. (d) The name and business address of the trustee of the Trust which has its principal place of business in the State of Delaware is as follows: CHEMICAL BANK DELAWARE, 1201 Market Street, Wilmington, Delaware 19801. Dated: October 13, 1995 Robert J. DeSantis as Regular Trustee \s\ Robert J. DeSantis ---------------------- Edward O. Kipperman as Regular Trustee \s\ Edward O. Kipperman ----------------------- CHEMICAL BANK DELAWARE as Delaware Trustee By: \s\ John J. Cashin ------------------- Name: John J. Cashin Title: Senior Trust Officer EX-4 3 AMENDED AND RESTATED DECLARATION OF TRUST CITIZENS UTILITIES TRUST Dated as of ________, 1995 AMENDED AND RESTATED DECLARATION OF TRUST OF CITIZENS UTILITIES TRUST ____________, 1995 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of ___________, 1995, by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Citizens Utilities Company, a Delaware corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established a trust (the "Trust") under the Delaware Business Trust Act pursuant to a Declaration of Trust dated as of _________, 1995, (the "Original Declaration") and a Certificate of Trust filed with the Secretary of State of Delaware on __________, 1995, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and contributing the proceeds thereof to Citizens Capital to acquire certain Partnership Preferred Securities of Citizens Capital; WHEREAS, as of the date hereof, no interests in the Trust have been issued; WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. 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; (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 Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "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. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" has the meaning set forth in Annex II hereto. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code SECTION3801 et seq., as it may be amended from time to time. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Citizens Capital" has the meaning set forth in Annex II hereto. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Convertible Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of beneficial interests in the Convertible Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the Closing Time and each "Date of Delivery" under the Underwriting Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission. "Common Security Certificate" means a definitive certificate in fully registered form representing a Convertible Common Security substantially in the form of Exhibit A-2. "Common Stock" has the meaning set forth in Annex II hereto. "Company" has the meaning set forth in Annex II hereto. "Company Event" has the meaning set forth in Annex II hereto. "Conversion Agent" has the meaning set forth in Annex II hereto. "Conversion Date" has the meaning set forth in Section 5 of Annex I hereto. "Conversion Price" has the meaning set forth in Section 5 of Annex I hereto. "Convertible Common Securities" has the meaning set forth in Annex II hereto. "Convertible Common Securities Guarantee Agreement" means the guarantee agreement to be dated as of ________, 1995, of the Sponsor in respect of the Convertible Common Securities. "Convertible Debentures" means the series of Convertible Debentures to be issued by the Debenture Issuer under the Indenture to be held by Citizens Capital, a specimen certificate for such series of Convertible Debentures being Exhibit D. "Convertible Preferred Securities Guarantee Agreement" means the guarantee agreement to be dated as of ______, 1995, between the Sponsor and Chemical Bank, as guarantee trustee, in respect of the Convertible Preferred Securities. "Convertible Preferred Security" has the meaning set forth in Annex II hereto. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debenture Issuer" means the Sponsor in its capacity as issuer of the Convertible Debentures. "Delaware Trustee" has the meaning set forth in Section 5.2. "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.4. "Distribution" has the meaning set forth in Section 6.1. "Distribution Declaration Date" has the meaning set forth in Annex II hereto. "Distribution Declaration Notice" has the meaning set forth in Annex II hereto. "Distribution Payment Date" has the meaning set forth in Section 2 of Annex I hereto. "DTC" means the Depository Trust Company, the initial Clearing Agency. "Election Agent" has the meaning set forth in Annex II hereto. "Election Period" has the meaning set forth in Annex II hereto. "Equivalent Value" has the meaning set forth in Annex II hereto. "Event of Default" has the meaning set forth in Annex II hereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Fiscal Year" has the meaning set forth in Section 11.1. "General Partner" means the Sponsor in its capacity as general partner in Citizens Capital. "Global Certificate" has the meaning set forth in Section 9.4. "Guarantee Agreements" has the meaning set forth in Annex II hereto. "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) any Trustee; (b) any Affiliate of any Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee; or (d) any employee or agent of the Trust or its Affiliates. "Indenture" has the meaning set forth in Annex II hereto. "Indenture Trustee" has the meaning set forth in Annex II hereto. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Legal Action" has the meaning set forth in Section 3.6(g). "Limited Partner" means the Trust in its capacity as holder of the Partnership Preferred Securities of Citizens Capital. "Limited Partnership Agreement" has the meaning set forth in Annex II hereto. "List of Holders" has the meaning set forth in Section 2.2. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Section __ of Annex I hereto. "Majority in liquidation amount of the Securities" means, except as provided in the terms of the Convertible Preferred Securities and by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Convertible Preferred Securities or Holders of outstanding Convertible 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. "No Recognition Opinion" has the meaning set forth in Annex II hereto. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Partnership Events" has the meaning set forth in Annex II hereto. "Partnership Investment Company Act Event" has the meaning set forth in Annex II hereto. "Partnership Preferred Securities" has the meaning set forth in Annex II hereto. "Partnership Tax Event" has the meaning set forth in Annex II hereto. "Paying Agent" has the meaning specified in Section 3.8(h). "Person" has the meaning set forth in Annex II hereto. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a certificate representing a Convertible Preferred Security substantially in the form of Exhibit A-1. "Property Trustee" has the meaning set forth in Annex II hereto. "Property Trustee Account" has the meaning set forth in Section 3.8(c). "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. "Rating Agency Event" has the meaning set forth in Annex II hereto. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any officer of the Property Trustee with direct responsibility for the administration of the Trust 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. "Securities" means the Convertible Common Securities and the Convertible Preferred Securities. "Securities Guarantee Agreements" means the Convertible Common Securities Agreement and the Convertible Preferred Securities Agreement. "Securities Act" means the Securities Act of 1933, as amended. "Share Transfer and Valuation Date" has the meaning set forth in Annex II hereto. "66-2/3% in liquidation amount of the Securities" means, except as provided in the terms of the Convertible Preferred Securities and by the Trust Indenture Act, Holders of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Convertible Preferred Securities or Holders of outstanding Convertible Common Securities voting separately as a class, representing at least 66 2/3% 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. "Special Event" means any Company Event, Partnership Event or Trust Event. "Special Representative" has the meaning set forth in the Partnership Agreement. "Sponsor" means Citizens Utilities Company, a Delaware corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Property Trustee" has the meaning set forth in Section 5.6(b). "Super Majority" has the meaning set forth in Section 2.6(a)(ii). "Tax Deduction Event" has the meaning set forth in Section __ of Annex I hereto. "10% in liquidation amount of the Securities" means, except as provided in the terms of the Convertible Preferred Securities or by the Trust Indenture Act, Holders of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Convertible Preferred Securities or Holders of outstanding Convertible Common Securities, voting separately as a class, representing 10% 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. "Trading Day" has the meaning set forth in Annex II hereto. "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). "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 Events" has the meaning set forth in Annex II hereto. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Trust Investment Company Act Event" has the meaning set forth in Annex II hereto. "Trust Tax Event" has the meaning set forth in Annex II hereto. "Underwriting Agreement" means the Underwriting Agreement for the offering and sale of Convertible Preferred Securities in the form of Exhibit E. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by SECTIONSECTION 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, promptly following, and in any event within 10 days of, receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity), provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under SECTION 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. Within 60 days after May 1 of each year, the Property Trustee shall provide to the Holders of the Convertible Preferred Securities such reports as are required by SECTION 313 of the Trust Indenture Act, if any, in the form and in the manner provided by SECTION 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of SECTION 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by SECTION 314 of the Trust Indenture Act (if any) and the compliance certificate required by SECTION 314 of the Trust Indenture Act in the form, in the manner and at the times required by SECTION 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in SECTION 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to SECTION 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. (a) The Holders of a Majority in liquidation amount of Convertible Preferred Securities may, by vote, on behalf of the Holders of all of the Convertible Preferred Securities, waive any past Event of Default in respect of the Convertible Preferred Securities and its consequences, provided that, if the underlying Event of Default under the Limited Partnership Agreement: (i) is not waivable under the Limited Partnership Agreement, the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of greater than a majority in principal amount the holders of the Partnership Preferred Securities (a "Super Majority") to be waived under the Limited Partnership Agreement, the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Convertible Preferred Securities that the relevant Super Majority represents of the aggregate liquidation amount of the Partnership Preferred Securities outstanding. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Convertible Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or an Event of Default with respect to the Convertible Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Convertible Preferred Securities of an Event of Default with respect to the Convertible Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Convertible Common Securities of any such Event of Default with respect to the Convertible Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Convertible Common Securities. (b) The Holders of a Majority in liquidation amount of the Convertible Common Securities may, by vote, on behalf of the Holders of all of the Convertible Common Securities, waive any past Event of Default with respect to the Convertible Common Securities and its consequences, provided that, if the underlying Event of Default under the Limited Partnership Agreement: (i) is not waivable under the Limited Partnership Agreement, except where the Holders of the Convertible Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of a Super Majority to be waived, except where the Holders of the Convertible Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b), the Event of Default under the Declaration may only be waived by the vote of the Holders of at least the proportion in liquidation amount of the Convertible Preferred Securities that the relevant Super Majority represents of the aggregate liquidation amount of the Partnership Preferred Securities outstanding; provided further, at any time when an Event of Default with respect to the Convertible Preferred Securities has occurred and is continuing, each Holder of Convertible Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Convertible Common Securities and its consequences until all Events of Default with respect to the Convertible Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Convertible Preferred Securities and only the Holders of the Convertible Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Convertible Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Convertible Common Securities or impair any right consequent thereon. (c) A waiver of an Event of Default under the Limited Partnership Agreement by the Property Trustee, acting at the direction of the Holders of the Convertible Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. SECTION 2.7 Event of Default; Notice. (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Limited Partnership Agreement, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided that, except for a default in the payment of liquidation amount of (or premium, if any) or distribution on any of the Partnership Preferred Securities or in the payment of any sinking fund installment established for the Partnership Preferred Securities, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default or Event of Default except: (i) a default under Sections [ ] of the Limited Partnership Agreement; or (ii) any default or Event of Default as to which the Property Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice of. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust is named "Citizens Utilities Trust," or such other name as the Regular Trustees may adopt from time to time following written notice to the Property Trustee, the Delaware Trustee and the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Citizens Utilities Company, High Ridge Park, P.O. Box 3801, Stamford, Connecticut 06905. On ten (10) Business Days written notice to the Property Trustee, the Delaware Trustee and the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Partnership Preferred Securities, and (b) except as otherwise limited herein, to engage in only those other activities necessary, or incidental thereto. 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 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Convertible Debentures and the Property Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Regular Trustees. The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Convertible Preferred Securities and the Convertible Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Convertible Preferred Securities and no more than one series of Convertible Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to a simultaneous issuance of both Convertible Preferred Securities and Convertible Common Securities on each Closing Date; (b) in connection with the issue and sale of the Convertible Preferred Securities, at the direction of the Sponsor, to: (i) execute and file with the Commission the registration statement on Form S-3 prepared by the Sponsor, including any amendments thereto, pertaining to the Convertible Preferred Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Convertible Preferred Securities in any State in which the Sponsor has determined to qualify or register such Convertible Preferred Securities for sale; (iii) execute and file an application, prepared by the Sponsor, to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Convertible Preferred Securities; (iv) execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor relating to the registration of the Convertible Preferred Securities under Section 12(b) of the Exchange Act; and (v) execute and enter into the Underwriting Agreement providing for the sale of the Convertible Preferred Securities; (c) to acquire the Partnership Preferred Securities with the proceeds of the sale of the Convertible Preferred Securities and the Convertible Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Partnership Preferred Securities to be held of record in the name of the Property Trustee for the benefit of the Holders of the Convertible Preferred Securities and the Holders of Convertible Common Securities; (d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Trust Event; provided that the Regular Trustees shall consult with the Debenture Issuer, Citizens Capital and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Trust Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of SECTION316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Convertible Preferred Securities and Holders of Convertible Common Securities as to such actions and applicable record dates (with copies to the Property Trustee); (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by SECTION 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities (with a copy to the Property Trustee) of any notice received from Citizens Capital of a decision to defer distribution payments on the Partnership Preferred Securities by extending the payment period under the Limited Partnership Agreement; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) 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 Convertible Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be classified for United States federal income tax purposes as a grantor trust; and (iii) cooperating with the Debenture Issuer to ensure that the Convertible Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes; provided that such action does not adversely affect the interests of the Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) shall not, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall not take any action to cause the Trust to: (i) invest any proceeds received by the Trust from holding the Partnership Preferred Securities, but shall distribute all such proceeds to Holders of 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 Partnership Preferred Securities; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) other than as set forth in Annex I hereto, (A) if the Property Trustee holds the Partnership Preferred Securities, (i) cause the Special Representative to direct the time, method and place of exercising any trust or power conferred upon the Indenture Trustee with respect to the Convertible Debentures, (ii) cause the Special Representative to waive any past default that is waivable under Section 5.13 of the Limited Partnership Agreement, (iii) cause the Special Representative to exercise any right to rescind or annul any declaration that the liquidation amount of all the Convertible Debentures shall be due and payable, or (iv) cause the Special Representative to consent to any amendment, modification or termination of the Limited Partnership Agreement or the Partnership Preferred Securities where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such amendment, modification or termination will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will not be classified as a grantor trust; or (B) if the Property Trustee holds Convertible Debentures as a result of the liquidation of the Citizens Capital and the distribution of such Convertible Debentures in exchange for the Partnership Preferred Securities, (i) direct the time, method and place of exercising any trust or power conferred upon the Indenture Trustee with respect to the Convertible Debentures, (ii) waive any past default that is waivable under Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul any declaration that the liquidation amount of all the Convertible Debentures shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Convertible Debentures where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such amendment, modification or termination will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will not be classified as a grantor trust; or (viii) other than in connection with the liquidation of the Trust pursuant to a Special Event or Rating Agency Event, file a certificate of cancellation of the Trust. SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Partnership Preferred Securities shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Partnership Preferred Securities shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with in Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Convertible Debentures have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Partnership Preferred Securities to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall not exercise any rights of conversion with respect to any of the Partnership Preferred Securities unless and until it has received copies of notices of conversion with respect to an aggregate liquidation amount of the Securities equal to the aggregate liquidation amount of Partnership Preferred Securities to be converted. (d) The Property Trustee shall: (i) establish and maintain a segregated non- interest bearing trust account (the "Property Trustee Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds or securities made in respect of the Partnership Preferred Securities held by the Property Trustee, deposit such funds or securities into the Property Trustee Account and make payments to the Holders of the Convertible Preferred Securities and Holders of the Convertible Common Securities from the Property Trustee Account in accordance with Section 6.1. Funds or securities in the Property Trustee 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 Convertible Preferred Securities and the Convertible Common Securities to the extent the Convertible Debentures are redeemed or mature; and (iii) upon written notice of distribution issued by the Regular Trustees in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Partnership Preferred Securities or the Convertible Debentures, as the case may be, to Holders of Securities or redemption of the Securities, as the case may be, upon the occurrence of a Special Event or Rating Agency Event. (e) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities. (f) The Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act. (g) The Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 5.6. (h) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Partnership Preferred Securities under the Limited Partnership Agreement and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Partnership Preferred Securities subject to the rights of the Holders pursuant to the terms of such Securities. (i) The Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Securities, to act as a Conversion Agent with respect to convertible securities on behalf of the Trust, or to act as Election Agent with respect to the election by holders of the Convertible Preferred Securities of the form of payments of distributions; and any such Paying Agent shall comply with SECTION 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee. (j) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Event of Default 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 Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and, if required by the terms of this Declaration, conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders given pursuant to the terms of this Declaration relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Partnership Preferred Securities (or, if applicable, Convertible Debentures) and the Property Trustee Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration, the Trust Indenture Act; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Partnership Preferred Securities or Convertible Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Trustee Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees, the Delaware Trustee or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for the acts, omissions, default, negligence or misconduct of the Regular Trustees, the Delaware Trustee or the Sponsor. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Property Trustee may consult with counsel or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion, such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee adequate security and indemnity against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Securities, which instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Property Trustee under the terms of the Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of SECTION 3807 of the Business Trust Act. [In the performance of any duties or obligations hereunder, the Delaware Trustee shall be entitled to the same benefits and immunities as the Property Trustee under Sections 3.9(b) and 3.10 hereof.] SECTION 3.12 Execution of Documents. Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act, a majority of or, if there are only two, any Regular Trustee or, if there is only one, such Regular Trustee, is, authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.6; provided that, the registration statement referred to in Section 3.6(b)(i), including any amendments thereto, shall be signed by all of the Regular Trustees. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence for 45 years from the initial Closing Date. SECTION 3.15 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 body, except as described in Section 3.15(b) and (c). (b) The Trust may, with the consent of a majority of the Regular Trustees (or if there are only one or two Regular Trustees, with the consent of each such Regular Trustee) and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Convertible Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Convertible Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) Citizens Capital expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee as the holder of the Partnership Preferred Securities and that satisfies the same criteria as required of the Property Trustee required by Section 5.3 of this Declaration; (iii) the Convertible Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with an other organization on which the Convertible Preferred Securities are then listed or quoted; (iv) such merger, consolidation, amalgamation or replacement does not cause the Convertible Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (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; (vi) such Successor Entity has a purpose identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor and the Property Trustee have received an 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; (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) all conditions precedent in this Declaration to such merger, consolidation, amalgamation or replacement have been satisfied; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Convertible Preferred Securities Guarantee Agreement. (c) Notwithstanding Section 3.15(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 entity or permit any other entity 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 IV SPONSOR SECTION 4.1 Sponsor's Purchase of Convertible Common Securities. On each Closing Date the Sponsor for cash all the Convertible Common Securities issued by the Trust, in an amount equal to at least 3% of the total capital of the Trust, at the same time as the Convertible Preferred Securities are sold. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Convertible Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Convertible Preferred Securities, including any amendments thereto; (b) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Convertible Preferred 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; (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Convertible Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Convertible Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Underwriting Agreement providing for the sale of the Convertible Preferred Securities. SECTION 4.3 Covenants of Sponsor. Other than in connection with the liquidation of the Trust pursuant to a Special Event or Rating Agency Event, the Sponsor shall not cause the filing of a certificate of cancellation of the Trust. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees. The number of Trustees shall initially be four (4), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Convertible Common Securities voting as a class at a meeting of the Holders of the Convertible Common Securities. SECTION 5.2 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 has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that, if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, 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, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 5.6(c). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of SECTION 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Convertible Common Securities (as if it were the obligor referred to in SECTION 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of SECTION 310(b) of the Trust Indenture Act. (d) The Convertible Preferred Securities Guarantee Agreement shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5 Initial Trustees. The initial Regular Trustees shall be: Robert J. DeSantis Edward O. Kipperman The initial Delaware Trustee shall be: Chemical Bank Delaware, a Delaware banking corporation. The initial Property Trustee shall be: Chemical Bank, a New York banking corporation. SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities by vote of the Holders of a Majority in liquidation amount of the Convertible Common Securities voting as a class at a meeting of the Holders of the Convertible Common Securities. (b)(i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until a successor Property Trustee (the "Successor Property Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Convertible Common Securities shall use their best efforts to promptly appoint a Successor Delaware Trustee or Successor Property Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.6. (e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Property Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.7 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. SECTION 5.8 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9 Merger of a Trustee. Any corporation into which a 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 a Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of a Trustee, shall be the successor of such Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Declaration, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by a Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 5.10 Meetings. Meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in- person meetings of the Regular Trustees 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 Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours 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 Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.11 Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular 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. ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Convertible Preferred Securities and the Convertible Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that Citizens Capital makes a distribution payment (including payment of Additional Distribution (as defined in the Limited Partnership Agreement)) of premium and principal on the Partnership Preferred Securities held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available, to make a distribution (a "Distribution") of the Payment Amount to Holders. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. (a) The Regular Trustees shall on behalf of the Trust issue one class of Convertible Preferred Securities having such terms as are set forth in Annex I hereto and one class of Convertible Common Securities having such terms as are set forth in Annex I hereto. The Trust shall have no securities or other interests in the assets of the Trust other than the Convertible Preferred Securities and the Convertible Common Securities. (b) The Certificates shall be signed on behalf of the Trust by a Regular Trustee. Such signature shall be the manual signature of any present or any future Regular Trustee. In case any Regular Trustee of the Trust who shall have signed any of the Securities shall cease to be such Regular Trustee 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 Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. (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 or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust. (a) The Trust shall terminate: (i) upon the bankruptcy of the Holder of the Convertible Common Securities or the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Convertible Common Securities or the Sponsor; the filing of a certificate of cancellation with respect to the Trust or the revocation of the Holder of the Convertible Common Securities or the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Convertible Common Securities, the Sponsor or the Trust; (iv) 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; (v) upon the occurrence and continuation of a Trust Event, Partnership Event or Rating Agency Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and either all of the Partnership Preferred Securities or such amount of Convertible Debentures as set forth in Annex I, as the case may be, shall have been distributed to the Holders of Securities in exchange for all of the Securities or the Securities shall have been redeemed; or (vi) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. (c) The provisions of Section 3.9 and Article X shall survive the termination of the Trust. ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article IX, Convertible Preferred Securities shall be freely transferable. (c) Subject to this Article IX, the Sponsor and any Related Party may only transfer Convertible Common Securities to the Sponsor or a Related Party of the Sponsor; provided that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would not be classified for United States federal income tax purposes as a grantor trust; and (ii) the Trust would be an Investment Company or the transferee would become an Investment Company. SECTION 9.2 Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 9.3 Deemed Security Holders. The Trustees 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 shall have actual or other notice thereof. SECTION 9.4 Book Entry Interests. Unless otherwise specified in the terms of the Convertible Preferred Securities, the Preferred Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.7. Unless and until definitive, fully registered Preferred Security Certificates (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7: (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Convertible Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Convertible Preferred Security Holders is required under this Declaration, unless and until Definitive Preferred Security Certificates shall have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7, the Trustees shall give all such notices and communications specified herein to be given to the Convertible Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Preferred Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Convertible Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Convertible Preferred Securities. SECTION 9.7 Definitive Preferred Security Certificates. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Convertible Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.6; (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Convertible Preferred Securities; or (c) upon an Event of Default then: (d) Definitive Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Convertible Preferred Securities; and (e) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Preferred Security Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, said instructions of the Clearing Agency. The Definitive Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Convertible Preferred Securities may be listed, or to conform to usage. SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of the Trustees harmless, then: In the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall execute 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 9.8, the Regular Trustees 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. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration, the Securities Guarantee Agreements, the Indenture and the terms of the Securities, neither the Sponsor nor the Trustees shall 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) be required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) The Holder of the Convertible 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 Convertible Preferred 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 10.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 10.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage, liability, tax, penalty, expense (including legal fees and expenses) or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation 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 or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). The indemnification shall survive the termination of this Declaration. SECTION 10.5 Outside Businesses. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee 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. No Covered Person, the Sponsor, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Regular Trustees shall cause to be prepared 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 Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds or securities in respect of the Partnership Preferred Securities held by the Property Trustee shall be made directly to the Property Trustee Account and no other funds or securities of the Trust shall be deposited in the Property Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Trustee Account. SECTION 11.4 Withholding. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustee 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 Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by: (i) the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee; (b) no amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities) and that all conditions precedent to such proposed amendment have been satisfied; and (iii) to the extent the result of such amendment would be to: (A) cause the trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust; (B) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or (C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act; (c) at such time after the Trust has issued any Securities that remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (d) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities; (e) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Convertible Common Securities and; (f) the rights of the holders of the Convertible Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Convertible Common Securities; and (g) notwithstanding Section 12.1(c), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and (iv) if the Trust is deemed not to be an Investment Company solely by reason of Rule 3a-7, conform to any change in Rule 3a-7 or written change in interpretation or application of Rule 3a-7 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. SECTION 12.2 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 Regular Trustees or following an Event of Default, by the Property Trustee (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 Convertible Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Security Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of 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 Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Convertible Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of 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 Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (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 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; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Convertible Preferred Securities are then listed or trading, otherwise provides, the Regular Trustees, 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 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. ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a New York banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of New York, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Property Trustee. (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 Property Trustee, of the Declaration. [(e) The Property Trustee, pursuant to the Declaration, shall hold legal title and a valid ownership interest in the Partnership Preferred Securities under the law of its place of incorporation and Delaware law.] SECTION 13.2 Representations and Warranties of Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) The Delaware Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) 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 the Declaration. (d) The Delaware Trustee is an entity which has its principal place of business in the State of Delaware. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Trustees and the Holders of the Securities): CITIZENS UTILITIES TRUST c/o Citizens Utilities Company High Ridge Park P.O. Box 3801 Stamford, Connecticut 06905 Attention: _________________ (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the other Trustees): Chemical Bank Delaware __________________________ __________________________ Attention: _______________ (c) if given to the Property Trustee, at the mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders of the Securities): Chemical Bank 450 West 33rd Street, 15th Floor New York, New York 10001 Attention: Corporate Trustee Administration Department (d) if given to the Holder of the Convertible Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Convertible Common Securities may give notice to the Trust): CITIZENS UTILITIES COMPANY High Ridge Park P.O. Box 3801 Stamford, Connecticut 06905 Attention: _________________ (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 14.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 14.3 Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to Persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one 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. IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. Robert J. DeSantis as Regular Trustee __________________________ Edward O. Kipperman as Regular Trustee __________________________ CHEMICAL BANK DELAWARE as Delaware Trustee By: Name: Title: CHEMICAL BANK as Property Trustee By: Name: Title: CITIZENS UTILITIES COMPANY as Sponsor By: Name: Title: ANNEX I TERMS OF SECURITIES ANNEX II STATEMENT OF COMMON DEFINITIONS EXHIBIT A-1 FORM OF PREFERRED SECURITY CERTIFICATE EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE EXHIBIT B FORM OF NOTICE OF DISTRIBUTION ELECTION EXHIBIT C FORM OF PARTNERSHIP PREFERRED SECURITIES EXHIBIT D FORM OF CONVERTIBLE DEBENTURE EXHIBIT E UNDERWRITING AGREEMENT TABLE OF CONTENTS Page ARTICLE I INTERPRETATION AND DEFINITIONS . . . . . . . . 2 SECTION 1.1 Definitions . . . . . . . . . . . . . . . 2 ARTICLE II TRUST INDENTURE ACT . . . . . . . . . . . . . 9 SECTION 2.1 Trust Indenture Act; Application . . . . 9 SECTION 2.2 Lists of Holders of Securities . . . . 10 SECTION 2.3 Reports by the Property Trustee . . . . 10 SECTION 2.4 Periodic Reports to Property Trustee . . 10 SECTION 2.5 Evidence of Compliance with Conditions Precedent . . . . . . . . . . . . . 10 SECTION 2.6 Events of Default; Waiver . . . . . . . . 11 SECTION 2.7 Event of Default; Notice . . . . . . . . 13 ARTICLE III ORGANIZATION . . . . . . . . . . . . . . . . . 14 SECTION 3.1 Name . . . . . . . . . . . . . . . . . . 14 SECTION 3.2 Office . . . . . . . . . . . . . . . . . 14 SECTION 3.3 Purpose . . . . . . . . . . . . . . . . . 14 SECTION 3.4 Authority . . . . . . . . . . . . . . . . 15 SECTION 3.5 Title to Property of the Trust . . . . . 15 SECTION 3.6 Powers and Duties of the Regular Trustees . . . . . . . . . . . . . . 15 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees . . . . . . . . . . 19 SECTION 3.8 Powers and Duties of the Property Trustee . . . . . . . . . . . . . . 20 SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee . . . . . . . . 22 SECTION 3.10 Certain Rights of Property Trustee . . . 25 SECTION 3.11 Delaware Trustee . . . . . . . . . . . . 28 SECTION 3.12 Execution of Documents . . . . . . . . . 28 SECTION 3.13 Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . 28 SECTION 3.14 Duration of Trust . . . . . . . . . . . . 28 SECTION 3.15 Mergers . . . . . . . . . . . . . . . . . 28 ARTICLE IV SPONSOR . . . . . . . . . . . . . . . . . . . 30 SECTION 4.1 Sponsor's Purchase of Convertible Common Securities . . . . . . . . . . . . . 30 SECTION 4.2 Responsibilities of the Sponsor . . . . . 31 ARTICLE V TRUSTEES . . . . . . . . . . . . . . . . . . . 31 SECTION 5.1 Number of Trustees . . . . . . . . . . . 31 SECTION 5.2 Delaware Trustee . . . . . . . . . . . . 32 SECTION 5.3 Property Trustee; Eligibility . . . . . . 32 SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally . . . . . 33 SECTION 5.5 Initial Trustees . . . . . . . . . . . . 33 SECTION 5.6 Appointment, Removal and Resignation of Trustees . . . . . . . . . . . . . . 34 SECTION 5.7 Vacancies among Trustees . . . . . . . . 35 SECTION 5.8 Effect of Vacancies . . . . . . . . . . . 36 SECTION 5.9 Meetings . . . . . . . . . . . . . . . . 36 SECTION 5.10 Delegation of Power . . . . . . . . . . . 36 ARTICLE VI DISTRIBUTIONS . . . . . . . . . . . . . . . . 37 SECTION 6.1 Distributions . . . . . . . . . . . . . . 37 ARTICLE VII ISSUANCE OF SECURITIES . . . . . . . . . . . . 37 SECTION 7.1 General Provisions Regarding Securities . 37 ARTICLE VIII TERMINATION OF TRUST . . . . . . . . . . . . . 39 SECTION 8.1 Termination of Trust . . . . . . . . . . 39 ARTICLE IX TRANSFER OF INTERESTS . . . . . . . . . . . . 40 SECTION 9.1 Transfer of Securities . . . . . . . . . 40 SECTION 9.2 Transfer of Certificates . . . . . . . . 40 SECTION 9.3 Deemed Security Holders . . . . . . . . . 41 SECTION 9.4 Book Entry Interests . . . . . . . . . . 41 SECTION 9.5 Notices to Clearing Agency . . . . . . . 42 SECTION 9.6 Appointment of Successor Clearing Agency . . . . . . . . . . . . . . . 42 SECTION 9.7 Definitive Preferred Security Certificates . . . . . . . . . . . . 42 SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . 43 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS . . . . 44 SECTION 10.1 Liability . . . . . . . . . . . . . . . . 44 SECTION 10.2 Exculpation . . . . . . . . . . . . . . . 44 SECTION 10.3 Fiduciary Duty . . . . . . . . . . . . . 45 SECTION 10.4 Indemnification . . . . . . . . . . . . . 46 SECTION 10.5 Outside Businesses . . . . . . . . . . . 47 ARTICLE XI ACCOUNTING . . . . . . . . . . . . . . . . . . 48 SECTION 11.1 Fiscal Year . . . . . . . . . . . . . . . 48 SECTION 11.2 Certain Accounting Matters . . . . . . . 48 SECTION 11.3 Banking . . . . . . . . . . . . . . . . . 49 SECTION 11.4 Withholding . . . . . . . . . . . . . . . 49 ARTICLE XII AMENDMENTS AND MEETINGS . . . . . . . . . . . 49 SECTION 12.1 Amendments . . . . . . . . . . . . . . . 49 SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent . . . . . 52 ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE . . . . . . . . . . . . . . 54 SECTION 13.1 Representations and Warranties of Property Trustee . . . . . . . . . . 54 SECTION 13.2 Representations and Warranties of Delaware Trustee . . . . . . . . . . 55 ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . 56 SECTION 14.1 Notices . . . . . . . . . . . . . . . . . 56 SECTION 14.2 Governing Law . . . . . . . . . . . . . . 57 SECTION 14.3 Intention of the Parties . . . . . . . . 57 SECTION 14.4 Headings . . . . . . . . . . . . . . . . 57 SECTION 14.5 Successors and Assigns . . . . . . . . . 57 SECTION 14.6 Partial Enforceability . . . . . . . . . 58 SECTION 14.7 Counterparts . . . . . . . . . . . . . . 58 CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Declaration 310(a) . . . . . . . . . . . . . . . . . 5.3(a) 310(c) . . . . . . . . . . . . . . . . . Inapplicable 311(c) . . . . . . . . . . . . . . . . . Inapplicable 312(a) . . . . . . . . . . . . . . . . . 2.2(a) 312(b) . . . . . . . . . . . . . . . . . 2.2(b) 313 . . . . . . . . . . . . . . . . . . . 2.3 314(a) . . . . . . . . . . . . . . . . . 2.4 314(b) . . . . . . . . . . . . . . . . . Inapplicable 314(c) . . . . . . . . . . . . . . . . . 2.5 314(d) . . . . . . . . . . . . . . . . . Inapplicable 314(f) . . . . . . . . . . . . . . . . . Inapplicable 315(a) . . . . . . . . . . . . . . . . . 3.9(b) 315(c) . . . . . . . . . . . . . . . . . 3.9(a) 315(d) . . . . . . . . . . . . . . . . . 3.9(a) 316(a) . . . . . . . . . . . . . . . . . Annex I 316(c) . . . . . . . . . . . . . . . . . 3.6(e) _______________ * This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. EX-4 4 ANNEX I TERMS OF __% CITIZENS UTILITIES CONVERTIBLE PREFERRED SECURITIES __% CITIZENS UTILITIES CONVERTIBLE COMMON SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust, dated as of , 1995 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Convertible Preferred Securities and the Convertible Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below): 1. DESIGNATION AND NUMBER. (a) Convertible Preferred Securities. ______________ Convertible Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of __________________________ Dollars ($___________) plus up to an additional Convertible Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $ solely to cover over-allotments as provided for in the Underwriting Agreement (the "Additional Convertible Preferred Securities"), and a liquidation amount with respect to the assets of the Trust of $50 per Convertible Preferred Security, are hereby designated for the purposes of identification only as " % Citizens Utilities Convertible Preferred Securities" (the "Convertible Preferred Securities"). The Preferred Security Certificates evidencing the Convertible Preferred Securities shall be substantially in the form attached hereto as Exhibit A-1, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Convertible Preferred Securities are listed. (b) Convertible Common Securities. ______________ Convertible Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of ______________________________ Dollars ($___________) plus to an additional Convertible Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $ to meet the capital requirements of the Trust in the event of an issuance of Additional Convertible Preferred Securities, and a liquidation amount with respect to the assets of the Trust of $50 per Convertible Common Security, are hereby designated for the purposes of identification only as "__% Citizens Utilities Convertible Common Securities" (the "Convertible Common Securities"). The Common Security Certificates evidencing the Convertible Common Securities shall be substantially in the form attached hereto as Exhibit A-2, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. DISTRIBUTIONS. (a) Periodic Distributions payable on each Security will be fixed at a rate per annum of ____% (the "Rate") of the stated liquidation amount of $50 per Security, such rate being the rate of distributions payable on the Partnership Preferred Securities to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon at the Rate (to the extent permitted by applicable law). The form of payments of distributions (the "Distributions") may be in either cash or an Equivalent Value of shares of Common Stock, as provided in Section 8 of this Annex I. A Distribution can be paid only to the extent that payments are made in respect of the Partnership Preferred Securities held by the Property Trustee. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed in such period. (b) Distributions on the Securities will be cumulative, will accrue from , 1995 and will be payable quarterly in arrears, on January 31, April 30, July 31 and October 31 of each year, commencing on , 1996, except as otherwise described below (each, a "Distribution Payment Date"). In the event certain events specified in the Limited Partnership Agreement occur, Citizens Capital will defer distribution payments on the Partnership Preferred Securities. Such a deferral will occur if the Debenture Issuer elects to extend the distribution payment period on the Convertible Debentures for a period not exceeding 20 consecutive quarters (each, an "Extension Period") and, as a consequence of such extension, distributions on the Partnership Preferred Securities and, therefore, the Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Rate, compounded quarterly, during any such Extension Period. Prior to the termination of any such Extension Period, Citizens Capital may, under the Limited Partnership Agreement, be required to further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters nor extend the maturity date of the Securities. Payments of accrued Distributions which have been extended pursuant to this Section 2 will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, Citizens Capital may, under the Limited Partnership Agreement, be required to commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the Regular Record Date (as defined in the Indenture) immediately preceding the applicable Distribution Payment Date. So long as the Securities remain in book-entry only form, subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Convertible Preferred Securities will be made as described under the heading "Description of the Convertible Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company" in the Prospectus dated ______, 1995 (the "Prospectus") of the Trust included in the Registration Statement on Form S-3 of the Sponsor, Citizens Capital and the Trust (Reg. No. 33-________). The relevant record dates for the Convertible Common Securities shall be the same record dates as for the Convertible Preferred Securities. Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of Citizens Capital having failed to make a payment on the Partnership Preferred Securities, will cease to be payable to the Person in whose name such Securities are registered on the Regular Record Date, and such late 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 Declaration. 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 date. (d) In the event of an election by the Holder to convert its Securities through the Conversion Agent into shares of Common Stock, pursuant to the terms of the Securities as set forth in this Annex I to the Declaration, no payment, allowance or adjustment shall be made with respect to accumulated, deferred and unpaid Distributions on such Securities, or be required to be made; provided that Holders of Securities at the close of business on any record date for the payment of Distributions will be entitled to receive the Distributions payable on such Securities on the corresponding payment date notwithstanding the conversion of such Securities into Common Stock following such record date. (e) 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 in Section 10 of this Annex I) among the Holders of the Securities on [the next Distribution Payment Date]. (f) In the event that Citizens Capital is dissolved and the Convertible Debentures are issued to the Trust, Distributions shall continue to be payable in the manner provided for by this Section 2, except that Distributions shall no longer be payable upon receipt of distributions due under the Partnership Preferred Securities as set forth in the Limited Partnership Agreement but rather shall be payable upon receipt of payments due under the Convertible Debentures as set forth in the Indenture. 3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Securities on the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities to creditors, an amount equal to the aggregate of the stated liquidation amount of $50 per Security, payable in cash, plus accrued and unpaid Distributions thereon to the date of payment, payable in cash or an Equivalent Value of Common Stock (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, at the election of the Regular Trustees, Partnership Preferred Securities (or, if the Partnership has been terminated and the Property Trustee holds Convertible Debentures, Convertible Debentures) in an aggregate liquidation amount (or principal amount) equal to the aggregate stated liquidation amount of such Securities, with a distribution rate (or interest rate) equal to the Rate of, and bearing accrued and unpaid distributions (or interest) in an amount equal to the accrued and unpaid Distributions on, such Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, 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 the Securities shall be paid on a Pro Rata basis in accordance with Section 10 of this Annex I. If, upon any liquidation of the Trust, the holders of Securities are paid in full the aggregate Liquidation Distribution to which they are entitled, then such holders will not be entitled to receive or share in any other assets of the Trust thereafter available for distribution to any other holders of beneficial interests in the Trust. 4. REDEMPTION AND DISTRIBUTION. (a) Mandatory Redemption. Upon the repayment of the Convertible Debentures in whole or in part, whether at maturity, upon acceleration of the maturity of the Convertible Debentures or upon redemption, the proceeds from such repayment or payment shall be simultaneously applied to redeem, ultimately, upon redemption of Partnership Preferred Securities, if any, Securities having an aggregate liquidation amount equal to the aggregate liquidation amount of the Convertible Debentures so repaid or redeemed, at a redemption price of $50 per Security, plus an amount equal to accrued and unpaid Distributions thereon at the date of the redemption, payable in cash (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days notice of such redemption. If the Convertible Debentures are redeemed in part, then the Securities shall be redeemed on a Pro Rata basis in accordance with Section 10 of this Annex I. (b) [reserved] (c) Special Redemption. If, at any time, a Trust Event shall occur and be continuing the Regular Trustees shall (i) after receipt by the Company of a No Recognition Opinion with respect to the Partnership Preferred Securities and delivery of such No Recognition Opinion to the Trust, dissolve the Trust and, after satisfaction of creditors, cause the Partnership Preferred Securities held by the Property Trustee, having an aggregate stated liquidation amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the Rate of, and accrued and unpaid distributions equal to accrued and unpaid Distributions on and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities, in liquidation of such Holders' interests in the Trust, on a Pro Rata basis or (ii) after receipt by the Company of No Recognition Opinions with respect to the Partnership Preferred Securities and the Convertible Debentures and delivery of the appropriate No Recognition Opinion to each of the Trust and Citizens Capital, and following the dissolution of Citizens Capital in the manner set forth in the Limited Partnership Agreement, dissolve the Trust, and, after satisfaction of creditors, cause the Convertible Debentures held by the General Partner, having aggregate stated principal amount equal to the aggregate stated liquidation amount of, with an interest payment rate identical to the Rate of and accrued and unpaid interest equal to accrued and unpaid Distributions on and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities, in liquidation of such Holders' interests in the Trust, on a Pro Rata basis, or, in the event the Company cannot receive a No Recognition Opinion with respect to the Partnership Preferred Securities, the Regular Trustees may dissolve the Trust and, after satisfaction of creditors, at the direction of the Company, as Debenture Issuer, and following the redemption, in whole or in part, of the Convertible Debentures in the manner set forth in the Indenture and the Partnership Preferred Securities in the manner set forth in the Limited Partnership Agreement, redeem, in whole or in part, the Securities in the manner set forth in this Annex I to the Declaration; provided, however, that, if at the time there is available to the Trust the opportunity to eliminate the Trust Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Trustees, Citizens Capital, the Sponsor or the Holders of the Securities ("Ministerial Action"), the Regular Trustees will pursue such Ministerial Action in lieu of dissolution. If, at any time, a Partnership Event shall occur and be continuing the General Partner may dissolve Citizens Capital and, after satisfaction of creditors, either (i) upon receipt by the Company of a No Recognition Opinion with respect to the Convertible Debentures and delivery of such No Recognition Opinion to Citizens Capital, cause the Convertible Debentures held by the General Partner, having an aggregate stated principal amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid distributions on and having the same record date for payment as the Partnership Preferred Securities, to be distributed to the holders of the Partnership Preferred Securities, in liquidation of such holders' interests in Citizens Capital or (ii) in the event the Company cannot receive a No Recognition Opinion, at the direction of the Company, as Debenture Issuer, and following the redemption, in whole or in part, of the Convertible Debentures in the manner set forth in the Indenture and the Partnership Preferred Securities in the manner set forth in the Limited Partnership Agreement, redeem, in whole or in part, the Securities in the manner set forth in this Annex I to the Declaration, provided, however, that, if at the time there is available to Citizens Capital the opportunity to eliminate the Partnership Event by taking a Ministerial Action, Citizens Capital will pursue such Ministerial Action in lieu of dissolution. In the event that the General Partner undertakes the actions specified in item (i) of this paragraph, the Company, as Sponsor, may dissolve the Trust and thereby cause the Convertible Debentures to be distributed to the Holders of the Securities. If, at any time, a Company Event shall occur and be continuing, the Company, as Debenture Issuer, may cause the redemption, in whole but not in part, of the Securities by redeeming, in whole but not in part, the Convertible Debentures in the manner set forth in the Indenture and thereby causing the redemption of the Partnership Preferred Securities in the manner set forth in the Limited Partnership Agreement, which redemption shall in turn cause the redemption of the Securities in the manner set forth in this Annex I to the Declaration, provided, however, that, if at the time there is available to the Debenture Issuer the opportunity to eliminate the Company Event by taking a Ministerial Action, the Debenture Issuer will pursue such Ministerial Action in lieu of redemption. If, at any time, a Rating Agency Event shall occur and be continuing, the Company, as Sponsor of the Trust, shall dissolve the Trust and (i) after satisfaction of creditors, cause the Partnership Preferred Securities having an aggregate liquidation amount equal to the aggregate liquidation amount of the Securities to be distributed to the holders of the Securities in liquidation of the Trust or (ii) upon dissolution of Citizens Capital as set forth in the Limited Partnership Agreement, and after satisfaction of creditors, cause the Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation preference of the Securities to be distributed to the holders of the Securities in liquidation of the Trust and Citizens Capital. After the date for any distribution of Partnership Preferred Securities or Convertible Debentures, as the case may be, upon dissolution and liquidation of the Trust (i) the Securities will be deemed to be no longer outstanding, (ii) if the Convertible Preferred Securities then remain in book- entry only form, the Depository Trust Company (the "Depositary") or its nominee, as the record holder of the Convertible Preferred Securities, will receive a registered global certificate or certificates representing the Partnership Preferred Securities or Convertible Debentures, as the case may be, and (iii) any certificates representing Securities not held by the Depositary or its nominee will be deemed to represent, as applicable, (a) Partnership Preferred Securities having an aggregate liquidation amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid interest to accrued and unpaid Distributions on such Convertible Preferred Securities, or (b) Convertible Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on such Securities, as the case may be, until such certificates are presented to the Company, as General Partner or Debenture Issuer, as the case may be, or its agent for registration of transfer or reissuance. (d) General. The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. If fewer than all the outstanding Securities are to be so redeemed, the Convertible Common Securities and the Convertible Preferred Securities will be redeemed Pro Rata and the Convertible Preferred Securities to be redeemed will be as described in Section 4(f)(ii) of this Annex I. If the Partnership Preferred Securities or the Convertible Debentures are distributed to Holders of the Securities, Citizens Capital or the Debenture Issuer, as the case may be, will use its best efforts to have the Partnership Preferred Securities or the Convertible Debentures, as the case may be, listed on the New York Stock Exchange or on such other exchange as the Convertible Preferred Securities were listed immediately prior to the distribution of the Partnership Preferred Securities or the Convertible Debentures. (e) Redemption or Distribution Procedures. (i) Notice of any redemption of Partnership Preferred Securities and/or Convertible Debentures or notice of distribution of Partnership Preferred Securities or Convertible 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 Partnership Preferred Securities and/or Convertible Debentures which in turn will be the date fixed for redemption of the Convertible 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) of Annex 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 Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata and, in the event Convertible Preferred Securities are held in book- entry only form by the Depositary or its nominee (or any successor Clearing Agency or its nominee), the Depositary will reduce Pro Rata the amount of the interest of each Clearing Agency Participant in the Convertible Preferred Securities to be redeemed; provided that if, as a result of such Pro Rata redemption, Clearing Agency Participants would hold fractional interests in the Convertible Preferred Securities, the Depositary will adjust the amount of the interest of each Clearing Agency Participant to be redeemed to avoid such fractional interests. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice which notice may only be issued if the Partnership Preferred Securities and/or Convertible Debentures are redeemed as set out in this Section 4 to Annex I (which notice will be irrevocable) then (A) while the Convertible Preferred Securities are in book-entry only form, with respect to the Convertible Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that Citizens Capital or the Debenture Issuer, as the case may be, has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Partnership Preferred Securities and/or Convertible Debentures, the Property Trustee will deposit irrevocably with the Paying Agent funds sufficient to pay the applicable Redemption Price with respect to the Convertible Preferred Securities and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Depositary for payment to the Holders of the Convertible Preferred Securities, and (B) (i) in the case of Convertible Preferred Securities that are issued in definitive form, then with respect to such Convertible Preferred Securities, and (ii) with respect to the Convertible Common Securities, provided that Citizens Capital or the Debenture Issuer, as the case may be, has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Partnership Preferred Securities and/or the Convertible Debentures, the Property Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant 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, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, Distributions will cease to 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 Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities which have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Guarantee Agreement, Distributions on such Securities will continue to accrue, 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. (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Convertible Preferred Securities, the Depositary or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or if Definitive Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Convertible Common Securities to the Holder thereof. (v) If a Redemption/Distribution Notice shall have been given with respect to the redemption of the Securities, the conversion rights set forth in Section 5 of this Annex I shall terminate at the close of business on the fifth Business Day prior to the redemption date. (vi) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Convertible Preferred Securities by tender, in the open market or by private agreement. 5. CONVERSION RIGHTS. The Holders of Securities shall have the right, at any time up to and including the fifth Business Day prior to the maturity or redemption of the Securities, at their option, to cause the Conversion Agent to convert Securities, on behalf of the converting Holders, into shares of Common Stock in the manner described herein on and subject to the following terms and conditions: (a) The Securities will be convertible at the office of the Conversion Agent into fully paid and nonassessable shares of Common Stock pursuant to the Holder's direction in writing given pursuant to Section 5(b) of this Annex I. Upon receipt of any such written directions, the Conversion Agent shall (i) exchange such Securities for a portion of the Partnership Preferred Securities or Convertible Debentures, as the case may be, theretofore held by the Trust on the basis of one Security per $50 liquidation amount of Partnership Preferred Securities or $50 principal amount of Convertible Debentures, as the case may be, (ii), as holder of such Partnership Preferred Securities in the event Citizens Capital has not been dissolved, immediately cause Citizens Capital to exchange such amount of Partnership Preferred Securities for a portion of the Convertible Debentures theretofore held by Citizens Capital on the basis of $50 liquidation amount of Partnership Preferred Securities per $50 principal amount of Convertible Debentures, and (iii) as holder of such Convertible Debentures, immediately convert such amount of Convertible Debentures into fully paid and nonassessable shares of Common Stock at an initial rate of _________ shares of Common Stock per $50 principal amount of Convertible Debentures (which is equivalent to a conversion price of $______ per share of Common Stock, subject to certain adjustments set forth in the terms of the Convertible Debentures (as so adjusted, "Conversion Price")). (b) In order to convert Securities into Common Stock the Holder shall submit to the Conversion Agent at the office referred to above an irrevocable request to convert Securities on behalf of such Holder (the "Conversion Request"), together, if the Securities are in certificated form, with such certificates. The Conversion Request shall (i) set forth the number of Securities to be converted and the name or names, if other than the Holder, in which the shares of Common Stock should be issued and (ii) direct the Conversion Agent (a) to exchange such Securities for a portion of the Partnership Preferred Securities or Convertible Debentures, as the case may be, held by the Trust (at the rate of exchange specified in the preceding paragraph), (b) to, in the event Partnership Preferred Securities are held, immediately exchange such Partnership Preferred Securities on behalf of such Holder, into Convertible Debentures (at the conversion rate specified in the preceding paragraph) and (c) to immediately convert such Convertible Debentures on behalf of such Holder, into Common Stock (at the conversion rate specified in the preceding paragraph). The Conversion Agent shall notify the Trust of the Holder's election to exchange Securities for a portion of the Partnership Preferred Securities or Convertible Debentures, as the case may be, held by the Trust and the Trust shall, upon receipt of such notice, deliver to the Conversion Agent the appropriate liquidation amount of Partnership Preferred Securities or the appropriate principal amount of Convertible Debentures, as the case may be, for exchange in accordance with this Section. In the event Partnership Preferred Securities are held by the Trust, the Conversion Agent shall thereupon notify Citizens Capital of the Holder's election to exchange such Partnership Preferred Securities for a portion of the Convertible Debentures held by Citizens Capital and Citizens Capital shall, upon receipt of such notice, deliver to the Conversion Agent the appropriate principal amount of Convertible Debentures for exchange in accordance with this Section. The Conversion Agent shall thereupon notify the Company of the Holder's election to convert such Convertible Debentures into shares of Common Stock. Holders of Securities at the close of business on a Distribution record date will be entitled to receive the Distribution payable on such securities on the corresponding Distribution Payment Date notwithstanding the conversion of such Securities following such record date but prior to such Distribution Payment Date. Except as provided above, neither the Trust nor the Sponsor will make, or be required to make, any payment, allowance or adjustment upon any conversion on account of any accumulated and unpaid Distributions accrued on the Securities (including any Additional Amounts accrued thereon) surrendered for conversion, or on account of any accumulated and unpaid dividends on the shares of Common Stock issued upon such conversion. Securities shall be deemed to have been converted immediately prior to the close of business on the day on which a Notice of Conversion relating to such Securities is received by the Conversion Agent in accordance with the foregoing provision (the "Conversion Date"). The Person or Persons entitled to receive the Common Stock issuable upon conversion of the Securities shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the Conversion Date, the Company shall issue and deliver at the office of the Conversion Agent a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same, unless otherwise directed by the Holder in the Notice of Conversion and the Conversion Agent shall distribute such certificate or certificates to such Person or Persons. (c) Each Holder of a Security by his acceptance thereof appoints Chemical Bank "Conversion Agent" for the purpose of effecting the conversion of Securities in accordance with this Section. In effecting the conversion and transactions described in this Section, the Conversion Agent shall be acting as agent of the Holders of Securities directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Securities from time to time for Partnership Preferred Securities or Convertible Debentures, as the case may be, held by the Trust in connection with the conversion of such Securities in accordance with this Section, (ii) to, in the event Partnership Preferred Securities are held by the Trust, exchange such Partnership Preferred Securities for Convertible Debentures held by Citizens Capital in connection with the conversion of such Securities in accordance with this Section and (iii) to convert all or a portion of the Convertible Debentures into Common Stock and thereupon to deliver such shares of Common Stock in accordance with the provisions of this Section and to deliver to Citizens Capital a new Convertible Debenture or Convertible Debentures for any resulting unconverted principal amount and to the Trust a new Partnership Preferred Security or Partnership Preferred Securities or Convertible Debenture or Convertible Debentures, as the case may be, for any resulting unconverted liquidation amount. (d) No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, such fractional interest will be in cash by the Company to the Trust, which in turn will make such payment to the Holder or Holders of Securities so converted. (e) The Company shall at all times reserve and have available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of the Convertible Debentures, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the Convertible Debentures then outstanding. Notwithstanding the foregoing, the Company shall be entitled to deliver upon conversion of Convertible Debentures, shares of Common Stock reacquired and held in the treasury of the Company (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances. Any shares of Common Stock issued upon conversion of the Convertible Debentures shall be duly authorized, validly issued and fully paid and nonassessable. The Trust shall deliver the shares of Common Stock received upon conversion of the Convertible Debentures to the converting Holder free and clear of all liens, charges, security interests and encumbrances, except for United States withholding taxes. Each of the Company, Citizens Capital (if in existence) and the Trust shall prepare and shall use its best efforts to obtain and keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all applicable requirements as to registration or qualification of the Common Stock (and all requirements to list the Common Stock issuable upon conversion of Convertible Debentures that are at the time applicable), in order to enable the Company to lawfully issue Common Stock to the Trust upon conversion of the Convertible Debentures and the Trust to lawfully deliver the Common Stock to each Holder upon conversion of the Securities. (f) The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Convertible Debentures and the delivery of the shares of Common Stock by the Trust upon conversion of the Securities. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Securities so converted were registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Trust the amount of any such tax, or has established to the satisfaction of the Trust that such tax has been paid. (g) Nothing in the preceding Paragraph (f) shall limit the requirement of the Trust to withhold taxes pursuant to the terms of the Securities as set forth in this Annex I to the Declaration or to the Declaration itself or otherwise require the Property Trustee or the Trust to pay any amounts on account of such withholdings. 6. VOTING RIGHTS - CONVERTIBLE PREFERRED SECURITIES. (a) Except as provided under Sections 6(b) and 9 of this Annex I and as otherwise required by law and the Declaration, the Holders of the Convertible Preferred Securities will have no voting rights. (b) Subject to the requirements of the penultimate sentence of this paragraph, the Holders of a Majority in liquidation amount of the Convertible Preferred Securities voting separately as a class may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) for so long as the Property Trustee shall hold the Partnership Preferred Securities, (A) causing the Special Representative (as defined in the Partnership Agreement) to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on Indenture Trustee with respect to the Convertible Debentures, (B) causing the Special Representative to waive any past default and its consequences that are waivable under Section 5.13 of the Indenture, or (C) causing the Special Representative to exercise any right to rescind or annul a declaration that the principal amount of all the Convertible Debentures shall be due and payable; and (ii) if the Property Trustee holds Convertible Debentures in the event that the Citizens Capital is liquidated and such Convertible Debentures are distributed in exchange for the Partnership Preferred Securities, (A) directing the time, method and place of exercising any trust or power conferred upon the Indenture Trustee with respect to the Convertible Debentures, (B) waiving any past default that is waivable under Section 5.13 of the Indenture, or (C) exercising any right to rescind or annul any declaration that the principal amount of all the Convertible Debentures shall be due and payable; provided, however, that where a consent under the Limited Partnership or the Indenture, as the case may be, would require the consent or act of the Holders of greater than a majority in liquidation amount of the Partnership Preferred Securities or the Holders of greater than a majority in principal amount of Convertible Debentures, as the case may be, affected thereby (a "Super Majority"), the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation amount of the Partnership Preferred Securities or in principal amount of the Convertible Debentures, as the case may be, which the relevant Super Majority represents of the aggregate liquidation amount of the Partnership Preferred Securities or the aggregate principal amount of the Convertible Debentures, as the case may be, outstanding. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Convertible Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Special Representative as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Convertible Preferred Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for United States federal income tax purposes the Trust will continue to be classified as a grantor trust after consummation of such action. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Convertible Preferred Securities may, after a period of 30 days has elapsed from such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Convertible Preferred Securities may be given at a separate meeting of Holders of Convertible Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Convertible Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Convertible Preferred 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 Convertible Preferred Securities will be required for the Trust to redeem and cancel Convertible Preferred Securities, or to distribute Partnership Preferred Securities or Convertible Debentures, as the case may be, in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Convertible Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Convertible Preferred Securities that are owned by the Sponsor, or by any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding; provided, however, that holders of Convertible Preferred Securities that have been validly pledged by the Company or any such affiliate to a party otherwise eligible to vote may vote or consent under any of the circumstances described above. 7. VOTING RIGHTS - CONVERTIBLE COMMON SECURITIES. (a) Except as provided under Sections 7(b), 7(c) and 9 of this Annex I and as otherwise required by law and the Declaration, the Holders of the Convertible Common Securities will have no voting rights. (b) The Holders of the Convertible Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.6 of the Declaration and only after all Events of Default with respect to the Convertible Preferred Securities have been cured, waived or otherwise eliminated and subject to the requirements of the penultimate sentence of this paragraph, the Holders of a Majority in liquidation amount of the Convertible Common Securities voting separately as a class may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) for so long as the Property Trustee shall hold the Partnership Preferred Securities, (A) direct the time, method, place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee with respect to the Convertible Debentures, (B) causing the Special Representative to waive any past default and its consequences that are waivable under Section 5.13 of the Indenture, or (C) causing the Special Representative to exercise any right to rescind or annul a declaration that the principal amount of all the Convertible Debentures shall be due and payable; and (ii) if the Property Trustee holds Convertible Debentures in the event that the Citizens Capital is liquidated and such Convertible Debentures are distributed in exchange for the Partnership Preferred Securities (A) directing the time, method and place of exercising any trust or power conferred upon the Indenture Trustee with respect to the Convertible Debentures, (B) waiving any past default that is waivable under Section 5.13 of the Indenture, or (C) exercising any right to rescind or annul any declaration that the principal amount of all the Convertible Debentures shall be due and payable; provided, however, that where a consent or action under the Limited Partnership Agreement or Indenture, as the case may be, would require the consent or act of the Holders of greater than a majority in liquidation amount of Partnership Preferred Securities or the Holders of greater than a majority in principal amount of the Convertible Debentures, as the case may be, affected thereby (a "Super Majority"), the Property Trustee may only give such consent or take such action at the direction of the Holders of at least the proportion in liquidation amount of the Convertible Common Securities which the relevant Super Majority represents of the aggregate liquidation amount of the Partnership Preferred Securities or the aggregate principal amount of the Convertible Debentures, as the case may be, outstanding. Pursuant to this Section 7(c) to Annex I, the Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Convertible Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Special Representative as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Convertible Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for United States federal income tax purposes the Trust will continue to be classified as a greater trust after consummation of such action. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Convertible Common Securities may, after a period of 30 days has elapsed from such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Convertible Common Securities may be given at a separate meeting of Holders of Convertible Common Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Convertible Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Convertible 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 Convertible Common Securities will be required for the Trust to redeem and cancel Convertible Common Securities or to distribute Partnership Preferred Securities or Convertible Debentures, as the case may be, in accordance with the Declaration and the terms of the Securities. 8. DISTRIBUTION ELECTION. (a) Declaration by Company. For so long as Citizens Capital shall hold the Convertible Debentures, the Company shall have by the Distribution Declaration Date applicable to each Distribution Payment Date declared the form of payment in which it intends to pay the interest on the Convertible Debentures. Such Distribution Declaration Notice shall determine the form of payment in which the Trust shall pay the Distributions, subject to the terms and conditions of this Section 8 of Annex I. If the Company shall have declared to pay interest on the Convertible Debentures in the form of cash, by the Distribution Declaration Date in respect of a Distribution Payment Date, the Holders of the Securities will receive Distributions only in the form of cash, notwithstanding any election by a Holder of the Securities to the contrary. If the Company shall have by the Distribution Declaration Date declared to pay interest on the Convertible Debentures in the form of shares of Common Stock, the Holders of the Securities may receive Distributions in the form of cash or shares of Common Stock subject to the provision of this Section 8 of Annex I. If the Company fails to make a timely declaration, the Company shall be deemed to have elected to pay interest in the form of shares of Common Stock. (b) Election by Holder. For so long as Citizens Capital shall hold the Convertible Debentures, Distributions on the Securities may be payable in cash or shares of Common Stock as set forth in this Section 8 of Annex I. Thereafter, Distributions shall be payable only in the form of cash. Subject to Sections 8(a), 8(d) and 8(e) of this Annex I, each Holder may elect during the annual Election Period to receive Distributions for the next four Distribution Payment Dates in either (a) an Equivalent Value of shares of Common Stock (a "Stock Distribution Election") or (b) cash (a "Cash Distribution Election"), in each case by submitting to the Election Agent a notice of distribution election substantially in the form of Exhibit B (a "Notice of Distribution Election"). The Election Agent shall thereupon inform all such parties (e.g., the Clearing Agency, any Clearing Agency Participants, any nominee of the Clearing Agency) as are necessary to ensure that the Paying Agent is properly informed of such Holder's election with respect to a pro rata share of the Partnership Preferred Securities. The Notice of Distribution Election shall specify the form of payment in which the Holder elects to receive Distributions. If a Holder fails to submit a Notice of Distribution Election during the Election Period, the Holder shall be deemed to have elected to receive Distributions in the form of cash. If a Holder transfers any or all Securities in such Holder's possession, the subsequent Holder(s) of such transferred Securities shall be deemed to have made a Cash Distribution Election for the remaining Distribution Payment Dates prior to the next Election Period for which such subsequent Holder(s) appear as the Holder(s) of record. (c) Common Stock Election by Company. If the Company has (or be deemed to have) elected to pay interest on the Convertible Debentures in the form of shares of Common Stock, the Trust shall pay Distributions on Securities in accordance with this Section 8(c) of Annex I. No fractional shares of Common Stock will be issued as a result of the Company's election to pay interest on the Convertible Debentures in Common Stock, but in lieu thereof, such fractional interest will be paid in cash. No fractional shares of Common Stock will be issued as a result of the Holder's election to receive payments of Distribution in the form of Common Stock, but in lieu thereof such fractional interests will be paid for in cash to the Security Holders. (i) To the extent Holders have elected to receive payment of Distributions in shares of Common Stock, subject to Section 8(d) of this Annex I, the Paying Agent shall distribute an Equivalent Value of shares of Common Stock equal to the amount of such Distribution, together with the cash payment, if any, in lieu of any fractional share of Common Stock to such Security Holders at the address specified on the register of the Trust. (ii) To the extent Holders have elected to receive payment of Distributions in cash the Paying Agent shall pay Distributions in cash. (d) Company Cash Option. Notwithstanding the foregoing paragraphs of this Section 8 of Annex I, the Debenture Issuer has the right (the "Company Cash Option") on and after the Distribution Declaration Date but before the Cash Interest Payment Date (as such term is defined in the Indenture) to cause all Holders of Securities to receive payment of Distributions in the form of cash. The Debenture Issuer may exercise the Company Cash Option, if the Debenture Issuer shall have provided written notice to the Trust, the Partnership, the Paying Agent and the holders of the Securities (a "Cash Payment Notice"). (e) Call Option on Common Stock. On or after the Share Transfer and Valuation Date, the Company may cause some or all the holders of Securities to receive Distributions in the form of cash by purchasing from Citizens Capital shares of Common Stock distributed by the Company as interest payment on the Convertible Debentures, that have not yet been sold for cash or distributed to the holders of the Partnership Preferred Securities at a price equal to the Equivalent Value (the "Company Call Option"). The Company may exercise the Company Call Option, if the Company shall have provided a Cash Payment Notice. 9. AMENDMENTS TO DECLARATION AND LIMITED PARTNERSHIP AGREEMENT. (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Regular 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 dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Securities as a class will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least 66-2/3% in liquidation amount of the Securities, voting together as a single class; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Convertible Preferred Securities or the Convertible 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 66-2/3% in liquidation amount of such class of Securities. (b) In the event the consent of the Property Trustee, as the holder of the Partnership Preferred Securities or, in the event Citizens Capital is dissolved and the Convertible Debentures are issued to the holders of the Partnership Preferred Securities, the Convertible Debentures, is required under the Limited Partnership Agreement or the Indenture, as the case may be, with respect to any amendment, modification or termination of the Limited Partnership Agreement or the Indenture, as the case may be, or the Partnership Preferred Securities or the Convertible Debentures, as the case may be, the Property Trustee shall request the 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 Limited Partnership Agreement or the Indenture, as the case may be, would require the consent of the holders of greater than a majority in aggregate liquidation amount of the Partnership Preferred Securities or the Convertible Debentures, as the case may be (a "Super Majority"), the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate liquidation amount of the Partnership Preferred Securities or aggregate principal amount of the Convertible Debentures, as the case may be, outstanding; provided, further, that the Property Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this Section 9(b) of Annex I unless the Property Trustee has obtained an opinion of tax counsel to the effect that for United States federal income tax purposes the Trust will continue to be classified as a grantor trust after consummation of such action. 10. 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 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 under the Limited Partnership Agreement] has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Convertible Preferred Securities pro rata according to the aggregate liquidation amount of Convertible Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Convertible Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Convertible Preferred Securities, to each Holder of Convertible Common Securities pro rata according to the aggregate liquidation amount of Convertible Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Convertible Common Securities outstanding. 11. RANKING. The Convertible Preferred Securities rank pari passu and payment thereon shall be made Pro Rata with the Convertible Common Securities except that when an Event of Default occurs and is continuing under the Limited Partnership Agreement in respect of the Partnership Preferred Securities held by the Property Trustee, the rights of Holders of the Convertible 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 Convertible Preferred Securities. 12. LISTING. The Regular Trustees shall use their best efforts to cause the Convertible Preferred Securities to be listed for quotation on the New York Stock Exchange. 13. ACCEPTANCE OF GUARANTEE AGREEMENTS, LIMITED PARTNERSHIP AGREEMENT AND INDENTURE. Each Holder of Convertible Preferred Securities and Convertible Common Securities, by the acceptance thereof, agrees to the provisions of the Convertible Preferred Securities Guarantee Agreement and the Convertible Common Securities Guarantee Agreement, respectively, including the subordination provisions therein and to the provisions of the Limited Partnership Agreement and the Indenture. 14. NO PREEMPTIVE RIGHTS. The Holders of the Securities shall have no preemptive rights to subscribe for any additional Securities. 15. MISCELLANEOUS. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Convertible Preferred Securities Guarantee Agreement, the Limited Partnership Agreement and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. EXHIBIT A-1 FORM OF PREFERRED SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] [IF THE CONVERTIBLE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This Convertible Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Convertible Preferred Security is exchangeable for Convertible Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Convertible Preferred Security (other than a transfer of this Convertible Preferred Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Convertible Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Convertible Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Convertible Preferred Securities CUSIP NO. [ ] Certificate Evidencing Convertible Preferred Securities of Citizens Utilities Trust ____% Citizens Utilities Convertible Preferred Securities (liquidation amount $50 per Convertible Preferred Security) Citizens Utilities Trust, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the registered owner of preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Citizens Utilities Convertible Preferred Securities (liquidation amount $50 per Convertible Preferred Security) (the "Convertible Preferred Securities"). The Convertible Preferred 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 Convertible Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of _______, 1995, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Convertible Preferred Securities as set forth in Annex I to 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 Convertible Preferred Securities Guarantee Agreement to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Convertible Preferred Securities Guarantee Agreement, the Limited Partnership Agreement and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Convertible Debentures as indebtedness and the Convertible Preferred Securities as evidence of indirect beneficial ownership in the Partnership Preferred Securities. IN WITNESS WHEREOF, the Trust has executed this certificate this day of , 199 . CITIZENS UTILITIES TRUST By: Name: Title: [FORM OF REVERSE OF SECURITY] Distributions payable on each Convertible Preferred Security will be fixed at a rate per annum of % (the "Rate") of the stated liquidation preference of $50 per Convertible Preferred Security, such rate being the rate of distribution payable on the Partnership Preferred Securities to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payment in the form of cash or shares of common stock, par value $.25 per share, of Citizens Utilities Company ("Common Stock"). A Distribution is payable only to the extent that payments are made in respect of the Partnership Preferred Securities or Convertible Debentures, as the case may be, held by the Property Trustee and to the extent the Property Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360- day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Convertible Preferred Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears, on , , and of each year, commencing on , 1996, to Holders of record on the relevant Record Dates (as such term is defined in the Declaration), which payment dates shall correspond to the distribution payment dates on the Partnership Preferred Securities or, in the event Citizens Capital is dissolved and the Convertible Debentures are distributed to the holders of the Convertible Preferred Securities, on the Convertible Debentures. Citizens Capital may be directed by the Debenture Issuer, acting pursuant to the Indenture, to defer distribution payments by extending the distribution payment period on the Partnership Preferred Securities for a period not exceeding 20 consecutive quarters (each an "Extension Period") and, as a consequence of such deferral, Distributions will also be deferred. In the event Citizens Capital has been dissolved and the Convertible Debentures are held by the Trust, the Trust may be directed by the Debenture Issuer, acting pursuant to the Indenture, to defer distribution payments by extending the Distributions for a period not exceeding an Extension Period. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, Citizens Capital or the Trust, as the case may be, may be required to further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, Citizens Capital or the Trust, as the case may be, may commence a new Extension Period, subject to the above requirements. The Convertible Preferred Securities shall be redeemable as provided in the Declaration. The Convertible Preferred Securities shall be convertible into shares of Series A of Common Stock ("Common Stock"), through (i) the exchange of Convertible Preferred Securities for a portion of the Partnership Preferred Securities or Convertible Debentures, as the case may be, held by the Property Trustee, (ii), in the event Partnership Preferred Securities are held by the Trust, the immediate exchange of Partnership Preferred Securities for a portion of the Convertible Debentures held by Citizens Capital or the Trust, as the case may be, and (iii) the immediate conversion of such Convertible Debentures into shares of Common Stock, in the manner and according to the terms set forth in the Declaration. CONVERSION REQUEST To: Chemical Bank, as Property Trustee of Citizens Utilities Trust The undersigned owner of these Convertible Preferred Securities hereby irrevocably exercises the option to convert these Convertible Preferred Securities, or the portion below designated, into Series A Common Stock of CITIZENS UTILITIES COMPANY (the "Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust (the "Declaration"), dated as of _________ ___, 1995, by the Trustees named therein, Citizens Utilities Company, as Sponsor, and by the Holders (as defined therein). Pursuant to the aforementioned exercise of the option to convert these Convertible Preferred Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Convertible Preferred Securities for a portion of the Partnership Preferred Securities (as that term is defined in the Declaration) or Convertible Debentures (as that term is defined in the Declaration), as the case may be, held by the Trust (at the rate of exchange specified in the terms of the Convertible Preferred Securities set forth as Annex I to the Declaration), (ii), in the event Partnership Preferred Securities are held by the Trust, immediately exchange such Partnership Preferred Securities for a portion of the Convertible Debentures (as that term is defined in the Declaration) held by Citizens Capital (at the rate of exchange specified in the terms of the Convertible Preferred Securities set forth as Annex I to the Declaration), and (iii) immediately convert such Convertible Debentures on behalf of the undersigned, into Common Stock (at the conversion rate specified in the terms of the Convertible Preferred Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. This Conversion Request and any action taken hereunder shall be governed by the terms of the Declaration and the terms of the Convertible Preferred Securities set forth in Annex I thereto. Date: ____________, ____ in whole __ in part Number of Convertible Preferred Securities to be converted: ___________________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Common Stock are to be issued, along with the address or addresses of such person or persons Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number _____________________ ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ (Insert assignee's social security or tax identification number) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ agent to transfer this Preferred 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 Preferred Security Certificate) EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE [FORM OF FACE OF SECURITY] Certificate Number Number of Convertible Common Securities Certificate Evidencing Convertible Common Securities of Citizens Utilities Trust ______% Citizens Utilities Convertible Common Securities (liquidation amount $50 per Convertible Common Security) Citizens Utilities Trust, a statutory business trust formed 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 designated the ______% Citizens Utilities Convertible Common Securities (liquidation amount $50 per Convertible Common Security) (the "Convertible Common Securities"). The Convertible Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Convertible Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of _______, 1995, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Convertible Common Securities as set forth in Annex I to 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 Convertible Common Securities Guarantee Agreement to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Convertible Common Securities Guarantee Agreement, the Limited Partnership Agreement and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Sponsor is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat for United States federal income tax purposes the Convertible Debentures as indebtedness and the Convertible Common Securities as evidence of indirect beneficial ownership in the [Limited Partnership Securities]. IN WITNESS WHEREOF, the Trust has executed this certificate this day of , 199 . CITIZENS UTILITIES TRUST By: Name: Title: [FORM OF REVERSE OF SECURITY] Distributions payable on each Convertible Common Security will be fixed at a rate per annum of % (the "Rate") of the stated liquidation preference of $50 per Convertible Common Security, such rate being the rate of distribution payable on the Partnership Common Securities to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payment in the form of cash or shares of common stock, par value $.25 per share, of Citizens Utilities Company ("Common Stock"). A Distribution is payable only to the extent that payments are made in respect of the Partnership Preferred Securities or the Convertible Debentures, as the case may be, held by the Property Trustee and to the extent the Property Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Convertible Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears, on , , and of each year, commencing on , 1996, to Holders of record on the relevant Record Dates (as such term is defined in the Declaration), which payment dates shall correspond to the distribution payment dates on the Partnership Preferred Securities or, in the event Citizens Capital is dissolved and the Convertible Debentures are distributed to the holders of the Convertible Common Securities, on the Convertible Debentures. Citizens Capital may be directed by the Debenture Issuer, acting pursuant to the Indenture, to defer distribution payments by extending the distribution payment period on the Partnership Preferred Securities for a period not exceeding 20 consecutive quarters (each an "Extension Period") and, as a consequence of such deferral, Distributions will also be deferred. In the event Citizens Capital has been dissolved and the Convertible Debentures are held by the Trust, the Trust may be directed by the Debenture Issuer, acting pursuant to the Indenture, to defer distribution payments by extending the Distributions for a period not exceeding an Extension Period. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, Citizens Capital or the Trust, as the case may be, may be required to further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, Citizens Capital or the Trust, as the case may be, may commence a new Extension Period, subject to the above requirements. The Convertible Common Securities shall be redeemable as provided in the Declaration. The Convertible Common Securities shall be convertible into shares of Series A of Common Stock ("Common Stock"), through (i) the exchange of Convertible Common Securities for a portion of the Partnership Preferred Securities or Convertible Debentures, as the case may be, held by the Property Trustee, (ii), in the event Partnership Preferred Securities are held by the Trust, the immediate exchange of Partnership Preferred Securities for a portion of the Convertible Debentures held by Citizens Capital or the Trust, as the case may be, and (iii) the immediate conversion of such Convertible Debentures into shares of Common Stock, in the manner and according to the terms set forth in the Declaration. CONVERSION REQUEST To: Chemical Bank, as Property Trustee of Citizens Utilities Trust The undersigned owner of these Convertible Common Securities hereby irrevocably exercises the option to convert these Convertible Common Securities, or the portion below designated, into Series A Common Stock of CITIZENS UTILITIES COMPANY (the "Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust (the "Declaration"), dated as of _________ ___, 1995, by the Trustees named therein, Citizens Utilities Company, as Sponsor, and by the Holders (as defined therein). Pursuant to the aforementioned exercise of the option to convert these Convertible Common Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) to (i) exchange such Convertible Common Securities for a portion of the Partnership Preferred Securities (as that term is defined in the Declaration) or Convertible Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Convertible Common Securities set forth as Annex I to the Declaration), (ii), in the event Partnership Preferred Securities are held by the Trust, immediately exchange such Partnership Preferred Securities for a portion of the Convertible Debentures (as that term is defined in the Declaration) held by Citizens Capital (at the rate of exchange specified in the terms of the Convertible Common Securities set forth as Annex I to the Declaration) and (iii) immediately convert such Convertible Debentures on behalf of the undersigned, into Common Stock (at the conversion rate specified in the terms of the Convertible Common Securities set forth as Annex I to the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. This Conversion Request and any action taken hereunder shall be governed by the terms of the Declaration and the terms of the Convertible Common Securities set forth in Annex I thereto. Date: ____________, ____ in whole __ in part Number of Convertible Common Securities to be converted: ___________________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Common Stock are to be issued, along with the address or addresses of such person or persons Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number _____________________ 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 ________________________________________ _________________________________________________________________ _________________________________________________________________ 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) EXHIBIT B FORM OF NOTICE OF DISTRIBUTION ELECTION TO: _____________________, as Election Agent of Citizens Utility Company The undersigned owner of ____% Citizens Utilities Convertible Preferred Securities (liquidation amount $50 per Convertible Preferred Security) (the "Convertible Preferred Securities"), issued pursuant to the Amended and Restated Declaration of Trust (the "Declaration"), dated as of __________ ___, 1995, by the Trustees named therein, Citizens Utilities Company, as Sponsor, and by the Holders (as defined therein), hereby irrevocably elects to receive any and all Distributions (as such term is defined in the Declaration) due and payable on the next four Distribution Payment Dates, as set forth in the terms of the Convertible Preferred Securities set forth in Annex I to the Declaration, immediately following the Election Period during which this Notice of Distribution Election is being submitted. I, ______________________, as Holder of [Number of Convertible Preferred Securities held] Convertible Preferred Securities, elect to receive any and all Distributions due and payable on the next four Distribution Payment Dates in the following form: (A) ( ) Cash; or (B) ( ) An Equivalent Value (as such term is defined in the Declaration) of shares of common stock series A, par value $.25 per share, of Citizens Utilities Company ("Common Stock"). The undersigned does also hereby direct the addressee that any and all Distributions in the form of Common Stock made pursuant to this Notice of Distribution Election be delivered to and issued in the name of the undersigned, unless a different name has been indicated in the assignment below. If such shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. This Notice of Distribution Election and any action taken hereunder shall be governed by the terms of the Declaration and the terms of the Convertible Preferred Securities set forth in Annex I thereto. Date: ____________, ____ (Applicable only if box (B) has been checked.) If a name or names other than the undersigned, please indicate in the spaces below the name or names in which shares of Common Stock are to be issued, along with the address or addresses of such person or persons Signature Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number EX-4 5 =================================== CITIZENS UTILITIES COMPANY, To CHEMICAL BANK, Trustee ----------------------------------- INDENTURE Dated as of _________, 1995 -------------- =================================== CITIZENS UTILITIES COMPANY Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of __________, 1995. Trust Indenture Act Section Indenture Section ----------- ----------------- Sec. 310(a)(1) 6.9 (a)(2) 6.9 (a)(3) Not Applicable (a)(4) Not Applicable (a)(5) 6.9 (b) 6.8, 6.10 Sec. 311(a) 6.13 (b) 6.13 Sec. 312(a) 7.1,7.2(a) (b) 7.2(b) (c) 7.2(c) Sec. 313(a) 7.3(a) (b) 7.3(a) (c) 7.3(a) (d) 7.3(b) Sec. 314(a) 7.4 (b) Not Applicable (c)(1) 1.2 (c)(2) 1.2 (c)(3) Not Applicable (d) Not Applicable (e) 1.2 Sec. 315(a) 6.1 (b) 6.2,2.7 (c) 6.1 (d) 6.1 (d)(1) 6.1 (e) 5.14 Sec. 316(a) 10.1 (a)(1)(A) 5.2,5.12 (a)(1)(B) 5.2,5.13 (a)(2) Not Applicable (b) 5.8 (c) 1.4(c) Sec. 317(a)(1) 5.3 (a)(2) 5.4 (b) 1.3 Sec. 318(a) 1.7 NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. TABLE OF CONTENTS Page ---- PARTIES 1 RECITALS OF THE COMPANY 1 ARTICLE 1 Definitions and Other Provisions of General Application Section 1.1 Definitions 1 Section 1.2 Compliance Certificates and Opinions 7 Section 1.3 Form of Documents Delivered to Trustee 7 Section 1.4 Acts of Holders 8 Section 1.5 Notices, Etc., to Trustee or Company 9 Section 1.6 Notice to Holders; Waiver 9 Section 1.7 Conflict with Trust Indenture Act 10 Section 1.8 Effect of Headings and Table of Contents 10 Section 1.9 Successors and Assigns 10 Section 1.10 Separability Clause 10 Section 1.11 Benefits of Indenture 10 Section 1.12 Governing Law 10 Section 1.13 Legal Holidays 10 ARTICLE 2 Security Forms Section 2.1 Forms Generally 11 Section 2.2 Form of Trustee's Certificate of Authentication 12 ARTICLE 3 The Securities Section 3.1 Amount Unlimited; Issuable in Series 12 Section 3.2 Denominations 15 Section 3.3 Execution, Authentication, Delivery and Dating 15 Section 3.4 Temporary Securities 17 Section 3.5 Registration, Registration of Transfer and Exchange 17 (i) TABLE OF CONTENTS Page ---- Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities 18 Section 3.7 Payment of Interest; Interest Rights Preserved 19 Section 3.8 Persons Deemed Owners 21 Section 3.9 Cancellation 22 Section 3.10 Computation of Interest 22 Section 3.11 Book-Entry Securities 22 ARTICLE 4 Satisfaction and Discharge Section 4.1 Satisfaction and Discharge of Indenture 24 Section 4.2 Application of Trust Money 25 Section 4.3 Reinstatement 26 ARTICLE 5 Remedies Section 5.1 Events of Default 27 Section 5.2 Acceleration of Maturity; Rescission and Annulment 28 Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee 29 Section 5.4 Trustee May File Proofs of Claim 30 Section 5.5 Trustee May Enforce Claims Without Possession of Securities 31 Section 5.6 Application of Money Collected 31 Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert or Exchange 32 Section 5.9 Restoration of Rights and Remedies 33 Section 5.10 Rights and Remedies Cumulative 33 Section 5.11 Delay or Omission Not Waiver 33 Section 5.12 Control by Holders 33 Section 5.13 Waiver of Past Defaults 34 Section 5.14 Undertaking for Costs 34 Section 5.15 Waiver of Stay or Extension Laws 35 (ii) TABLE OF CONTENTS Page ---- ARTICLE 6 The Trustee Section 6.1 Certain Duties and Responsibilities 35 Section 6.2 Notice of Defaults 35 Section 6.3 Certain Rights of Trustee 35 Section 6.4 Not Responsible for Recitals or Issuance of Securities 36 Section 6.5 May Hold Securities 37 Section 6.6 Money Held in Trust 37 Section 6.7 Compensation and Reimbursement 37 Section 6.8 Disqualification; Conflicting Interests 38 Section 6.9 Corporate Trustee Required; Eligibility 38 Section 6.10 Resignation and Removal; Appointment of Successor 38 Section 6.11 Acceptance of Appointment by Successor 40 Section 6.12 Merger, Conversion, Consolidation or Succession to Business 41 Section 6.13 Preferential Collection of Claim Against Company 41 Section 6.14 Appointment of Authenticating Agent 41 ARTICLE 7 Holders' Lists and Reports by Trustee and Company Section 7.1 Company to Furnish Trustee Names and Addresses of Holders 43 Section 7.2 Preservation of Information; Communications to Holders 43 Section 7.3 Reports by Trustee 44 Section 7.4 Reports by Company 44 ARTICLE 8 Consolidation, Merger, Conveyance, Transfer or Lease Section 8.1 Company May Consolidate, Etc., Only on Certain Terms 44 Section 8.2 Successor Substituted 45 (iii) TABLE OF CONTENTS Page ---- ARTICLE 9 Supplemental Indentures Section 9.1 Supplemental Indentures Without Consent of Holders 45 Section 9.2 Supplemental Indentures with Consent of Holders 47 Section 9.3 Execution of Supplemental Indentures 48 Section 9.4 Effect of Supplemental Indentures 48 Section 9.5 Conformity with Trust Indenture Act 48 Section 9.6 Reference in Securities to Supplemental Indentures 48 ARTICLE 10 Covenants Section 10.1 Payment of Principal, Premium and Interest 49 Section 10.2 Maintenance of Office or Agency 49 Section 10.3 Money for Securities Payments to Be Held in Trust 49 Section 10.4 Corporate Existence 51 Section 10.5 Waiver of Certain Covenants 51 Section 10.6 Certificate to Trustee 51 ARTICLE 11 Redemption of Securities Section 11.1 Applicability of Article 52 Section 11.2 Election to Redeem; Notice to Trustee 52 Section 11.3 Selection by Trustee of Securities to Be Redeemed 52 Section 11.4 Notice of Redemption 53 Section 11.5 Deposit of Redemption Price 54 Section 11.6 Securities Payable on Redemption Date 54 Section 11.7 Securities Redeemed in Part 54 (iv) TABLE OF CONTENTS Page ---- ARTICLE 12 Sinking Funds Section 12.1 Applicability of Article 55 Section 12.2 Satisfaction of Sinking Fund Payments with Securities 55 Section 12.3 Redemption of Securities for Sinking Fund 55 ARTICLE 13 Defeasance and Covenant Defeasance Section 13.1 Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance 56 Section 13.2 Defeasance and Discharge 56 Section 13.3 Covenant Defeasance 57 Section 13.4 Conditions to Defeasance or Covenant Defeasance 57 Section 13.5 Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions 59 Section 13.6 Reinstatement 60 ARTICLE 14 Immunity of Incorporators, Shareholders, Officers and Directors Section 14.1 Indenture and Securities Solely Corporate Obligations 61 (v) INDENTURE, dated as of _________, 1995, from CITIZENS UTILITIES COMPANY, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal administrative offices at High Ridge Park, Building No. 3, Stamford, Connecticut 06905, to CHEMICAL BANK, a New York banking corporation, as Trustee (herein called the "Trustee"), having its principal corporate trust office at 450 West 33rd Street, New York, New York 10001. RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured subordinated debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE 1 Definitions and Other Provisions of General Application Section 1.1 Definitions. ----------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and Page 1 (4) 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. "Act", when used with respect to any Holder, has the meaning specified in Section 1.4. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Board of Directors", when used with reference to the Company, means either the board of directors, or any duly authorized committee of the board of directors, of the Company, as the case requires. "Board Resolution", when used with reference to the Company, 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. "Book-Entry Security" means any Security registered in the name of CEDE & Co., as nominee of DTC, or any successor to CEDE & Co. and/or DTC. "Business Day" means any day other than a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order, as the case may be, signed in the name of the Company, by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. Page 2 "Conversion Agent" means any Person authorized by the Company to convert any Securities on behalf of the Company. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office, as at the date of this Indenture, is located at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attn: Corporate Trustee Administration Department. The term "corporation" includes corporations, associations, companies and business trusts. The terms "defeasance" and "covenant defeasance" bear the meanings assigned to such terms, respectively, by Sections 13.2 and 13.3. "Delayed Interest" has the meaning specified in Section 3.7. "DTC" or "Depository" means the securities depository, The Depository Trust Company, New York, New York, and any successor. "Event of Default" has the meaning specified in Section 5.1. "Exchange Agent" means any Person authorized by the Company to exchange any Securities on behalf of the Company. "Fiscal Year" means with respect to the Company, the fiscal year ending December 31 of each year or such other date as the Company may hereafter elect, and with respect to any other Person, the calendar year or other annual accounting period of the Person in question. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 3.1. "Interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Letter of Representation", with respect to the Securities of any series, means that certain agreement by and among the Company, the Trustee and DTC setting forth the rights Page 3 and duties of DTC and its nominee to act as depository and registered owner, with respect to such Securities. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company and who shall be acceptable to the Trustee. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: ------ (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money (or in the case of payment by defeasance under Section 13.2, money, U.S. Government obligations or both) in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such -------- Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made and provided further, in the case of payment by defeasance ---------------- under Section 13.2, that all conditions precedent to the application of such Section shall have been satisfied; and (iii) Securities which have been paid pursuant to Section 3.6 or surrendered for conversion or exchange into other securities or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; Page 4 provided, however, that in determining whether the Holders of the requisite - -------- ------- principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 5.2, (ii) the principal amount of a Security denominated in a foreign currency or currencies shall be the U.S. dollar equivalent, determined on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent on the date of original issuance of such Security of the amount determined as provided in (i) above) of such Security, and (iii) Securities owned by the Company, or any other obligor upon the Securities or any Affiliate of the Company, or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's independent right so to act with respect to such Securities and that the pledgee is not the Company, or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and interest on the Securities of that series are payable as specified as contemplated by Section 3.1 or, if not so specified, the City of New York, New York. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. Page 5 "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 3.1. "Responsible Officer", when used with respect to the Trustee, means any officer in the Corporate Trust Office of the Trustee and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 3.5. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company, or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, provided, however, that -------- ------- in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended, except as provided in Section 9.5 or Section 10.6. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "U.S. Government Obligation" has the meaning set forth in Section 13.4. "Vice President", when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". Page 6 "Voting Stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency, but shall not include securities convertible into such Voting Stock. Section 1.2 Compliance Certificates and Opinions. ------------------------------------ Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that 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, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) 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; (3) a statement that, in the opinion of each such individual, 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 (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3 Form of Documents Delivered to Trustee. -------------------------------------- In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of any officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless Page 7 such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.4 Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders Page 8 required to be provided pursuant to Section 7.1) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 1.5 Notices, Etc., to Trustee or Company. ------------------------------------ Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. Section 1.6 Notice to Holders; Waiver. ------------------------- Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Page 9 In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 1.7 Conflict with Trust Indenture Act. --------------------------------- If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 1.8 Effect of Headings and Table of Contents. ---------------------------------------- The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.9 Successors and Assigns. ---------------------- All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 1.10 Separability Clause. ------------------- In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11 Benefits of Indenture. --------------------- Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.12 Governing Law. ------------- This Indenture, and the Securities, shall be governed by and construed in accordance with the laws of the State of New York. Section 1.13 Legal Holidays. -------------- Page 10 In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security or the last date on which a Holder has the right to convert or exchange his Securities shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) or conversion or exchange of the Securities need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, or on such last day for conversion or exchange, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, except that if such succeeding Business Day falls in the next calendar year, payment shall be made on the immediately preceding Business Day. ARTICLE 2 Security Forms Section 2.1 Forms Generally. --------------- The Securities of each series shall be in substantially such form as shall be established by or pursuant to a Board Resolution or, to the extent authorized by a Board Resolution, an Officers' Certificate, or as set forth in, or in an Exhibit to, any indenture supplemental hereto which establishes such series in each case substantially in the form annexed to such Board Resolution, Officers' Certificate or supplemental indenture, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of such Securities. If the form of Securities of any series of such Securities is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 for the authentication and delivery of such Securities. The Trustee's certificates of authentication shall be in substantially the form set forth in this Article. The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Page 11 Section 2.2 Form of Trustee's Certificate of Authentication. ----------------------------------------------- This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. CHEMICAL BANK, as Trustee By_________________________________ Authorized Signatory ARTICLE 3 The Securities Section 3.1 Amount Unlimited; Issuable in Series. ------------------------------------ The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution or, to the extent authorized by a Board Resolution, an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, such of the following as may be appropriate to such series: (1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.7 and except for any Securities which, pursuant to Section 3.3, are deemed never to have been authenticated and delivered hereunder); (3) the Person or Persons to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security is registered at the close of business on the Regular Record Date for such interest or the method of determining the same; (4) the date or dates on which the principal of the Securities of the series is payable or the method of determining the same; Page 12 (5) the rate or rates (or method for establishing the rate or rates) at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and the Regular Record Date and/or Special Record Date for the interest payable on any Interest Payment Date or other date on which interest is paid (or method for establishing such date or dates); (6) the form of payment (whether by cash, securities or other property) in satisfaction of interest requirements of the Securities of the series; (7) the right of the Company, if any, to defer interest with respect the Securities of the series; (8) any subordination terms of the Securities of the series; (9) the place or places where the principal of (and premium, if any) and interest on Securities of the series shall be payable; (10) if applicable, the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (11) if applicable, the terms and conditions upon which the Securities of the series may be convertible or exchangeable, in whole or in part; (12) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Secu- rities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (13) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (14) if other than the full principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 5.2; (15) if other than such coin or currency of the United States of America as at the time of payment is legal tender for payment of public or private debts, the currency or currencies (including composite currencies) or securities or other property in which payment of the principal of (and premium, if any) and/or interest on the Securities of such series shall be payable; Page 13 (16) if the principal of (and premium, if any) and/or interest on the Securities of such series are to be payable, at the election of the Company or any Holder, in a currency or currencies (including composite currencies) or securities or other property other than that in which the Securities are stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made; (17) if the amounts of payments of principal of (and premium, if any) and/or interest on the Securities of such series may be determined with reference to an index, the manner in which such amounts shall be determined; (18) in the case of Securities of a series the terms of which are not established pursuant to subsection (15), (16) or (17) above, the application, if any, of Section 13.2 and/or Section 13.3 to the Securities of such series; or, in the case of Securities the terms of which are established pursuant to subsection (15), (16) or (17) above, the adoption and applicability to such Securities of any terms and conditions similar to those contained in Section 13.2 and/or Section 13.3; (19) if applicable, the issuance of a global security representing all of the Securities of such series and exchange of such global Security for definitive or other Securities representing such series, or the issuance of global securities of any other nature; (20) any addition to, deletion or modification of any Event of Default applicable to such series; (21) any provisions providing for or governing one or more series of global Securities, bearer Securities or Securities proposed to be listed or quoted on or in any exchange or market, within or without the United States of America, including provisions which establish the form and terms of such Securities, including interest coupons, and govern the manner of payment of principal and interest, registration and exchange of Securities, notice to Holders, Acts of Holders, waivers and any and all other aspects thereof; and (22) any other terms of the series (which terms shall not be in conflict with the provisions of this Indenture which apply to such series). All Securities of any one series shall be substantially identical except as to interest rates, method for determining interest rates, Interest Payment Dates, Regular Record Dates, redemption terms, Stated Maturity, denomination, date of authentication, currency or other property, any index for determining amounts payable, and except as may otherwise be provided in or pursuant to such Board Resolution and set forth or determined as provided in such Officers' Certificate or in any such indenture supplemental hereto. Page 14 If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. Section 3.2 Denominations. ------------- The Securities of each series shall be issuable in registered form without coupons in such denominations as shall be specified as contemplated by Section 3.1. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. Section 3.3 Execution, Authentication, Delivery and Dating. ---------------------------------------------- The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President, one of its Vice Presidents or its Treasurer, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established in or pursuant to one or more Board Resolutions or Officers' Certificates as permitted by Sections 2.1 and 3.1, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) if the form of any of such Securities has been established by or pursuant to Board Resolution or Officers' Certificate as permitted by Section 2.1, that such form has been established in conformity with the provisions of this Indenture; (b) if the terms of any of such Securities have been established by or pursuant to Board Resolution or Officers' Certificate as permitted by Section 3.1, that such terms have been established in conformity with the provisions of this Indenture; and Page 15 (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles. If the Company shall establish pursuant to Section 3.1 that the Securities of a series are to be issued in the form of one or more registered global securities, then the Company shall execute and the Trustee shall, in accordance with this Section and the Company Order with respect to such series, authenticate and deliver one or more registered global securities that (a)(i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities of such series issued and not yet canceled, (ii) shall be registered in the name of DTC or a nominee of DTC, (iii) shall be delivered by the Trustee to DTC or pursuant to DTC's instructions, and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this Security may not be trans- ferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor to DTC or a nominee of such successor" or such other legend as shall be acceptable to DTC; or (b) shall comply with such other terms or procedures as may be set forth in a Company Order with respect to such series. Notwithstanding that such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture would adversely affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 3.1 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 3.1 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the time of authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.9, Page 16 together with an Officers' Certificate (which need not comply with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 3.4 Temporary Securities. -------------------- Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order, the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive securities in lieu of which they are issued, with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series and of like tenor, of authorized denominations. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series. Section 3.5 Registration, Registration of Transfer and Exchange. --------------------------------------------------- The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Page 17 At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 11.3 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities. ------------------------------------------------ If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount, and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of any of them harmless then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security Page 18 of the same series and of like tenor and principal amount, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmen- tal charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series, issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.7 Payment of Interest; Interest Rights Preserved. ---------------------------------------------- Unless otherwise provided as contemplated by Section 3.1 with respect to any series of Securities, interest on any Security which is payable (unless payment has been deferred pursuant to the exercise of a right of the Company so to defer), and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for for any reason, including the exercise of a right of the Company to defer such interest payment, on any Interest Payment Date (herein called "Delayed Interest") shall forthwith cease to be payable to the Person entitled to such interest by virtue of having been such Holder, and such Delayed Interest may be paid by the Company, at its election in each case, as provided in Clauses (1), (2) or (3) below: (1) With respect to any Delayed Interest resulting from the exercise of a right of the Company to defer such Delayed Interest, the Company may elect to make payment, in whole or in part, as hereinafter provided in this subparagraph (1). The Company may elect to make payment to the Persons in whose names the Securities of such series are registered at the close of business on a Special Record Date for the payment of such Delayed Interest, which shall be fixed by the Company in the Page 19 following manner: The Company shall notify the Trustee in writing of the amount of Delayed Interest proposed to be paid on each Security of such series, the date of the proposed payment, if payment is to be in shares of Common Stock (the "Special Stock Transfer and Valuation Date"), and the date of the proposed payment if payment is to be in cash (the "Special Cash Interest Payment Date"), which shall also be the "Special Distribution Payment Date" for purposes of the Partnership Preferred Securities and the Convertible Preferred Securities and the related distribution. Thereupon the Company shall fix a special record date (the "Special Record Date") for the payment of such Delayed Interest which shall be not more than 35 days and not less than 10 days prior to the date of the proposed payment. The Company shall promptly cause notice of the proposed payment of such Delayed Interest and the Special Record Date, Special Stock Transfer and Valuation Date, Special Cash Interest Payment Date and Special Distribution Payment Date therefor to be mailed, first-class postage prepaid, or delivered by courier service or by hand delivery or by any other manner deemed practicable by the Trustee, to each Holder of Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Delayed Interest and such dates therefor having been so mailed or delivered, such Delayed Interest shall be paid to the Persons in whose names the Securities of such series are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clauses (2) or (3). (2) With respect to any Delayed Interest which has not been the subject of the exercise of the Company's right to defer, the Company may elect to make payment of any Delayed Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Delayed Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Delayed Interest proposed to be paid on each Security of such series 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 Delayed Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Delayed Interest as in this Clause provided. Thereupon the Trustee shall fix a special record date (the "Special Record Date") for the payment of such Delayed Interest which shall be not more than 30 days and not less than 10 days prior to the date of the proposed payment and not less than 10 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 Delayed Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, or delivered by courier service or by hand delivery, or by any other manner deemed practicable by the Trustee, to each Holder of Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Page 20 Special Record Date. Notice of the proposed payment of such Delayed Interest and the Special Record Date therefor having been so mailed or delivered, such Delayed Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (3). (3) The Company may make payment of any Delayed Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed or any book-entry security system which may be applicable to the Debentures, and upon such notice as may be required by such exchange or system, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. In the case of any Security which is converted or exchanged (other than exchanges pursuant to Section 3.5) after any Regular Record Date or Special Record Date and on or prior to the next succeeding Interest Payment Date (other than any Security whose Maturity is prior to such Interest Payment Date), interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion or exchange, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on such Regular Record Date or Special Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security which is converted or exchanged, interest whose Stated Maturity is after the date of conversion or exchange of such Security shall not be payable, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest on the Securities being converted or exchanged. Section 3.8 Persons Deemed Owners. --------------------- Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 3.7) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Page 21 Section 3.9 Cancellation. ------------ All Securities surrendered for payment, redemption, registration of transfer or exchange or conversion or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by a Company Order from the Company or in the absence of such Company Order, in accordance with the Trustee's standard procedures. Section 3.10 Computation of Interest. ----------------------- Except as otherwise specified as contemplated by Section 3.1 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. Section 3.11 Book-Entry Securities. --------------------- (a) Except as provided in subsection (c) of this Section 3.11, the registered owner of all Securities of any series of Securities which is designated as a Book-Entry Security series in the Board Resolution, Officers' Certificate, indenture supplemental hereto establishing such series, or other instrument supplemental hereto, shall be CEDE & Co., as nominee of DTC. Payment of interest for any Securities registered as of each Record Date in the name of CEDE & Co. shall be made by wire transfer to the account of CEDE & Co. on the Interest Payment Date for such Securities at the address indicated on the Record Date for CEDE & Co. in the registration books of the Company kept by Trustee, as Security Registrar. (b) With respect to any Book-Entry Securities, the Securities shall be issued or registered in the form of one or more fully registered global securities in the principal amount of each separate series of the Securities. Upon issuance or registration, the ownership of such Securities shall be registered in the registration books of the Company kept by the Trustee in the name of CEDE & Co., as nominee of DTC. The Trustee and the Company may treat DTC (or its nominee) as the sole and exclusive owner of the Securities registered in its name for the purposes of payment of the principal of, premium, if any, or interest on such Securities, giving any notice permitted or required to be given to Holders under this Indenture, registering the transfer of such Securities, obtaining any consent or other action to be taken by Holders and for all other purposes whatsoever; and neither the Trustee nor the Company shall be affected by any notice to the contrary. Neither the Trustee nor the Company shall have any responsibility or obligation to any DTC participant, any Person claiming a beneficial ownership interest in Securities registered in Page 22 the name of CEDE & Co. under or through DTC or any DTC participant, or any other Person which is not shown on the registration books of the Company kept by the Trustee as being a Holder with respect to the accuracy of any records maintained by DTC, CEDE & Co. or any DTC participant; the payment by DTC or any DTC participant to any beneficial owner of any amount in respect of the principal of, premium, if any, or interest on the Securities registered in the name of CEDE & Co.; the delivery to any DTC participant or any beneficial owner of any notice which is permitted or required to be given to Holders under this Indenture; the selection by DTC or any DTC participant of any Person to receive payment in the event of a partial payment of any Securities registered in the name of CEDE & Co.; or any consent given or other action taken by DTC as Holder. The Paying Agent shall pay all principal of, premium, if any, and interest on any Securities registered in the name of CEDE & Co., only to or upon the order of CEDE & Co., as nominee of DTC, and all such payments shall be valid and effective to fully satisfy and discharge the Company's obligations with respect to the principal of, premium, if any, and interest on such Securities to the extent of the sum or sums so paid. Upon delivery by DTC to the Trustee of written notice to the effect that DTC had determined to substitute a new nominee in place of CEDE & Co., and subject to the provisions herein with respect to record dates, the words "CEDE & Co." in this Indenture shall refer to such new nominee of DTC. (c) With respect to any series of Securities proposed to be registered in the name of CEDE & Co., in the event that (i) DTC gives or has given notice that it will discontinue its services as securities depository for such series of Securities; or (ii) DTC ceases or has ceased to be a clearing house registered under the Securities Exchange Act of 1934; or (iii) the Company in its sole discretion determines or has determined that the beneficial owners of such Securities will be entitled to obtain definitive certificates; or (iv) an Event of Default with respect to such series has occurred and is continuing, the Company shall, if the event is triggered by either (i) or (ii) above, attempt to locate another qualified securities depository. If the Company fails to locate such a replacement or if the event is triggered by either (iii) or (iv) above, then it shall notify DTC and the Trustee, requesting DTC to notify its participants, of the availability through DTC of definitive certificates. In any such event, the Trustee shall issue, register the transfer of and exchange definitive certificates as requested by DTC and any other Holders in appropriate amounts. The Company and the Trustee shall be obligated to deliver definitive certificates as described in this Indenture. In the event definitive certificates are issued to Holders other than DTC, the provisions of this Indenture shall apply to, among other things, the registration, transfer of and exchange of such certificates and the method of payment of principal of, premium, if any, and interest on such certificates. Whenever DTC requests the Company and the Trustee to do so, the Trustee and the Company will cooperate with DTC in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the Securities registered in the name of CEDE & Co., to any DTC participant having Securities credited to its DTC account or (ii) to arrange for another securities depository to maintain custody of certificates evidencing such Securities. If the Company uses a securities depository other than DTC, the provisions of this Section shall apply with the appropriate modifications. Page 23 (d) Notwithstanding any other provision of this Indenture to the contrary, so long as any Securities are registered in the name of CEDE & Co., as nominee of DTC, all payments with respect to the principal of, premium, if any, and interest on such Securities and all notices, with respect to such Securities shall be made and given to DTC as provided in the applicable Letter of Representation. (e) In connection with any notice or other communication to be provided to Holders pursuant to this Indenture by the Company or the Trustee with respect to any consent or other action to be taken by Holders so long as any Securities of a series are registered in the name of CEDE & Co., as nominee of DTC, the Company or the Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. (f) The notice requirements set forth in the Letter of Representation relating to the Securities of any series with respect to redemptions, conversions and mandatory tenders shall be effective whenever such Securities are Book-Entry Securities, notwithstanding any other provisions of this Indenture, to the extent such other provisions are incompatible with the notice requirements set forth in the Letter of Representation. ARTICLE 4 Satisfaction and Discharge Section 4.1 Satisfaction and Discharge of Indenture. --------------------------------------- This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of conversion, exchange, registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on the demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by, the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or Page 24 (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.7, and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive. Section 4.2 Application of Trust Money. -------------------------- Subject to provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1, all money and U.S. Government Obligations deposited with the Trustee pursuant to Section 13.2 or Section 13.3 and all money received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 13.2 or Section 13.3, shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with or received by the Trustee as contemplated by Section 4.1, Section 13.2 or Section 13.3. All moneys deposited with the Trustee (and held by it or any Paying Agent) for the payment of any Securities which are subsequently converted or exchanged shall be returned to the Company upon Company Request. Page 25 Section 4.3 Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or securities in accordance with Section 4.2 of this Indenture, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.1 of this Indenture until such time as the Trustee or Paying Agent is permitted to apply all such money or securities in accordance with Section 4.2 of this Indenture; provided that, if the Company has made any payment of -------- principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or securities held by the Trustee or Paying Agent. Page 26 ARTICLE 5 Remedies Section 5.1 Events of Default. ----------------- "Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 60 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifical- ly dealt with or which has expressly been included in this Indenture solely for the benefit of a series of Securities other than that series), 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 a majority in principal amount of the Outstanding Securities of that series 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 (5) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or Page 27 (6) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by either of them of an assignment for the benefit of creditors, or the admission by either of them in writing of its inability to pay its debts generally as they become due, or the talking of corporate action by the Company in furtherance of any such action; or (7) any other Event of Default provided with respect to Securities of that series; it being understood that in each case (other than those described in paragraphs (1) through (3) above to the extent the Trustee is the Paying Agent for the Securities of such series) the Trustee shall not be deemed to have knowledge of an Event of Default hereunder unless a Responsible Officer has received written notice thereof. Nothing contained in this Section 5.1 shall limit the rights of the Company to add, delete or modify any Event of Default or other similar event with respect to one or more series of Securities at the time of establishment of any such series as provided in Section 3.1 hereof. Section 5.2 Acceleration of Maturity; Rescission and Annulment. -------------------------------------------------- If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of a majority in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a Page 28 majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, other than interest deferred in accordance with the provisions of any supplemental indenture, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee. ------------------------------------------------------- The Company covenants that if (1) default occurs in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 60 days; (2) default occurs in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof; or Page 29 (3) default occurs in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 5.4 Trustee May File Proofs of Claim. -------------------------------- In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized by the Trust Indenture Act in order to have claims of the Holders of Securities of any series and the Trustee allowed in any such proceeding. In particular the Trustee shall be authorized, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to, have the claims of the Trustee (including any claim for the reasonable compensation, Page 30 expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder 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 Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5.5 Trustee May Enforce Claims Without Possession of Securities. ----------------------------------------------------------- All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.6 Application of Money Collected. ------------------------------ Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 6.7; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or Page 31 priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively. Section 5.7 Limitation on Suits. ------------------- No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of a majority in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 90 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 90-day period by the Holders of 66-2/3% in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert or Exchange. ------------------------------------------------------------ Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 3.7) interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date), to convert or exchange such Security in accordance with the terms of any supplemental indenture providing for conversion or exchange, and to institute Page 32 suit for the enforcement of any such payment and right to convert or exchange, and such rights shall not be impaired without the consent of such Holder. Section 5.9 Restoration of Rights and Remedies ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontin- ued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10 Rights and Remedies Cumulative. ------------------------------ Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11 Delay or Omission Not Waiver. ---------------------------- No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12 Control by Holders. ------------------ The Holders of a majority in principal amount of the Outstanding Securities of any series 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 the Securities of such series, provided that -------- (1) such direction shall not be in conflict with any rule of law or with this Indenture, nor subject the Trustee to a material risk of personal liability, and Page 33 (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 5.13 Waiver of Past Defaults. ----------------------- The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 5.14 Undertaking for Costs. --------------------- All parties to this Indenture agree, and each Holder of any 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, suffered 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, 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 shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the right to receive payment of the principal of (or premium if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date) or to convert or exchange any Security. Page 34 Section 5.15 Waiver of Stay or Extension Laws. -------------------------------- The Company covenants (to the extent that.it may lawfully do so) that it will not at any time insist upon or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 6 The Trustee Section 6.1 Certain Duties and Responsibilities. ----------------------------------- The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 6.2 Notice of Defaults. ------------------ The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that -------- ------- in the case of any default of the character specified in Section 5.1(4), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 6.3 Certain Rights of Trustee. ------------------------- Subject to the provisions of Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of Page 35 indebtedness 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 or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, or as otherwise expressly provided herein, and any resolution of the Board of Directors of the Company may be sufficiently evidenced by a Board Resolution; (c) the Trustee may consult with counsel and the advice of such counsel or any 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 reliance thereon; (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 or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (e) 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, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate. Section 6.4 Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------ The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Page 36 Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 6.5 May Hold Securities. ------------------- The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar, any Conversion Agent, any Exchange Agent or any other agent of the Company or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar, Conversion Agent, Exchange Agent or such other agent in writing. Section 6.6 Money Held in Trust. ------------------- Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on money received by it hereunder except as otherwise agreed with the Company. Section 6.7 Compensation and Reimbursement. ------------------------------ The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provi- sion of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Trustee's negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. As security for the performance of the obligations of the Company under this Section the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of, premium, if any, or interest, if any, on particular Securities. Page 37 Section 6.8 Disqualification; Conflicting Interests. --------------------------------------- If the Trustee has or shall acquire a conflicting interest within the meaning 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 the provisions of, the Trust Indenture Act and this Indenture. Nothing herein shall prohibit the Trustee from filing the application described in the penultimate paragraph of Section 3.10(b) of the Trust Indenture Act as the same is in effect on the date of this instrument, or any successor provision or any other application seeking similar relief. Section 6.9 Corporate Trustee Required; Eligibility. --------------------------------------- There shall at all times be a Trustee hereunder which shall be a corpora- tion organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, 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 the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10 Resignation and Removal; Appointment of Successor. ------------------------------------------------- (a) No resignation or removal of the 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 Section 6.11. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the outstanding Securities of such series, delivered to the Trustee and to the Company. (d) If at any time: Page 38 (1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Company or any such Holder, 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, (i) the Company, by a Board Resolution, may remove the Trustee with respect to all Securities, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security 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 with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 6.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.11, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 6.11, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their Page 39 names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 6.11 Acceptance of Appointment by Successor. -------------------------------------- (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and the retiring Trustee an instrument accepting such appointment, 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, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, 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 Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) 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 trusts 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; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Page 40 (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) and (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 6.12 Merger, Conversion, Consolidation or Succession to Business. ----------------------------------------------------------- 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 the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.13 Preferential Collection of Claim Against Company. ------------------------------------------------ If and when the Trustee shall be, or shall become, a creditor, directly or indirectly, secured or unsecured, of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of Section 3.11 of the Trust Indenture Act. Section 6.14 Appointment of Authenticating Agent. ----------------------------------- At any time when any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authen- ticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and Page 41 surplus of not less than $50,000,000 and subject to supervision or examina- tion by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the require- ments of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent 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 Authenticat- ing Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticat- ing Agent which Authenticating Agent shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate cer- tificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. Page 42 CHEMICAL BANK, as Trustee By:_________________________________ As Authenticating Agent By:_________________________________ Authorized Signatory ARTICLE 7 Holders' Lists and Reports by Trustee and Company Section 7.1 Company to Furnish Trustee Names and Addresses of Holders. --------------------------------------------------------- The Company will furnish or cause to be furnished to the Trustee (1) semi-annually, not later than 15 days after each Regular Record Date (or, if there is no Regular Record Date relating to a series, semi-annually on dates set forth in the Board Resolution, Officers' Certificate or supplemental indenture with respect to such series), a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such date, and (2) 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; excluding from any such list names and addresses received by the Trustee in - --------- its capacity as Security Registrar. Section 7.2 Preservation of Information; Communications to Holders. ------------------------------------------------------ (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. Page 43 (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 7.3 Reports by Trustee. ------------------ (a) On or before May 15, 1996 and on or before May 15 in each year thereafter, so long as any Securities are Outstanding hereunder, the Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each securities exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any securities exchange. Section 7.4 Reports by Company. ------------------ The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such -------- information, documents or reports required to be filed by the Company with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE 8 Consolidation, Merger, Conveyance, Transfer or Lease Section 8.1 Company May Consolidate, Etc., Only on Certain Terms. ---------------------------------------------------- The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and the Company shall not permit any Person to consolidate with or merge into the Company, or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless: (1) (a) the Company shall be the surviving entity, or (b) the surviving, resulting or transferee Person, as the case may be, shall be a legal entity organized and existing under the laws of one of the states of the United States of America or the District of Columbia, shall have a consolidated net worth immediately Page 44 subsequent to such consolidation, merger, conveyance, transfer or lease at least equal to that of the Company immediately prior to such consolidation, merger, conveyance, transfer or lease and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance and observance of every covenant of this Indenture on the part of the Company to be performed or observed; and (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 8.2 Successor Substituted. --------------------- Upon any consolidation by the Company with or merger by the Company into any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 8.1, the successor Person formed by such consolidation, or into which the Company is merged or to which such conveyance, transfer or lease is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE 9 Supplemental Indentures Section 9.1 Supplemental Indentures Without Consent of Holders -------------------------------------------------- Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes with respect to one or more series of Securities: Page 45 (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default; or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registerable or not registerable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form, or to permit or facilitate compliance with the procedures or requirements of any securities exchange or market within or without the United States of America on or in which such series may be proposed for listing or quotation; or (5) to provide for modifications of the DTC book-entry system or adoption of additional or alternative systems of book-entry systems; or (6) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective -------- only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (7) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 3.1; or (8) to make provisions with respect to the conversion or exchange rights of Holders of any series of Securities; or (9) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series or 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 6.11(b); or (10) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely -------- Page 46 affect the interests of the Holders of Securities of any series in any material respect. Section 9.2 Supplemental Indentures with Consent of Holders. ----------------------------------------------- With the consent of the Holders of not less than 66 2/3% in principal amount of the Outstanding Securities of all series affected by the proposed indenture or indentures supplemental hereto referred to below by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no -------- ------- such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or adversely affect the right to convert or exchange any Security, or modify the provisions of any supplemental indenture with respect to the subordination of any Security in a manner adverse to the Holders, or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section or Section 5.13, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the -------- ------- consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Sections 6.11(b) and 9.1(7). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of Page 47 such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.3 Execution of Supplemental Indentures. ------------------------------------ In executing, or accepting the additional trusts created by, any supplemen- tal indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise. Section 9.4 Effect of Supplemental Indentures. --------------------------------- Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.5 Conformity with Trust Indenture Act. ----------------------------------- Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.6 Reference in Securities to Supplemental Indentures. -------------------------------------------------- Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and such Securities may be authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. Page 48 ARTICLE 10 Covenants Section 10.1 Payment of Principal, Premium and Interest. ------------------------------------------ The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. Section 10.2 Maintenance of Office or Agency. ------------------------------- The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange, where Securities of that series, if convertible or exchangeable other than as contemplated by Section 3.5, may be surrendered for conversion or exchange, and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission -------- ------- shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 10.3 Money for Securities Payments to Be Held in Trust. ------------------------------------------------- If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its failure so to act. Page 49 Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company in the making of any payment of principal (and premium, if any) or interest on the Securities of that series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of (and premium, if any) or interest on any Security of any series and remaining unclaimed for one year after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company, on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that -------- ------- the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be Page 50 published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 10.4 Corporate Existence. ------------------- Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. Section 10.5 Waiver of Certain Covenants. --------------------------- A Board Resolution or Officers' Certificate or indenture supplemental hereto which establishes the terms of a series of Securities may provide that specified terms, provisions and conditions are subject to this Section. In such event the Company may omit in any particular instance to comply with any such term, provision or condition with respect to the Securities of such series if before the time for such compliance the Holders of at least 66 2/3% in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition. No such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. Section 10.6 Certificate to Trustee. ---------------------- So long as the same shall be required by the Trust Indenture Act, the Company will deliver to the Trustee, within 120 days of the end of each fiscal year (or such other time or times as may be required by the Trust Indenture Act as then in effect) a certificate signed by its principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture (such compliance to be determined without regard to any period of grace or requirement of notice provided in this Indenture) or in such other form and with such other signatories as may be required by the Trust Indenture Act as then in effect. Page 51 ARTICLE 11 Redemption of Securities Section 11.1 Applicability of Article. ------------------------ Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 3.1 for Securities of any series) in accordance with this Article. Section 11.2 Election to Redeem; Notice to Trustee. ------------------------------------- The election of the Company to redeem any Securities shall be evidenced by a Board Resolution. In the case of any redemption at the election of the Company of all the Securities of any series, the Company shall, at least 35 days prior to the Redemption Date fixed by the Company (unless a shorter period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 40 days prior to the Redemption Date fixed by the Company (unless a shorter period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities of such series to be redeemed. In the case of any redemption of securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. The Company may rescind its election to redeem Securities by notice to the Trustee at any time on or before 20 days prior to the Redemption Date (unless a shorter period shall be satisfactory to the Trustee). To the extent the foregoing rescission provisions and the rescission provisions of Section 11.4 are inconsistent with applicable book- entry procedures of DTC, or any other record owner of registered global securities, such rescission provisions shall be modified to the extent necessary to permit coordination or conformity with such procedures, but the minimum time limitations of the rescission provisions shall not be reduced. Section 11.3 Selection by Trustee of Securities to Be Redeemed. ------------------------------------------------- If less than all the Securities of like tenor of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 35 days prior to the Redemption Date (unless a shorter period shall be satisfactory to the Trustee and the Company) by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of such Securities of a denomina- tion larger than the minimum authorized denomination for such Securities. Page 52 The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 11.4 Notice of Redemption. -------------------- Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, (6) if such Securities are convertible or exchangeable other than pursuant to Section 3.5, the conversion price and the last date on which such Securities may be converted or exchanged, (7) that the redemption is for a sinking fund, if such is the case, and (8) if the Company intends to retain its right to rescind the redemption, the last date by which notice of rescission of a redemption of Securities may be given. Notice of redemption of Securities to be redeemed at the election of the Company, and any notice of the rescission of any such redemption, shall be given by the Company or, Page 53 at the Company's request, by the Trustee in the name and at the expense of the Company. Any notice of rescission of any redemption shall be given on or before 15 days prior to the applicable Redemption Date. Section 11.5 Deposit of Redemption Price. --------------------------- On or before any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in section 10.3) an amount of money sufficient to pay on the Redemption Date the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. Section 11.6 Securities Payable on Redemption Date. ------------------------------------- Notice of redemption having been given as aforesaid (and not rescinded within the time limitations referred to above), the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments -------- -------- of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.7. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Section 11.7 Securities Redeemed in Part. --------------------------- Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of an authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. Page 54 ARTICLE 12 Sinking Funds Section 12.1 Applicability of Article. ------------------------ The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 3.1 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 12.2. Each sinking fund payment shall be applied to the redemption of securities of any series as provided for by the terms of Securities of such series. Section 12.2 Satisfaction of Sinking Fund Payments with Securities. ----------------------------------------------------- The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so -------- credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 12.3 Redemption of Securities for Sinking Fund. ----------------------------------------- Not less than 60 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 12.2 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 11.3 and cause notice of the redemption thereof to be given in Page 55 the name of and at the expense of the Company in the manner provided in Section 11.4. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 11.6 and 11.7. ARTICLE 13 Defeasance and Covenant Defeasance Section 13.1 Applicability of Article; Company's Option to Effect Defeasance or Covenant Defeasance. --------------------------------- If pursuant to Section 3.1 provision is made for either or both of (a) defeasance of the Securities of a series under Section 13.2 or (b) covenant defeasance of the Securities of a series under Section 13.3, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article Thirteen, shall be applicable to the Securities of such series, and the Company may at its option by or pursuant to a Board Resolution, at any time, with respect to the Securities of such series, elect to have either Section 13.2 (if applicable) or Section 13.3 (if applicable) be applied to the Outstanding Securities of such series upon compliance with the conditions set forth below in this Article Thirteen. Section 13.2 Defeasance and Discharge. ------------------------ Upon the Company's exercise of the above option applicable to this Section, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities of such series on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities of such series and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities of such series to receive, solely from the trust fund described in Section 13.4 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (C) the rights, powers, trusts, duties, and immunities of the Trustee under Sections 3.5, 3.6, 3.7, 3.9, 4.2, 6.7 and the last paragraph of Section 10.3, and otherwise the duty of the Trustee to authenticate Securities of such series issued on registration of transfer or exchange and (D) this Article Thirteen. Subject to compliance with this Article Thirteen, the Company may exercise its option under this Section 13.2 notwithstanding the prior exercise of its option under Section 13.3 with respect to the Securities of such series. Page 56 Section 13.3 Covenant Defeasance. ------------------- Upon the Company's exercise of the above option applicable to this Section with respect to the Securities of any series, the Company shall be released from its obligations under any covenant specified in the Board Resolution, Officers' Certificate or supplemental indenture establishing the terms, conditions and limitations with respect to the Outstanding Securities of such series as being subject to release pursuant to this Section on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities of such series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, and such covenant shall no longer be applicable to the Company, whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such document to any other provision herein or in any other document, but the remainder of this Indenture and the Securities of any other series shall be unaffected thereby. Section 13.4 Conditions to Defeasance or Covenant Defeasance. ----------------------------------------------- The following shall be the conditions to application of either Section 13.2 or Section 13.3 to the Outstanding Securities of such series: (a) the Company shall irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and dis charge, (i) the principal of (and premium, if any, on) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities of such series on the Stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either Page 57 case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as -------- required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (b) (i) No Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit, and (ii) with respect to a defeasance and discharge under Section 13.2, no such Event of Default or event shall have occurred and be continuing under subsection 501(5) or (6) hereof at any time during the period ending on the 91st day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period applicable to the Company in respect of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); provided that -------- in connection with a defeasance under Section 13.2 the Company will be released from any covenants specified as being subject to this Article 13 in a Board Resolution or Officers' Certificate or indenture supplemental hereto which establishes the term of a series of Securities, immediately upon the making of the deposit under subsection (a) without reference to the additional period of time referred to in this subsection (ii); and provided, further, however, that if (x) a -------- ------- bank with an investment rating of at least A by each of Standard & Poor's Corporation and Moody's Investors Service, Inc. shall issue in favor of the Trustee, for the benefit of the Holders of the Outstanding Securities to be defeased hereunder, an unsecured letter of credit to guarantee the deposit referred to in subparagraph (a) above and (y) the Company shall provide to the Trustee an Opinion of Counsel (which shall be nationally recognized counsel experienced in bankruptcy matters) satisfactory to the Trustee to the effect that no payments pursuant to the letter of credit to be made for the benefit of the Holders of the Outstanding Securities to be defeased hereunder would be subject to recapture, as a preference or otherwise, by any trustee in bankruptcy of the Company, then this condition shall be satisfied without regard to the period of time referred to in subsection (ii) above. (c) Such defeasance or covenant defeasance shall not (i) cause the Trustee for the Securities of such series to have a conflicting interest as defined in Section 6.8 and for purposes of the Trust Indenture Act with respect to any securities of the Company or (ii) result in a trust arising from such deposit which constitutes an investment company under the Investment Company Act of 1940, as amended (the Page 58 "40 Act"), unless it is registered as such or exempt from registration under the 40 Act. (d) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound. (e) Such defeasance or covenant defeasance shall not cause any Securities of such series then listed on any registered national securities exchange under the Securities Exchange Act of 1934, as amended, to be delisted. (f) In the case of an election under Section 13.2, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (g) In the case of an election under Section 13.3, the Company shall have delivered to the Trustee an opinion of Counsel to the effect that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (h) Such defeasance or covenant defeasance shall be effected in compliance with any additional terms, conditions or limitations which may be imposed on the Company in connection therewith pursuant to Section 3.1. (i) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent provided for relating to either the defeasance under Section 13.2 or the covenant defeasance under Section 13.3 (as the case may be) have been complied with. Section 13.5 Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. ------------------------------------------------ Page 59 Subject to the provisions of the last paragraph of Section 10.3, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 13.4 in respect of the Outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own paying agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 13.4 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities of such series. Anything in this Article Thirteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 13.4 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 13.6 Reinstatement. ------------ If the Trustee or Paying Agent is unable to apply any money or securities in accordance with Section 13.5 of this Indenture, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities of the applicable series shall be revived and reinstated as though no deposit had occurred pursuant to Section 13.4 of this Indenture until such time as the Trustee or Paying Agent is permitted to apply all such money or securities in accordance with Section 13.5 of this Indenture; provided that, if the -------- Company has made any payment of principal of or interest on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or securities held by the Trustee or Paying Agent. Page 60 ARTICLE 14 Immunity of Incorporators, Shareholders, Officers and Directors Section 14.1 Indenture and Securities Solely Corporate Obligations. ----------------------------------------------------- No recourse under or upon any obligation, covenant or agreement of this Indenture, any supplemental indenture or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or of any successor Person either directly or through 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 this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, shareholders, officers or directors, as such, of the Company or of any successor Person, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom; and that any and all such personal liability, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, shareholder, officer or director, as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Securities. * * * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counter- parts shall together constitute but one and the same instrument. Page 61 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed, all as of the day and year first above written. CITIZENS UTILITIES COMPANY By:__________________________________ Title: Vice President, Treasurer and Chief Financial Officer Attest: __________________________ Assistant Secretary CHEMICAL BANK, as Trustee By:_________________________________ Title: Vice President Attest: __________________________ Vice President County of Fairfield ) ) ss.: State of Connecticut ) On the ____ day of ______, 1995, before me personally came [Robert J. DeSantis], to me known, who, being by me duly sworn, did depose and say that he is [Vice President and Treasurer] of CITIZENS UTILITIES COMPANY, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. ______________________________________ County of New York ) ) ss.: State of New York ) On this ____ day of ___________ in the year of 1995 before me personally came [Thomas Foley], to me personally known, who being by me duly sworn did depose and say that he is [Vice President] of CHEMICAL BANK, one of the corporations described in and which executed the foregoing Indenture; that he knows the seal of said corporation; that the seal affixed to said instrument opposite the execution thereof on behalf of said corporation is the corporate seal of said corporation; that said instrument was signed and said corporate seal was so affixed on behalf of said corporation by authority and order of its Board of Directors; that he signed his name thereto by like authority; and he acknowledged said instrument to be his free act and deed and the free act and deed of said Chemical Bank. IN WITNESS WHEREOF I have hereunto set my hand and affixed my official seal, at New York in said State of New York, the day and year first above written. ____________________________________ EX-4 6 ================================================= CITIZENS UTILITIES COMPANY TO CHEMICAL BANK (Trustee) ------------------------------------------------ FIRST SUPPLEMENTAL INDENTURE Dated as of _______, 1995 ------------------------------------------------ TABLE OF CONTENTS PAGE - ----------------- ---- ARTICLE 1 DEFINITIONS Section 1.1 Definitions 3 ARTICLE 2 FORMS OF DEBENTURES Section 2.1 Form of the Debentures 8 ARTICLE 3 TERMS OF THE DEBENTURES Section 3.1 Terms of the Debentures 9 ARTICLE 4 SUBORDINATION OF DEBENTURES Section 4.1 Debentures Subordinate to Senior Indebtedness 13 Section 4.2 Payment Over of Proceeds Upon Dissolution, etc. 14 Section 4.3 No Payment When Senior Indebtedness In Senior Payment Default or Senior Indebtedness Accelerated 15 Section 4.4 Payment Permitted If No Default 16 Section 4.5 Subrogation To Rights Of Holders Of Senior Indebtedness 17 Section 4.6 Provisions Solely To Define Relative Rights 17 Section 4.7 Trustee To Effectuate Subordination 17 Section 4.8 No Waiver Of Subordination Provisions 18 Section 4.9 Notice To Trustee 18 Section 4.10 Reliance On Judicial Order Or Certificate Of Liquidating Agent 19 Section 4.11 Trustee Not Fiduciary For Holders Of Senior Indebtedness 20 Section 4.12 Rights of Trustee As Holder Of Senior Indebtedness; Preservation Of Trustee's Rights 20 Section 4.13 Article Applicable to Paying Agents 20 ARTICLE 5 CONVERSION OF DEBENTURES Section 5.1 Conversion Privilege 20 Section 5.2 Manner of Exercise of Conversion Privilege 21 Section 5.3 Fractional Shares 22 Section 5.4 Conversion Price 22 Section 5.5 Adjustment of Conversion Price 22 Section 5.6 Reclassification, Consolidation, Merger or Sale of Assets 27 Section 5.7 Notice of Adjustments of Conversion Price 28 Section 5.8 Notices 28 Section 5.9 Taxes on Conversion 29 Section 5.10 Company to Provide Stock 30 Section 5.11 Disclaimer of Responsibility for Certain Matters 30 Section 5.12 Return of Funds Deposited for Redemption of Converted Debentures 31 Section 5.13 Disposition of Converted Debentures 31 ARTICLE 6 REDEMPTION OF DEBENTURES Section 6.1 Redemption 31 Section 6.2 Applicability of Article 32 Section 6.3 Election to Redeem; Notice to Trustee 32 Section 6.4 Notice of Redemption 32 Section 6.5 Deposit of Redemption Price 33 Section 6.6 Debentures Payable on Redemption Date 33 ARTICLE 7 AMENDMENTS TO INDENTURE FOR PURPOSES OF FIRST SERIES OF DEBENTURES Section 7.1 Amendment to Section 5.1 of Indenture for Purposes of First Series of Debentures 34 Section 7.2 Amendment to Section 9.1 of Indenture for Purposes of First Series of Debentures 36 Section 7.3 Amendment to Section 9.2 of Indenture for Purposes of First Series of Debentures 36 ARTICLE 8 EXPENSES Section 8.1 Payment and Expenses 37 ARTICLE 9 COVENANTS Section 9.1 Covenants 38 ARTICLE 10 Section 10.1 Benefits of Indenture 40 Section 10.2 Incorporation of Indenture 40 Section 10.3 Acceptance of Trust 40 Section 10.4 Conflict with Trust Indenture Act 41 Section 10.5 Governing Law 41 Section 10.6 Recitals 41 Section 10.7 Amendments 41 Section 10.8 Counterparts 41 FIRST SUPPLEMENTAL INDENTURE, dated as of _______, 1995, between CITIZENS UTILITIES COMPANY, a corporation duly organized and existing under the laws of the State of Delaware (herein called "Citizens" or the "Company"), having its principal administrative offices at High Ridge Park, Building No. 3, Stamford, Connecticut 06905, and CHEMICAL BANK, a New York banking corporation, as Trustee (herein called the "Trustee"), having its principal corporate trust office at 450 West 33rd Street, New York, New York 10001. The First Supplemental Indenture is one of several agreements executed in connection with the issuance by the Company and certain of its affiliates of up to $185,993,000 principal amount of Debentures, up to $180,413,000 liquidating value of Partnership Preferred Securities and up to $175,000,000 liquidating value of Convertible Preferred Securities (the "Offering"). Said $185,993,000 principal amount of Debentures is subject to increase to not more than $213,895,000 by a supplemental instrument hereto. For ease of reference, certain of the operative agreements in connection with the Offering make use of a Statement of Common Definitions. In this First Supplemental Indenture, such Statement of Common Definitions ("Statement of Common Definitions") is found at Exhibit B. For the purposes hereof, capitalized terms are defined in Section 1.1 hereof, elsewhere in this First Supplemental Indenture, in the Indenture, and in the Statement of Common Definitions. RECITALS WHEREAS, the Company has entered into an Indenture dated as of __________, 1995 (the "Indenture"), with the Trustee to provide for the issuance from time to time of the Company's debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series; and WHEREAS, Section 9.1 of the Indenture provides, among other things, that the Company and the Trustee may enter into indentures supplemental to the Indenture for, among other things, the purpose of establishing the form and terms of the Securities of any series as permitted in Sections 2.1 and 3.1 of the Indenture and adding to the covenants of the Company for the benefit of the Holders of any series of Securities; and WHEREAS, the Company or one of its wholly owned subsidiaries is the general partner of Citizens Capital, and the Company formed Citizens Capital to issue the Partnership Preferred Securities, with a liquidation preference of $50 per Partnership Preferred Security, and to issue the General Partnership Interest; and WHEREAS, the Company has formed the Trust under the Trust Act pursuant to the Declaration for the purpose of issuing the Convertible Preferred Securities and the Convertible Common Securities (the Convertible Common Securities and the Convertible Preferred Securities are together, the "Trust Securities"), selling such Trust Securities and contributing the proceeds thereof to Citizens Capital; and WHEREAS, the Company wishes to sell to Citizens Capital, and Citizens Capital wishes to purchase from the Company, Debentures in exchange for the funds received by Citizens Capital from the Trust and capital contributed to Citizens Capital by the General Partner; and WHEREAS, the Declaration provides that the holders of Convertible Preferred Securities may cause the Conversion Agent to exchange such Convertible Preferred Securities for Partnership Preferred Securities, and, in turn, such Partnership Preferred Securities for Debentures held by Citizens Capital, and immediately convert such Debentures into Common Stock Series A; and WHEREAS, the Company is irrevocably and unconditionally guaranteeing, on a subordinated basis, payment of distributions, payment of the Redemption Price (as defined herein) and payments on liquidation, to the extent provided in the Convertible Preferred Securities Guarantee Agreement dated _______________, 1995 and the Convertible Common Securities Guarantee Agreement dated ___________________, 1995, each between the Company and Chemical Bank, as guarantee trustee for the benefit of the holders of the Trust Securities; and WHEREAS, the Company, by corporate action duly taken, has authorized the issuance of a first series of Securities designated as the ____% Convertible Subordinated Debentures Due 2035 (hereinafter sometimes called the "Debentures"), which series is limited in aggregate principal amount to $185,993,000 (subject to increase by supplement hereto), such Debentures to contain such provisions as have been determined by or at the direction of the Board of Directors of the Company and as are set forth in this First Supplemental Indenture; and WHEREAS, all conditions have been complied with, all actions have been taken and all things have been done which are necessary to make the Debentures, when executed by the Company and authenticated by or on behalf of the Trustee and when delivered as herein and in the Indenture provided, the valid obligations of the Company, and to make this First Supplemental Indenture a valid and binding supplemental indenture. NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debentures by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Debentures, as follows: Page 2 ARTICLE 1 DEFINITIONS Section 1.1 Definitions. ----------- For all purposes of this First Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (1) capitalized terms used in this First Supplemental Indenture shall have the meanings ascribed to them in the Indenture, this First Supplemental Indenture or, to the extent not inconsistent with the Indenture or this First Supplemental Indenture, the Statement of Common Definitions; (2) the words "herein", "hereof" and "hereto" and other words of similar import used in this First Supplemental Indenture refer to this First Supplemental Indenture as a whole and not to any particular Article or Section or other subdivision of this First Supplemental Indenture; (3) the provisions of this First Supplemental Indenture shall be read in conjunction with the provisions of the Indenture only with respect to the Debentures and the provisions of the Indenture shall not be modified by this First Supplemental Indenture with respect to any series of the Securities outstanding or to be outstanding under the Indenture, other than the Debentures; and (4) terms defined in this First Supplemental Indenture shall apply only to this First Supplemental Indenture and the Debentures hereunder, and such definitions shall not apply to any supplemental indenture other than this First Supplemental Indenture or to any Securities outstanding or to be outstanding under the Indenture, other than the Debentures. "Additional Interest" has the meaning specified in Section 3.1(17). "Average Market Price" is defined in the Statement of Common Definitions. "Capital Lease Obligation" of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Cash Interest Payment Date" has the meaning specified in Section 3.1(4). Page 3 "Citizens Capital" is defined in the Statement of Common Definitions. "Common Stock" and "Common Stock Series A" are defined in the Statement of Common Definitions. "Company Event" is defined in the Statement of Common Definitions. "Compound Interest" is defined in the Statement of Common Definitions. "Conversion Agent" is defined in the Statement of Common Definitions. "Conversion Price" has the meaning specified in Section 5.4. "Convertible Common Securities" is defined in the Statement of Common Definitions. "Convertible Preferred Securities" is defined in the Statement of Common Definitions. "Date of Conversion" has the meaning specified in Section 5.2. "Debentures Payment" has the meaning specified in Section 4.2. "Declaration" is defined in the Statement of Common Definitions. "Delaware Trustee" is defined in the Statement of Common Definitions. "Designated Senior Holder" means, with respect to any Senior Indebtedness, the Person designated as such in accordance with the terms of the instrument evidencing such Senior Indebtedness. "Distribution Declaration Date" has the meaning specified in Section 3.1(4). "Distribution Declaration Notice" has the meaning specified in Section 3.1(4). "Election Period" is defined in the Statement of Common Definitions. "Equivalent Value" is defined in the Statement of Common Definitions. "Expiration Time" has the meaning specified in Section 5.5(e). "General Partnership Interest" is defined in the Statement of Common Definitions. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness of any other Person where such other Person is the Primary Obligor under such Indebtedness, in any manner, whether directly or indirectly, and including, Page 4 without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the Primary Obligor so as to enable the Primary Obligor to pay such Indebtedness (and "Guaranteed," "Guaranteeing" and "Guarantor" shall have meanings correlative to the foregoing); provided, however, that the Guarantee by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business. "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Indebtedness or other obligation as a liability on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person, (i) all Indebtedness described in clauses (i)-(vii) of the definition of Senior Indebtedness (all references to Citizens in such definition being deemed to refer to such Person) and (ii) the maximum fixed redemption or repurchase price of Redeemable Interests of such Person at the time of determination. "Junior Subordinated Payment" has the meaning specified in Section 4.2. "Limited Partnership Agreement" is defined in the Statement of Common Definitions. "No Recognition Opinion" is defined in the Statement of Common Definitions. "Notice of Conversion" means the notice to be given by a Holder of Debentures to the Conversion Agent directing the Conversion Agent to convert the Debentures into Common Stock Series A on behalf of such Holder. "Other Subordinated Indebtedness" has the meaning specified in Section 9.1. "Partnership Event" is defined in the Statement of Common Definitions. "Partnership Preferred Securities" is defined in the Statement of Common Definitions. "Partnership Securities" is defined in the Statement of Common Definitions. Page 5 "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Debentures on behalf of the Company. "Payment Blockage Period" has the meaning specified in Section 4.3. "Person" is defined in the Statement of Common Definitions. "Primary Obligor" shall refer to the Person who is primarily liable under any Indebtedness. "Proceeding" has the meaning specified in Section 4.2. "Property Trustee" is defined in the Statement of Common Definitions. "Purchased Shares" has the meaning specified in Section 5.5(e). "Rating Agency Event" is defined in the Statement of Common Definitions. "Redeemable Interest" of any Person means any equity security of or other ownership interest in such Person that by its terms or otherwise is required to be redeemed prior to the Stated Maturity of the principal of the Debentures or is or may be redeemable at the option of the holder thereof at any time prior to the Stated Maturity of the principal of the Debentures; provided, however, that interests which are redeemable solely for any equity security of or other ownership interest in such Person that by its terms or otherwise is not required to be redeemed prior to the Stated Maturity of the principal of the Debentures shall not constitute Redeemable Interests. "Redemption Price" has the meaning specified in Section 6.1. "Reference Date" has the meaning specified in Section 5.5(c). "Regular Record Date" has the meaning specified in Section 3.1(4). "Securities" has the meaning specified in the Recitals to this instrument. "Senior Indebtedness" means the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether Incurred on or prior to the date hereof or hereafter Incurred: (i) all obligations of Citizens for money borrowed; (ii) all obligations of Citizens evidenced by notes, debentures, bonds or other similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses; Page 6 (iii) all Capital Lease Obligations of Citizens; (iv) all reimbursement obligations of Citizens with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of Citizens; (v) all obligations of Citizens issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business); (vi) all payment obligations of Citizens under interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements at the time of determination, including any such obligations Incurred by Citizens solely to act as a hedge against increases in interest rates that may occur under the terms of other outstanding variable or floating rate Indebtedness of Citizens; (vii) all obligations under lease transactions pursuant to which Citizens or any of its Subsidiaries are treated as the owner of the subject property for federal income tax purposes; (viii) all obligations of the type referred to in clauses (i) through (vii) above of another Person and all dividends of another Person the payment of which, in either case, Citizens has assumed or Guaranteed or for which Citizens is responsible or liable, directly or indirectly, jointly or severally, as obligor, Guarantor or otherwise; and (ix) all amendments, modifications, renewals, extensions, refinancings, replacements and refundings by Citizens of any such Indebtedness referred to in clauses (i) through (viii) above (and of any such amended, modified, renewed, extended, refinanced, refunded or replaced Indebtedness); provided, however, that the following shall not constitute Senior Indebtedness: (A) any trade accounts payable or accrued liabilities arising in the ordinary course of business, (B) any Indebtedness owed to a Person when such Person is a Subsidiary of Citizens, or (C) any Indebtedness which by the terms of the instrument creating or evidencing the same expressly provides that it is not superior in right of payment to the Debentures. For purposes of this Definition, "Indebtedness" includes any obligation to pay principal, premium (if any), interest, penalties, reimbursement or indemnity amounts, fees and expenses (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to Citizens whether or not a claim for post-petition interest is allowed in such proceeding). Such Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. Page 7 "Senior Nonmonetary Default" has the meaning specified in Section 4.3. "Senior Payment Default" has the meaning specified in Section 4.3. "Share Transfer and Valuation Date" has the meaning specified in Section 3.1(5). "Special Event" is defined in the Statement of Common Definitions. "Special Representative" is defined in the Statement of Common Definitions. "Subsidiary" is defined in the Statement of Common Definitions. "Trading Day" is defined in the Statement of Common Definitions. "Trustee" shall mean Chemical Bank as trustee with respect to the Debentures, until a successor Trustee shall have become such pursuant to the terms of the Indenture. "Trust" is defined in the Statement of Common Definitions. "Trust Event" is defined in the Statement of Common Definitions. "Trust Securities" has the meaning specified in the Recitals to this instrument. "Underwriting Agreement" is defined in the Statement of Common Definitions. "Voting Stock" has the meaning specified in the Statement of Common Definitions. Except as otherwise expressly provided or unless the context otherwise requires, "First Supplemental Indenture" means this instrument as originally executed or, if amended or supplemented pursuant to the applicable provisions of the Indenture, as amended or supplemented. ARTICLE 2 FORMS OF DEBENTURES Section 2.1 Form of the Debentures. ---------------------- The Debentures shall be in substantially the form set forth in Exhibit A to this First Supplemental Indenture, as such form may be completed pursuant to Article 3 hereof, the terms of which Exhibit A are herein incorporated by reference and made a part of this First Supplemental Indenture. Page 8 ARTICLE 3 TERMS OF THE DEBENTURES Section 3.1 Terms of the Debentures. ----------------------- The terms of the Debentures shall be as follows: (1) The Securities to be issued under the Indenture and this First Supplemental Indenture shall be the Debentures and shall be designated as the "____% Convertible Subordinated Debentures Due 2035". (2) The Debentures shall constitute a single series of the Securities under the Indenture, which series is limited in aggregate principal amount to $185,993,000 subject to increase by supplemental instrument to an aggregate of not more than $213,895,000. (3) So long as all of the Debentures are registered in the name of CEDE & Co., or any other nominee of The Depository Trust Company, and are intended to be Book-Entry Securities, the provisions of Section 3.11 of the Indenture shall apply to the Debentures. Thereafter, or in lieu thereof, the Debentures may be subjected to the requirements of a successor or different book-entry securities system that may be adopted by the Company in accordance with the provisions of the Indenture and this First Supplemental Indenture. (4) Interest on the Debentures will be paid in either shares of Common Stock Series A or cash, as specified in paragraphs (4), (5) and (6) of this Section. Interest which is paid in shares of Common Stock Series A shall be paid on the Share Transfer and Valuation Date, as defined in paragraph (5) below. Interest which is paid in cash shall be paid on the Cash Interest Payment Date, as defined in this paragraph (4). Computation of the interest payments shall be as follows: Interest on each of the Debentures shall be payable at the rate per annum specified in the title of the Debenture from _______, 1995, or from the most recent Cash Interest Payment Date to which interest has been paid or duly provided for, quarterly in arrears, on (or, if interest is paid in shares of Common Stock Series A, computed as of) January 31, April 30, July 31 and October 31 in each year (each such date, a "Cash Interest Payment Date"), commencing on ____________, 199_, subject to the right of deferral of the Company referred to in paragraph (7) of this Section. Interest shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days each. For any period shorter than a full quarter, interest will be computed on the basis of the actual number of days elapsed in such period. The interest so payable, and punctually paid or duly provided for, on or before any Cash Interest Payment Date will be paid to the Person in whose name such Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date ("Regular Record Date") next preceding such interest payment. Upon or before the day on which the Trust, the Partnership or the Company (or any direct or indirect beneficial owner of the Debentures) is required to give notice of the record date for the next scheduled distribution payable on the Convertible Preferred Securities, the Partnership Preferred Securities or the Debentures to Page 9 the NYSE, or NASDAQ, or other applicable self-regulatory organization, or to the holders of the Convertible Preferred Securities, the Partnership Preferred Securities or the Debentures (the "Distribution Declaration Date," a date which will be specified in advance by the Company in a written notice delivered to the Trustee, and which date shall initially be the date specified in paragraph (8) of this Section unless changed by the Company in accordance with the provisions of this Section), the Company shall give written notice ("Distribution Declaration Notice") to the Trustee and the Holders of the Debentures and the holders of the Convertible Preferred Securities and the Partnership Preferred Securities, which notice shall specify (a) whether the Company is exercising its option in whole or in part to make the next interest payment in cash, (b) whether the Company is exercising its right to elect to defer such next interest payment as permitted by paragraph (7) of this Section (unless written notice of the Company's election to defer such interest payment shall previously have been given to the Trustee and such holders), (c) the Regular Record Date for such interest payment (unless such Regular Record Date has theretofore been established by the Company and notice thereof has previously been given to the Trustee and such holders), (d) the Share Transfer and Valuation Date (as set forth in paragraph (5) of this Section) and (e) if such Distribution Declaration Notice relates to the January 31 Cash Interest Payment Date, the Election Period procedures. The Regular Record Date shall be established by the Company in the Distribution Declaration Notice as aforesaid or in a separate written notice given to the Trustee and the Holders no later than the Distribution Declaration Date immediately preceding the Cash Interest Payment Date in question. Such notice (or a separate notice) may also establish a schedule for subsequent Regular Record Dates which shall remain in effect until changed by a later written notice to the Trustee and Holders. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which 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 the Cash Interest Payment Date. Except with respect to any interest that has been properly deferred pursuant to Section 3.1(7) hereof, any interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date by virtue of having been such a Holder and shall be paid by the Company as provided in Section 3.7 of the Indenture. Any interest that has been properly deferred pursuant to Section 3.1(7) hereof shall be payable only as provided in Section 3.7 of the Indenture. Upon the deferral of any interest payment as permitted by paragraph (7) of this Section, interest on such deferred interest payment will be compounded on each Cash Interest Payment Date and accrued until paid at the rate specified in the title of the Debenture until the amount of such deferred interest (including compounded interest thereon) is paid in full. (5) So long as Citizens Capital shall be the Holder of all of the Outstanding Debentures, and subject to provisions of paragraph (6) of this Section, payment of interest shall be made by delivery (which may be by book- entry) on a date (the "Share Transfer and Valuation Page 10 Date"), which will be specified by the Company in the immediately preceding Distribution Declaration Notice, of shares of Common Stock Series A with an Equivalent Value to the interest requirement set forth in paragraph (4) of this Section. At any time subsequent to the Share Transfer and Valuation Date, the Company shall have the right to purchase some or all of the shares of Common Stock Series A delivered to the Holder as aforesaid at a price equal to the Equivalent Value of such shares on the relevant Share Transfer and Valuation Date. (6) So long as Citizens Capital shall be the Holder of all of the Outstanding Debentures, the Company shall have the option to elect to make payment of interest on or before the Cash Interest Payment Date in cash, which shall be payable either, at the option of the Company exercised on or before the Cash Interest Payment Date, (i) by check mailed to the address of the Holder appearing on the Security Register, (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by a Holder upon application to the Security Registrar not later than the Regular Record Date with respect to the first Cash Interest Payment Date for which such transfer is requested, or (iii) as otherwise provided with respect to a Book-Entry Security or pursuant to any applicable book- entry security system or similar system. The Company shall also have the continuing right at any time prior to the Share Transfer and Valuation Date to elect to pay all or part of the next interest payment in cash as aforesaid (notwithstanding the relevant Distribution Declaration Notice) by delivering a further written notice of override to the Holders and the Trustee, and by complying with any requirements of any stock exchange or market quotation system or the Commission with respect to the public notification or notice of such override. If the Company has made an election to pay interest in cash, the payment of such cash to the Holders shall occur on the Cash Interest Payment Date and need not be made on the Share Transfer and Valuation Date. If the Company has not elected to pay interest in cash prior to the Share Transfer and Valuation Date, the payment of such interest in shares of Common Stock shall occur on the Share Transfer and Valuation Date. If Citizens Capital ceases to be the Holder of all of the outstanding Debentures, Citizens will be deemed to have elected to make each subsequent payment of interest in cash. The principal amount of the Debentures together with all accrued or deferred but unpaid interest will be paid at maturity or redemption by check against presentation of the Debentures by the Holders or their duly authorized agent at the office or agency of the Trustee, in New York, New York or such other address in New York, New York as the Trustee shall designate by written notice to the Holders of the Debentures. (7) The Company shall have the right, at any time and from time to time during the term of the Debentures, to elect to defer the date on which one or more of the quarterly interest payments succeeding the date of such notice would otherwise become due and payable; provided that (a) no deferred quarterly interest payment shall remain unpaid for more than 20 consecutive quarters or be deferred beyond the Stated Maturity of the Debentures, (b) no Event of Default has occurred and is continuing, and (c) so long as any deferred interest has not been paid, the Company shall not take any action prohibited in the first sentence of Section 9.1 of this First Supplemental Indenture. Page 11 If the Company intends to exercise such right to elect to defer one or more interest payments, it shall give written notification thereof to the Trustee and the Holders no later than the Distribution Declaration Date occurring immediately prior to the first Cash Interest Payment Date with respect to which interest is being deferred. A deferred interest payment will become due and payable by the Company only upon the Company's giving a deferred distribution notice to the Holders of the Debentures and the Trustee in accordance with the provisions of Section 3.7 of the Indenture applicable to delayed interest payments, including deferred interest. The Company shall also give notice of any deferred interest payment to the holders of the Trust Securities and Partnership Preferred Securities. No interest payment deferred in accordance with this paragraph shall be deemed due or payable until the date specified for payment in Section 3.7 of the Indenture, or at Stated Maturity, whichever occurs first. (8) Prior to and pending the establishment by the Company of a different schedule by written notice given by the Company to the Trustee, the Holders and the holders of the Partnership Preferred Securities and the Convertible Preferred Securities, the Regular Record Dates and related Distribution Declaration Dates and Share Transfer and Valuation Dates shall occur on the days set forth on Annex A. Upon the completion of the giving of notice or taking of other action to establish or change any Distribution Declaration Date, Regular Record Date or Share Transfer and Valuation Date, the Company shall deliver (which delivery may be contemporaneous with the delivery of such notice) to the Trustee, and shall retain, a copy of a Revised Annex A duly reflecting any such date which has been established or changed. (9) If carried out in accordance with the provisions of paragraphs (4), (5), (6), (7) and (8) of this Section, the Company may give notice or take other action to establish or change any Distribution Declaration Date, Regular Record Date, Special Record Date or Share Transfer and Valuation Date (each of such days being referred to as a "Date" or collectively, "Dates" for the purposes of this paragraph), or to establish or change any schedule for one or more of the Dates, without any requirement of receiving the consent, authorization, or any other action by any other Person, including the Trustee, Citizens Capital, the Trust, any Holder or any beneficial owner of the Debentures, or any holder of Partnership Securities or Trust Securities. Such establishment or change shall not be deemed to be an act or change requiring a supplemental indenture pursuant to Section 9.2 of the Indenture. Any Annex A and Revised Annex A given to the Trustee pursuant to this Section shall be deemed to be included within the term "notice" as used in Section 6.3 of the Indenture. The Trustee shall be under no obligation with respect to the establishment, or change, of Dates and may rely upon such notice or notification to the full extent provided in such Section 6.3. (10) Notwithstanding the foregoing, so long as Citizens Capital or the Trust is the Holder of the Debenture, payment of the principal and interest on the Debenture will be made at such place and to such account as may be designated by such Holder. Page 12 (11) The Debentures shall be subordinated in right of payment to Senior Indebtedness as provided in Article 4. (12) The Debentures shall be convertible as provided in Article 5. (13) The Debentures shall be redeemable as provided in Article 6. (14) The Debentures shall be issued in registered form only and in denominations of $50 or any amount in excess thereof which is an integral multiple of $50. (15) When principal and interest on the Debentures is payable in cash, it shall be payable in the coin or currency of the United States of America, which, at the time of payment, is legal tender for public and private debts. (16) The Debentures shall not be subject to the defeasance provided for in Sections 13.2 and 13.3 of the Indenture. (17) If at any time while Citizens Capital or the Trust is the Holder of the Outstanding Debentures or the Trust is the holder of the Outstanding Partnership Preferred Securities of Citizens Capital, Citizens Capital or the Trust becomes legally obligated to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes), imposed by the United States, or any other domestic taxing authority, then, in such case, the Company shall pay, but without duplication, such additional amounts, if any, as shall be required to pay such taxes of Citizens Capital or the Trust either (i) as additional interest ("Additional Interest") on the Debentures or (ii) to such taxing authority or to the Trust or Citizens Capital, as the case may be, so that such taxes are paid on or before any date of redemption or the Stated Maturity, whichever comes first. (18) The Debentures initially will not be issued in the form of a registered global debenture. If Debentures are thereafter to be issued in the form of one or more registered global debentures, such global securities shall be governed by the appropriate provisions of Section 3.3 and 3.11 of the Indenture. ARTICLE 4 SUBORDINATION OF DEBENTURES Section 4.1 Debentures Subordinate to Senior Indebtedness. --------------------------------------------- The Company covenants and agrees, and each Holder of a Debenture, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to Article Four of the Indenture), the payment of the principal of (and premium, if any) and interest on each and all of the Debentures is hereby expressly made Page 13 subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness. Article Four shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. Section 4.2 Payment Over of Proceeds Upon Dissolution, etc. ----------------------------------------------- Upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshalling of assets or liabilities or any bankruptcy, insolvency or similar proceedings of the Company (each such event, if any, herein sometimes referred to as a "Proceeding"): (1) the holders of Senior Indebtedness shall be entitled to receive payment in full in cash of all amounts due on or to become due on or in respect of all Senior Indebtedness, before the Holders of the Debentures are entitled to receive any payment (including any payment to Holders of the Debentures made in respect of any other Indebtedness of the Company subordinated to the payment of the Debentures, such payment or distribution being hereinafter referred to as a "Junior Subordinated Payment"), on account of the principal of (and premium, if any) or interest on the Debentures or on account of any purchase, redemption or other acquisition of Debentures by the Company, any Subsidiary of the Company, the Trustee or any Paying Agent (all such payments, distributions, purchases, redemptions and acquisitions, whether or not in connection with a Proceeding, herein referred to, individually and collectively, as a "Debentures Payment"); and (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders of the Debentures or the Trustee would be entitled but for the provisions of this Article (including, without limitation, any Junior Subordinated Payment) shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment to the holders of such Senior Indebtedness. Page 14 In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Debenture shall have received in connection with any Proceeding any Debentures Payment before all Senior Indebtedness is paid in full or payment thereof provided for in cash, then and in such event such Debentures Payment shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full in cash after giving effect to any concurrent payment to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include a payment or distribution of stock or securities of the Company provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law or of any other corporation provided for by such plan of reorganization or readjustment which stock or securities are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent, or to a greater extent than, the Debentures are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article Eight of the Indenture shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article Eight of the Indenture. Section 4.3 No Payment When Senior Indebtedness In Senior Payment Default or Senior Indebtedness Accelerated. -------------------------------------------------- In the event that (a) any Senior Payment Default (as defined below) shall have occurred and such Senior Indebtedness shall have become, by reason thereof, due and payable prior to the Stated Maturity thereof, then no Debentures Payment shall be made (except that, so long as Citizens Capital shall be the Holder of all of the Outstanding Debentures, payment may be made in shares of capital stock), unless and until such Senior Payment Default shall have been cured or waived in writing or shall have ceased to exist or all amounts then due and payable in respect of such Senior Indebtedness (including amounts that have become and remain due by acceleration) shall have been paid in full in cash. "Senior Payment Default" means any default (which default has continued beyond any applicable grace and/or cure period (if any), in the payment of principal of (or premium, if any) or interest on any Senior Indebtedness when due, whether at the stated maturity of any such payment or by declaration of acceleration, call for redemption, mandatory payment or prepayment or otherwise. Page 15 In the event that any Senior Nonmonetary Default (as defined below) shall have occurred and be continuing, then, upon the receipt by the Company and the Trustee of written notice of such Senior Nonmonetary Default from the Designated Senior Holder of such certain Senior Indebtedness, no Debentures Payment (except that, so long as Citizens Capital shall be the Holder of all of the Outstanding Debentures, payment may be made in shares of capital stock) shall be made, during the period (the "Payment Blockage Period") commencing on the date of such receipt of such written notice and ending (subject to any blockage of payments that may then or thereafter be in effect as the result of any Senior Payment Default) on the earlier of (i) the date on which the Senior Indebtedness to which such Senior Nonmonetary Default relates is discharged or such Senior Nonmonetary Default shall have been cured or waived in writing or shall have ceased to exist and any acceleration of Senior Indebtedness to which such Senior Nonmonetary Default relates shall have been rescinded or annulled or (ii) the 179th day after the date of such receipt of such written notice. No more than one Payment Blockage Period may be commenced with respect to the Debentures during any period of 360 consecutive days and there shall be a period of at least 181 consecutive days in each period of 360 consecutive days when no Payment Blockage Period is in effect. Following the commencement of any Payment Blockage Period, the holders of the Senior Indebtedness will be precluded from commencing a subsequent Payment Blockage Period until the conditions set forth in the preceding sentence are satisfied. For all purposes of this paragraph, no Senior Nonmonetary Default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by holders of Senior Indebtedness or their representatives unless such Senior Nonmonetary Default shall have been cured for a period of not less than 90 consecutive days. "Senior Nonmonetary Default" means any default (other than a Senior Payment Default) or any event which, after notice or lapse of time (or both), would become an event of default, under the terms of any instrument or agreement pursuant to which any Senior Indebtedness is outstanding, permitting (after notice or lapse of time or both) one or more holders of such Senior Indebtedness (or a trustee or agent on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise become due and payable. In the event that, notwithstanding the foregoing, the Company shall make any Debentures Payment to the Trustee or any Holder prohibited by the foregoing provisions of this Section, then and in such event such Debentures Payment shall be paid over and delivered forthwith to the Designated Senior Holders under the Senior Indebtedness or, if such Senior Indebtedness has been repaid in full, to the Company. The provisions of this Section shall not apply to any Debentures Payment with respect to which Section 4.2 hereof would be applicable. Section 4.4 Payment Permitted If No Default. ------------------------------- Nothing contained in this Article or elsewhere in this First Supplemental Indenture or in any of the Debentures shall prevent the Company, at any time except during the pendency of Page 16 any Proceeding referred to in Section 4.2 hereof or under the conditions described in Section 4.3 hereof, from making Debentures Payments. Section 4.5 Subrogation To Rights Of Holders Of Senior Indebtedness. ------------------------------------------------------- Subject to the payment in full in cash of all Senior Indebtedness, the Holders of the Debentures shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of and interest on the Debentures shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Debentures or the Trustee would be entitled except for the provisions of this Article, and no payments pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Debentures or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Debentures, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. Section 4.6 Provisions Solely To Define Relative Rights. ------------------------------------------- The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this First Supplemental Indenture or in the Debentures is intended to or shall (a) impair, as among the Company, its creditors (other than holders of Senior Indebtedness) and the Holders of the Debentures, the obligation of the Company, which is absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Company), to pay to the Holders of the Debentures the principal of and interest on the Debentures as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this First Supplemental Indenture or the Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder or, under the conditions specified in Section 4.3, to prevent any payment prohibited by such Section or enforce their rights pursuant to the penultimate paragraph in Section 4.3. Section 4.7 Trustee To Effectuate Subordination. ----------------------------------- Each Holder of a Debenture by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company whether in bankruptcy, insolvency, receivership proceedings, or Page 17 otherwise, the timely filing of a claim for the unpaid balance of the Indebtedness of the Company owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file a proper claim at least 30 days before the expiration of the time to file such claim, then the holders of the Senior Indebtedness and their agents, trustees or other representatives are authorized to do so (but shall in no event be liable for any failure to do so) for and on behalf of the Holders of the Debentures. Section 4.8 No Waiver Of Subordination Provisions. ------------------------------------- No right of any present or future holder of any Senior Indebtedness 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 First Supplemental Indenture or the Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Debentures, without incurring responsibility to the Holders of the Debentures and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Debentures to the holders of the Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) permit the Company to borrow, repay and then reborrow any or all of the Senior Indebtedness; (iii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iv) release any Person liable in any manner for the collection of Senior Indebtedness; (v) exercise or refrain from exercising any rights against the Company and any other Person; and (vi) apply any sums received by them to Senior Indebtedness. Section 4.9 Notice To Trustee. ----------------- The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Debentures. Notwithstanding the provision of this Article or any other provision of this First Supplemental Indenture or the Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Debentures, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company, any holder of Senior Indebtedness, any Designated Senior Holder or from any trustee, fiduciary or agent therefore; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 6.1 of the 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 at least three Page 18 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 or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, but without limiting the rights and remedies of the holders of Senior Indebtedness or any trustee, fiduciary or agent therefor, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Any notice required or permitted to be given to the Trustee by a holder of Senior Indebtedness or by any Designated Senior Holder shall be in writing and shall be sufficient for every purpose hereunder if in writing and either (i) sent via facsimile to the Trustee, the receipt of which shall be confirmed via telephone, or (ii) mailed, first class postage prepaid, or sent by overnight carrier, to the Trustee addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address furnished in writing to such holder of Senior Indebtedness by the Trustee. Subject to the provisions of Section 6.1 of the Indenture, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness or Designated Senior Holder (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness or Designated Senior Holder (or a trustee, fiduciary or agent therefor). 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 Senior Indebtedness or Designated Senior Holder to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of 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, 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. Notwithstanding anything else contained herein, no notice, request or other communication to or with the Trustee shall be deemed given unless received by a Responsible Officer at the Trustee's principal corporate trust office. Section 4.10 Reliance On Judicial Order Or Certificate Of Liquidating Agent. -------------------------------------------------------- Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 6.1 of the Indenture, and the Holders of the Debentures shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Debentures, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and Page 19 all other facts pertinent thereto or to this Article, provided that the foregoing shall apply only if such court has been apprised of the provisions of this Article. Section 4.11 Trustee Not Fiduciary For Holders Of Senior Indebtedness. -------------------------------------------------------- The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Debentures or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. Section 4.12 Rights of Trustee As Holder Of Senior Indebtedness; Preservation Of Trustee's Rights. -------------------------------------------------- The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this First Supplemental Indenture shall deprive the Trustee of any of its rights as a holder of Senior Indebtedness. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.7 of the Indenture. Section 4.13 Article Applicable to Paying Agents. ----------------------------------- In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 4.11 hereof shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. ARTICLE 5 CONVERSION OF DEBENTURES Section 5.1 Conversion Privilege. -------------------- Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Debenture may, at any time or from time to time on any Business Day to and including, but not after, the close of business on the day which is five Business Days prior to _______ 2035, be converted, in whole, or, if the Debenture is in a principal amount in excess of $50, in part, in integral multiples of $50 principal amount, into fully paid and nonassessable shares of Common Stock Series A, at the Conversion Price in effect on the date of conversion. Page 20 In case a Debenture or a portion thereof is called for redemption, such conversion right in respect of such Debenture or the portion so called, shall expire at the close of business on the day which is five Business Days prior to the Redemption Date, unless the Company defaults in making the payment due upon redemption. Section 5.2 Manner of Exercise of Conversion Privilege. ------------------------------------------ In order to exercise the conversion privilege, the Holder of any Debenture to be converted in whole or in part shall surrender such Debenture to the Conversion Agent at the office or agency to be maintained by the Company pursuant to Section 10.2 of the Indenture for the conversion of Debentures, with the fully completed Notice of Conversion set forth in the Debenture duly completed and, if so required by the Company, accompanied by instruments of transfer, in form satisfactory to the Company and to the Trustee, duly executed by the Holder or his duly authorized attorney in writing. Said notice shall state the name or names (with addresses), if other than the Holder, in which the certificate or certificates for shares of Common Stock Series A which shall be issuable on such conversion shall be issued. As promptly as practicable after the surrender of such Debenture with the signed and completed notice as aforesaid, the Company shall, subject to the provisions of Section 5.8, issue and deliver at such office or agency to such Holder, or on his written order, a certificate or certificates for the number of shares of Common Stock Series A issuable on the principal amount of the Debenture then surrendered for conversion, cash, as provided in Section 5.3, in respect of any fraction of a share of Common Stock Series A otherwise issuable upon such conversion, and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder hereof without service charge, a new Debenture or Debentures, of any authorized denomination as requested by the Holder, in an aggregate principal amount equal to and in exchange for the unconverted portion of this Debenture so surrendered. Such conversion shall be deemed to have been effected immediately prior to the close of business on the date (herein called the "Date of Conversion") on which such Debenture containing a duly completed and executed Notice of Conversion shall have been surrendered as aforesaid, and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock Series A shall be issuable upon such conversion shall be deemed to have become on the Date of Conversion the holder or holders of record of the shares represented thereby; provided, however, that any such surrender, on any date when the stock transfer books of the Company shall be closed, shall constitute the Person or Persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof, for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open, but such conversion shall nevertheless be at the Conversion Price in effect at the close of business on the date when such Debenture shall have been so surrendered. The Holder at the close of business on any Regular Record Date for the payment of interest will be entitled to receive the interest payable on his or her Debenture on the corresponding Cash Interest Payment Date notwithstanding the conversion of such Debenture into Common Stock Series A following such Regular Record Date. Subject to Sections 5.5 and 5.6 hereof, no payment or adjustment shall be made upon conversion on account of any interest accrued or deferred or otherwise unpaid on the principal of any Debenture or portion thereof so converted or for any dividends or distributions on any shares Page 21 of Common Stock Series A. Holders of Common Stock Series A received upon such conversion prior to or on a record date for any dividend or distribution on such shares shall be entitled to receive the same dividend or distribution as other holders of record of Common Stock Series A. Section 5.3 Fractional Shares. ----------------- No fractional shares of Common Stock Series A shall be issued upon conversion of Debentures. If more than one Debenture shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion shall be computed on the basis of the aggregate principal amount of the Debentures so surrendered. Instead of any fractional interest in a share of Common Stock Series A which would otherwise be issuable upon conversion of any Debenture or Debentures, the Company shall pay a cash adjustment in respect of such fractional interest to the nearest one-hundredth of a share in an amount equal to the Average Market Price of such fractional interest on the Date of Conversion. Section 5.4 Conversion Price. ---------------- The initial Conversion Price of the Debentures shall be $________ per share of Common Stock Series A, subject to adjustment as provided in this Article 5. Section 5.5 Adjustment of Conversion Price. ------------------------------ The Conversion Price for each series shall be adjusted from time to time as follow: (a) In case the Company shall, while any of the Debentures are outstanding, (i) pay a dividend or make a distribution with respect to its Common Stock Series A in shares of Common Stock Series A, (ii) subdivide its outstanding shares of Common Stock Series A, (iii) combine its outstanding shares of Common Stock Series A into a smaller number of shares or (iv) issue by reclassification of its shares of Common Stock Series A any shares of capital stock of the Company, the conversion privilege and the Conversion Price for each series of Debentures in effect immediately prior to such action shall be adjusted so that the Holder of any Debenture thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Company which he would have owned immediately following such action had such Debenture been converted immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or other distribution and shall become effective immediately after the effective date in case of a subdivision, combination or reclassification (or immediately after the record date if a record date shall have been established for such event). If, as a result of an adjustment made pursuant to this subsection (a), the Holder of any Debenture thereafter surrendered for conversion shall become entitled to receive shares of two or more classes or series of capital stock of the Company, the Board of Directors (whose determination shall be conclusive and Page 22 shall be described in a Board Resolution filed with the Trustee) shall determine the allocation of the adjusted Conversion Price for each series of Debentures between or among shares of such classes or series of capital stock. (b) In case the Company shall, while any of the Debentures are outstanding, issue rights or warrants to all holders of its Common Stock Series A entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock Series A at a price per share less than the current market price per share of Common Stock Series A (as determined pursuant to subsection (f) below) on the record date mentioned below, the Conversion Price for the Debentures shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the numerator shall be the number of shares of Common Stock Series A outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such current market price, and of which the denominator shall be the number of shares of Common Stock Series A outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock Series A offered for subscription or purchase. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock Series A are not so delivered after the expiration of such rights or warrants, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. For the purposes of this subsection, the number of shares of Common Stock Series A at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not issue any rights or warrants in respect of shares of Common Stock Series A held in the treasury of the Company. In case any rights or warrants referred to in this subsection in respect of which an adjustment shall have been made shall expire unexercised within 45 days after the same shall have been distributed or issued by the Company, the Conversion Price shall be readjusted at the time of such expiration to the Conversion Price that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. (c) Subject to the last sentence of this subsection, in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock Series A evidences of its indebtedness, shares of any class or series of capital stock (other than Common Stock Series A), cash or assets (including securities, but excluding any rights or warrants referred to in subsection (b), any dividend or distribution paid exclusively in cash and any dividend or distribution referred Page 23 to in subsection (a) of this Section), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (c) by a fraction of which the numerator shall be the current market price per share (determined as provided in subsection (f) below) of the Common Stock Series A on the date fixed for the payment of such distribution (the "Reference Date") less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution), on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock Series A and the denominator shall be such current market price per share of the Common Stock Series A, such reduction to become effective immediately prior to the opening of business on the day following the Reference Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not occurred. If the Board of Directors determines the fair market value of any distribution for purposes of this subsection (c) by reference to the actual or when issued trading market for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used in computing the current market price per share of Common Stock Series A (determined as provided in subsection (f)). For purposes of this subsection (c), any dividend or distribution that includes shares of Common Stock Series A or rights or warrants to subscribe for or purchase shares of Common Stock Series A shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, shares of capital stock, cash or assets other than such shares of Common Stock Series A or such rights or warrants (making any Conversion Price reduction required by this subsection (c)) immediately followed by (2) a dividend or distribution of such shares of Common Stock Series A or such rights or warrants (making any further Conversion Price reduction required by subsections (a) or (b), except (A) the Reference Date of such dividend or distribution as defined in this subdivision shall be substituted as (i) "the record date in the case of a dividend or other distribution" and (ii) "the record date for the determination of stockholders entitled to receive such rights or warrants" within the meaning of subsections (a) and (b) and (B) any shares of Common Stock Series A included in such dividend or distribution shall not be deemed outstanding for purposes of computing any adjustment of the Conversion Price in subparagraph (a). (d) In case the Company shall pay or make a dividend or other distribution on its Common Stock Series A exclusively in cash (excluding all regular cash dividends if the annualized amount thereof per share of Common Stock Series A does not exceed 15% of the current market price per share (determined as provided in subsection (f)) of the Common Stock Series A on the Trading Day next preceding the date of declaration of such dividend, the Page 24 Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection by a fraction of which the numerator shall be the current market price per share (determined as provided in subsection (f)) of the Common Stock Series A on the date fixed for the payment of such distribution less the amount of cash so distributed and not excluded as provided applicable to one share of Common Stock Series A and the denominator shall be such current market price per share of the Common Stock Series A, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution; provided, however, that in the event the portion of the -------- ------- cash so distributed applicable to one share of Common Stock Series A is equal to or greater than the current market price per share (determined as provided in subsection (f)) of the Common Stock Series A on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of Debentures shall have the right to receive upon conversion the amount of cash such Holder would have received had such Holder converted such Debentures immediately prior to the record date for the distribution of the cash. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date had not been fixed. (e) In case a tender or exchange offer (other than an odd-lot offer) made by the Company or any Subsidiary of the Company for all or any portion of the Company's Common Stock Series A shall expire and such tender or exchange offer shall involve the payment by the Company or such Subsidiary of consideration per share of Common Stock Series A having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) at the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds 110% of the current market price per share (determined as provided in subsection (f)) of the Common Stock Series A on the Trading Day next succeeding the Expiration Time, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection by a fraction of which the numerator shall be the number of shares of Common Stock Series A outstanding (including any tendered or exchanged shares) at the Expiration Time multiplied by the current market price per share (determined as provided in subsection (f)) of the Common Stock Series A on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to holders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged Page 25 and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock Series A outstanding (less any Purchased Shares) at the Expiration Time and the current market price per share (determined as provided in subsection (f)) of the Common Stock Series A on the Trading Day next succeeding the Expiration Time, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time. (f) For the purpose of any computation under subsections (b), (c), (d) or (e), the current market price per share of Common Stock Series A on any date in question shall be deemed to be the average of the daily Average Market Prices for the five consecutive Trading Days selected by the Company commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question and, if applicable, the day before the "ex" date with respect to the issuance or distribution requiring such computation; provided, however, that if -------- ------- another event occurs that would require an adjustment pursuant to subsections (a) through (e), inclusive, the Board of Directors may make such adjustments to the Average Market Prices during such five Trading Day period as it deems appropriate to effectuate the intent of the adjustments in this Section, in which case any such determination by the Board of Directors shall be conclusive. For purposes of this paragraph, the term "ex" date, (1) when used with respect to any issuance or distribution, means the first date on which the Common Stock Series A trades regular way on the New York Stock Exchange or on such successor securities exchange as the Common Stock Series A may be listed or in the relevant market from which the Average Market Prices were obtained without the right to receive such issuance or distribution, and (2) when used with respect to any tender or exchange offer means the first date on which the Common Stock Series A trades regular way on such securities exchange or in such market after the Expiration Time of such offer. (g) The Company may make such reductions in the Conversion Price, in addition to those required by subsections (a) through (e) as it considers to be advisable to avoid or diminish any income tax to holders of Common Stock Series A or rights to purchase Common Stock Series A resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. The Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least twenty (20) days, the reduction is irrevocable during the period, and the Board of Directors of the Company shall have made a determination that such reduction would be in the best interest of the Company, which determination shall be conclusive. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to Holders of the Debentures a notice of the reduction at least fifteen (15) days prior to the date the reduced Conversion Price Page 26 takes effect, and such notice shall state the reduced Conversion Price and the period it will be in effect. (h) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided; however; that any adjustments which -------- ------- by reason of this subparagraph (i) are not required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment shall be required. (i) Notwithstanding the foregoing provisions, the issuance of any shares of Common Stock Series A pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock Series A under any such plan, and the issuance of any shares of Common Stock Series A or options or rights to purchase such shares pursuant to any employee benefit plan or program of the Company or pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the Debentures were first issued, shall not be deemed to constitute an issuance of Common Stock Series A or exercisable, exchangeable or convertible securities by the Company to which any of the adjustment provisions described above applies. There shall also be no adjustment of the Conversion Price in case of the issuance of any stock (or securities convertible into or exchangeable for stock) of the Company except as specifically described in this Article Five. (j) If any action would require adjustment of the Conversion Price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the Holder of the Debentures. Section 5.6 Reclassification, Consolidation, Merger or Sale of Assets. --------------------------------------------------------- In the event that the Company shall be a party to any transaction (including without limitation (a) any recapitalization or reclassification of the Common Stock Series A (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Stock Series A), (b) any consolidation of the Company with, or merger of the Company into, any other Person, or any merger of another Person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock Series A of the Company), (c) any sale or transfer of all or substantially all of the assets of the Company or (d) any compulsory share exchange) pursuant to which the Common Stock Series A is converted into the right to receive other securities, cash or other property, then lawful provision Page 27 shall be made as part of the terms of such transaction whereby the Holder of each Debenture then outstanding shall have the right thereafter to convert such Debenture only into the kind and amount of securities, cash and other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock Series A of the Company into which such Debenture could have been converted immediately prior to such transaction. The Company or the Person formed by such consolidation or resulting from such merger or which acquired such assets or which acquires the Company's shares, as the case may be, shall make provision in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article Five. The above provisions shall similarly apply to successive transactions of the foregoing type. Section 5.7 Notice of Adjustments of Conversion Price. ----------------------------------------- Whenever the Conversion Price is adjusted as herein provided: (a) the Company shall compute the adjusted Conversion Price and shall prepare a certificate signed by the Treasurer or Controller of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee and the Conversion Agent; and (b) a notice stating the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall as soon as practicable be mailed by the Company to all record holders of Convertible Preferred Securities, Partnership Preferred Securities and Debentures at their last addresses as they appear upon the transfer books of the Company, the Trust or Citizens Capital, as the case may be. Section 5.8 Notices. ------- In case, at any time while any of the Debentures are outstanding, (a) the Company shall (i) declare a dividend (or any other distribution) on its Common Stock Series A, excluding any cash dividends that would not require adjustment pursuant to Section 5.5(d) or dividends payable in shares of Common Stock Series A, or (ii) authorize a tender or exchange offer that would require an adjustment pursuant to Section 5.5(e); or Page 28 (b) the Company shall authorize the issuance to all holders of its Common Stock Series A of rights or warrants to subscribe for or purchase shares of its Common Stock Series A or of any other subscription rights or warrants; or (c) the Company shall authorize any reclassification of its Common Stock Series A (other than a transaction or event referred to in clauses (i), (ii), (iii) or (iv) of subsection (a) of Section 5.5) or any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required (except for a merger of the Company into one of its subsidiaries solely for the purpose of changing the corporate domicile of the Company to another state of the United States and in connection with which there is no substantive change in the rights or privileges of any securities of the Company other than changes resulting from differences in the corporate statutes of the then existing and the new state of domicile), or the sale or transfer of all or substantially all of the assets of the Company; or (d) the voluntary or involuntary dissolution, liquidation or winding up of the Company shall occur or be authorized; then the Company shall cause to be filed at each office or agency maintained by the Company for the purpose of conversion of the Debentures pursuant to Section 10.2 of the Indenture, and shall cause to be mailed to the Holders of Debentures and the holders of the Convertible Preferred Securities and the Partnership Preferred Securities at their last addresses as they shall appear on the Securities Register or the transfer books of the Trust or Citizens Capital, as the case may be, at least 10 days before the date hereinafter specified (or the earlier of the dates hereinafter specified, in the event that more than one date is specified), a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock Series A of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (ii) the date on which any such reclassification, consolidation, merger, sale, share exchange, transfer, dissolution, liquidation or winding-up is expected that holders of Common Stock Series A of record shall be entitled to exchange their Common Stock Series A for securities or other property (including cash), if any, deliverable upon such reclassification, consolidation, merger, sale, share exchange, transfer, dissolution, liquidation or winding-up. The failure to give or receive the notice required by this Section 5.8 or any defect therein shall not affect the legality or validity of any such dividend, distribution, right or warrant or other action. Section 5.9 Taxes on Conversion. ------------------- The Company will pay any and all documentary, stamp or similar taxes payable to the United States of America or any political subdivision or taxing authority thereof or therein respect of the issue or delivery of shares of Common Stock Series A on conversion of Debentures pursuant hereto; provided, however, that the Company shall not be required to pay Page 29 any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock Series A in a name other than that of the Holder of the Debentures to be converted and no such issue or delivery shall be made unless and until the Person requesting such issue or delivery has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid. Section 5.10 Company to Provide Stock. ------------------------ The Company covenants that there shall be reserved, from time to time, free from preemptive rights, out of authorized but unissued shares of Common Stock Series A, sufficient shares to provide for the conversion of the Debentures from time to time as such Debentures are presented for conversion. If any shares of Common Stock Series A to be reserved for the purpose of conversion of Debentures hereunder require registration with or approval of, or authorization by, any governmental authority under Federal or state law before such shares may be validly issued or delivered upon conversion, then the Company covenants that it will in good faith and as expeditiously as possible endeavor to secure such registration, approval or authorization, as the case may be. Before any action which would cause an adjustment reducing the Conversion Price for the Debentures below the then par value, if any, of the Common Stock Series A, the Company covenants that there will be taken all corporate action which may, in the opinion of its counsel, be necessary in order that there may be validly and legally issued fully paid and non-assessable shares of such Common Stock Series A at such adjusted Conversion Price. The Company covenants that all shares of Common Stock Series A which may be issued upon conversion of Debentures will upon issue be duly authorized, validly issued, fully paid and non-assessable and free from all liens and charges with respect to the issue or delivery thereof. Such shares of Common Stock Series A will, upon issue, be listed on the NYSE or any other national securities exchange, NASDAQ or other quotation system on which shares of Common Stock Series A may then be listed or quoted. Section 5.11 Disclaimer of Responsibility for Certain Matters. ------------------------------------------------ Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Holder of Debentures to determine whether any facts exist which may require any adjustment of the Conversion Price for any series of Debentures, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. Neither the Trustee nor any Conversion Agent shall be accountable with respect to the registration, validity or value (or the kind or amount) of any shares of Common Stock Series A, or of any securities or property, which may any time be issued or delivered upon the conversion of any Debenture; and neither the Trustee nor any Conversion Agent makes any representation Page 30 with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue or deliver any shares of Common Stock Series A or stock certificates or other securities, cash or property upon the surrender of any Debenture for the purpose of conversion, or, subject to Section 1.4 of the Indenture, to comply with any of the covenants of the Company obtained in this Article 5. Section 5.12 Return of Funds Deposited for Redemption of Converted Debentures. ----------------------------------------------------- Any funds which at any time shall have been deposited by the Company or on its behalf with the Trustee or any other Paying Agent for the purpose of paying the principal of, premium, if any, and interest, if any, on any of the Debentures and which shall not be required for such purposes because of the conversion of such Debentures, as provided in this Article 5, shall forthwith after such conversion, upon Company Request, be repaid to the Company by the Trustee or such other Paying Agent. Section 5.13 Disposition of Converted Debentures. ----------------------------------- All Debentures delivered to the Company or any Conversion Agent upon conversion pursuant to this Article 5 shall be delivered to the Trustee for cancellation. ARTICLE 6 REDEMPTION OF DEBENTURES Section 6.1 Redemption ---------- (a) Optional Redemption: At any time on or after ______________, -------------------- 199_, the Company, at its option, will have the right to prepay or redeem the Debentures, in whole or in part (together with any accrued or deferred but unpaid interest on the portion being prepaid), at 100% of the principal amount being redeemed (the "Redemption Price"), plus unpaid Additional Interest, if any. (b) Redemption upon Company Event: Except as set forth in paragraph ------------------------------ (d) of this Section 6.1, upon the occurrence of a Company Event, the Company shall have the right to redeem the Debentures, in whole or in part, for cash, at the Redemption Price, plus Additional Interest, if any, in accordance with Section 6.4. (c) Redemption upon Trust Event or Partnership Event: Except as set ------------------------------------------------- forth in paragraph (d) of this Section 6.1, upon the occurrence of a Trust Event or a Partnership Event, if the Company cannot obtain a No Recognition Opinion with regard to the distribution of either the Partnership Preferred Securities or the Convertible Debentures, then the Company shall have the right to redeem the Convertible Debentures, in whole or in part, for cash, at the Redemption Price, plus Additional Interest, if any, in accordance with Section 6.4. Page 31 (d) Ministerial Action. If at the time of any such Special Event, the ------------------- Company, Citizens Capital or the Trust are actually aware of an opportunity to eliminate the adverse effect of the Special Event on the Trust, the Company or Citizens Capital by taking some ministerial action (such as filing a form or making an election or pursuing some other similar reasonable measure) where the taking of such action does not involve a material cost, then the Company shall not, on or before ___________, 199_, redeem any Debentures at any time such opportunity exists, without first having pursued such ministerial action. (e) Accrued or Deferred Interest. The Company may not redeem any ---------------------------- outstanding Debentures unless all accrued or deferred but unpaid interest has been paid on all Debentures to be redeemed for all quarterly interest payment periods terminating on or before the date of redemption. Section 6.2 Applicability of Article. ------------------------ Redemption of Debentures at the election of the Company, as permitted by Section 6.1, shall be made in accordance with such provision, this Article and Article 11 of the Indenture, to the extent not inconsistent with this Article 6. Section 6.3 Election to Redeem; Notice to Trustee. ------------------------------------- The election of the Company to redeem any Debentures pursuant to Section 6.1 shall be evidenced by a Board Resolution. In the case of any redemption at the election of the Company, the Company shall, at least 40 days and no more than 60 days prior to the Redemption Date fixed by the Company, notify the Trustee of such Redemption Date and of the principal amount of Debentures to be redeemed and any accrued or deferred and unpaid interest (and Additional Interest, if any) thereon and provide a copy of the notice of redemption given to Holders of Debentures to be redeemed pursuant to Section 6.4. Section 6.4 Notice of Redemption. -------------------- Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Debentures to be Redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price and the amount of any Additional Interest, Page 32 (3) that on the Redemption Date the Redemption Price, and Additional Interest, if any, will become due and payable upon each such Debenture to be redeemed and that interest thereon will cease to accrue on and after said date, (4) the place or places where such Debentures are to be surrendered for payment of the Redemption Price, and Additional Interest, if any, (5) the date that the conversion right shall expire, and (6) the Conversion Price. Notice of redemption of Debentures to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 6.5 Deposit of Redemption Price. --------------------------- Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.3 of the Indenture) an amount of money sufficient to pay the Redemption Price of, Additional Interest, if any, on, and deferred interest on, only the Debentures which are to be redeemed on that date. Section 6.6 Debentures Payable on Redemption Date. ------------------------------------- Notice of redemption having been given as aforesaid, the Debentures so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, together with Additional Interest, if any, and from and after such date (unless the Company shall default in such payment) such Debentures shall cease to bear interest. Upon surrender of any such Debenture for redemption in accordance with said notice, such Debenture shall be paid by the Company at the Redemption Price, together with Additional Interest, if any; provided, however, that installments of interest whose Cash Interest Payment Date is prior to the Redemption Date shall be payable to the Holders of such Debentures registered as such at the close of business on the relevant Regular Record Dates subject to the provisions of Section 3.7 of the Indenture and Article 3 of this First Supplemental Indenture. Page 33 ARTICLE 7 AMENDMENTS TO INDENTURE FOR PURPOSES OF FIRST SERIES OF DEBENTURES Section 7.1 Amendment to Section 5.1 of Indenture for Purposes of First Series of Debentures. ------------------------------------------ For all purposes of the Debentures and for no other purposes, Section 5.1 of the Indenture shall read (terms used but not defined in the Indenture shall have the requisite meanings as used in this First Supplemental Indenture): "Section 5.1. Events of Default. ----------------- "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Four of the First Supplemental Indenture or shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) failure to pay any principal of the Debentures when due, and such failure shall continue for 15 days; or (2) failure to pay any interest on the Debentures, other than Additional Interest, if any, when due and such failure continues for a period of 60 days; provided, that a deferral of an interest payment by the Company pursuant to the First Supplemental Indenture shall not constitute a default in the payment of interest for this or any other purpose and no interest payment which has been deferred shall be deemed due or payable until the date specified as the date for payment of such interest as provided in Section 3.7 of the Indenture; or (3) failure by the Company to issue the Common Stock Series A (or other securities) upon an election to convert the Debentures for Common Stock Series A (or other securities), which failure shall continue for five days; or (4) failure by the Company to perform in any material respect any other covenant herein (other than a covenant whose performance is elsewhere in this Section specifically dealt with) for the benefit of the holders of Debentures continued for a period of 90 days after written notice, by registered or certified mail, (i) to the Company by the Trustee or (ii) to the Company and the Trustee by the Holders of a majority in aggregate principal amount of the Debentures or Page 34 by the holders of a majority in liquidation amount of Partnership Preferred Securities or Convertible Preferred Securities; or (5) the dissolution, winding-up, liquidation or termination of the Partnership unless the same is a result of a Special Event or Rating Agency Event; or (6) the dissolution, winding-up, liquidation or termination of the Trust unless the same is a result of a Special Event or Rating Agency Event; or (7) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company, the Partnership or the Trust in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company, the Partnership or the Trust a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company, the Partnership or the Trust under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company, the Partnership or the Trust or of any substantial part of the property of any of them, or ordering the winding-up or liquidation of its affairs, and the continuance or any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (8) the commencement by the Company, the Partnership or the Trust of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by any of the Company, the Partnership or the Trust it to the entry of a decree or order for relief in respect of itself in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against either the Company, the Partnership or the Trust, or the filing by any of them of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by any of the Company, the Partnership or the Trust to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company, the Partnership or the Trust or of any substantial part of the property of any of them, or the making by any of them of an assignment for the benefit of creditors, or the admission by any of them in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company, the Partnership or the Trust in furtherance of any such action; Page 35 it being understood that (other than those described in paragraphs (1) and (2) above to the extent the Trustee is the Paying Agent for the Debentures) the Trustee shall not be deemed to have knowledge of an Event of Default hereunder unless a Responsible Officer has received written notice thereof." Section 7.2 Amendment to Section 9.1 of Indenture for Purposes of First Series of Debentures. ------------------------------------------ For all purposes of the Debentures and for no other purposes, subsection (10) of Section 9.1 of the Indenture shall read (terms used but not defined in the Indenture shall have the requisite meanings as used in this First Supplemental Indenture): "(10) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture or the First Supplemental Indenture which shall not be inconsistent with the provisions of this Indenture or the First Supplemental Indenture; provided that such action pursuant to this clause (10) shall not adversely affect the interests of the Holders in any material respect or, so long as any of the Convertible Preferred Securities or Partnership Preferred Securities shall remain outstanding, the holders of the Convertible Preferred Securities or Partnership Preferred Securities in any material respect." Section 7.3 Amendment to Section 9.2 of Indenture for Purposes of First Series of Debentures. ------------------------------------------ For all purposes of the Debentures and for no other purposes, there shall be added a proviso following subsection (3) of Section 9.2 of the Indenture, which shall read (terms used but not defined in the Indenture shall have the requisite meanings as used in this First Supplemental Indenture): "; provided, that, so long as any of the Convertible Preferred Securities or Partnership Preferred Securities remains outstanding, no such amendment shall be made that adversely affects the holders of the Convertible Preferred Securities or Partnership Preferred Securities, and no termination of this Indenture or the First Supplemental Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture or the First Supplemental Indenture shall be effective, without the prior consent of the holders of at least 66-2/3% of the aggregate liquidation preference of the outstanding Convertible Preferred Securities or Partnership Preferred Securities unless and until the Debentures and all accrued or deferred and unpaid interest thereon have been paid in full." Page 36 ARTICLE 8 EXPENSES Section 8.1 Payment and Expenses. -------------------- In connection with the offering, sale and issuance of the Debentures to Citizens Capital in connection with the issuance of the Partnership Securities by Citizens Capital and the sale of the Trust Securities by the Trust, the Company shall: (a) pay for all costs and expenses relating to the offering, sale and issuance of the Debentures, including commissions to the underwriters payable pursuant to the Underwriting Agreement and compensation and expenses of the Trustee under the Indenture in accordance with the provisions of Section 6.7 of the Indenture; (b) pay for all costs and expenses relating to the organization, maintenance and dissolution of Citizens Capital and the Trust and the retention of its regular trustees; (c) pay for all costs and expenses of Citizens Capital and the Trust (including but not limited to, costs and expenses relating to the organization of Citizens Capital and the Trust, the issuance of the Partnership Securities, the offering, sale and issuance of the Trust Securities (including commissions to the underwriters in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation of Citizens Capital and the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Citizens Capital and Trust assets); (d) pay for all costs and expenses relating to the enforcement by the Property Trustee under the Trust of the rights of the holders of the Convertible Preferred Securities; and (e) to the extent contemplated by Section 3.1(17), pay taxes of Citizens Capital and the Trust and all liabilities, costs and expenses with respect to such taxes of Citizens Capital and the Trust, either by payment of Additional Interest or by otherwise making funds available to Citizens Capital or the Trust as contemplated by Section 3.1(17). Page 37 ARTICLE 9 COVENANTS Section 9.1 Covenants. --------- (1) The Company agrees (i) that the Company will not declare or pay any dividend or distribution (other than in shares of its capital stock) on any of the Company's capital stock, (ii) that neither the Company nor any of its Subsidiaries will redeem, purchase, acquire for value or make a liquidation payment to any holder of, or with respect to, any of its capital stock or any of its indebtedness for borrowed money which by its terms expressly ranks junior in subordination to the Debentures ("Other Subordinated Indebtedness") (other than (x) as an issuance of capital stock upon conversion of a convertible security or in payment of interest, premium or principal or in payment in redemption, purchase or other acquisition or liquidation of capital stock or Other Subordinated Indebtedness, (y) as a result of reclassification of such capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock, or (z) in connection with the right of the Company to purchase or reacquire shares of Common Stock Series A referred to in Section 3.1(5) of this First Supplemental Indenture or under the provisions of the Declaration or the Limited Partnership Agreement), (iii) that the Company will not make any payment of principal, premium or interest (unless payable in shares of capital stock) on Other Subordinated Indebtedness, and (iv) that neither the Company nor any of its Subsidiaries will make any guarantee of payments which would be prohibited or limited by the foregoing (other than payments under the Guarantees, payments of dividends by a Subsidiary, or guarantees of dividends or payments payable to the Company), if at such time (a) there shall have occurred any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default hereunder or under the Debentures, (b) the Company shall be in default with respect to its payment or other obligations under the Guarantees or (c) the Company shall have given notice of its election to defer an interest payment as provided herein and any deferred interest payment remains unpaid. The term "Other Subordinated Indebtedness" shall only include any indebtedness which is outstanding under an instrument which expressly permits the deferral of payment or extension of the time for payment of interest, premium or principal, or any installment thereof. (2) The Company also covenants (i) to remain the General Partner of Citizens Capital; provided that any permitted successor of the Company under the Limited Partnership Agreement may succeed to the Company's duties as General Partner, (ii) to cause at least 3% of the total value of Citizens Capital and at least 3% of all interests in the capital, income, gain, loss, deduction and credit of Citizens Capital to be held by the Company, as a General Partner of Citizens Capital, (iii) not to voluntarily dissolve, wind-up or liquidate Citizens Capital, (iv) to perform timely all of its duties as General Partner (including the duty to declare and pay distributions on the Partnership Preferred Page 38 Securities), (v) to maintain direct ownership of all partnership interests of Citizens Capital other than the Partnership Preferred Securities and any special partnership interest, except as may be permitted by the Limited Partnership Agreement, (vi) to use its reasonable efforts to cause Citizens Capital to remain a limited partnership and otherwise to continue to be treated as a partnership for United States federal income tax purposes; (vii) to issue Common Stock Series A upon an election by Holders to convert the Debentures; and (viii) to own Convertible Common Securities equal to at least 3% of the total undivided beneficial interests in the assets of the Trust. (3) The Company also covenants that so long as any Debentures are held by Citizens Capital, the General Partner shall not (i) exercise its option to select the form of payment of interest in violation of instructions of the Special Representative, (ii) direct the time, method and place of conducting any proceeding for any remedy available to the Special Representative, or exercising any trust or power conferred on the Special Representative with respect to the Debentures, (iii) waive any past default which is waivable under this First Supplemental Indenture, (iv) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, (v) consent to any amendment, modification or termination of the Debentures or of this First Supplemental Indenture or the Indenture without, in each case, obtaining the prior approval of the Property Trustee after having received the prior consent of the holders of at least 66-2/3% or more of the aggregate liquidation preference of the Convertible Preferred Securities then outstanding, provided, however, that where a consent under the Debentures would require the consent of each Holder affected thereby, no such consent shall be given by the General Partner without the prior approval of such Property Trustee after having received the prior consent from each holder of the Convertible Preferred Securities. The General Partner shall not revoke any action previously approved by the Property Trustee with the prior consent or approval of the holders of the Convertible Preferred Securities, without the approval of the Property Trustee after having received the prior consent or approval of the holders of Convertible Preferred Securities representing 66-2/3% or more (or 100% where the consent of each holder affected thereby is required) of the aggregate liquidation preference of the Convertible Preferred Securities. (4) If the Trust or Citizens Capital shall notify the Company and the Trustee in writing that either the Trust or Citizens Capital is giving notice of the redemption of all or a portion of the Trust Securities or the Partnership Preferred Securities and General Partnership Interest, which notice shall state an amount of liquidating value to be redeemed of each security and the date of such redemption, the Company will promptly give notice of redemption of the Debentures with the same principal amount (without duplication) as the aggregate liquidating value of the Partnership Preferred Securities and the General Partnership Interest being redeemed or, if the Debentures are held by the Trust, in the same aggregate principal amount as the liquidating value of the Trust Securities being redeemed. The redemption date specified in such notice of redemption Page 39 of Debentures shall be the same redemption date as is specified by the Trust or Citizens Capital. (5) If Debentures are to be distributed to the holders of the Convertible Preferred Securities upon a liquidation of the Trust, the Company will use its best efforts to list the Debentures on the NYSE or on such other exchange as the Convertible Preferred Securities are then listed. (6) The Company expressly acknowledges that, under the terms of the Convertible Preferred Securities, the trustee for the holders of outstanding Convertible Preferred Securities shall have the right to appoint a Special Representative, which Special Representative shall be authorized to exercise the right of the Trustee or the Holders of not less than a majority in principal amount of the outstanding Debentures to accelerate the principal amount of the Debentures and to enforce the Holders' other rights hereunder or under the Debentures. ARTICLE 10 MISCELLANEOUS Section 10.1 Benefits of Indenture. --------------------- The Company's obligations under the Indenture and this First Supplemental Indenture and the Debentures will also be for the benefit of the holders from time to time of the Partnership Preferred Securities, Convertible Preferred Securities and Convertible Common Securities. Nothing in the Indenture or this First Supplemental Indenture or in the Debentures, express or implied, shall give any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the holders of Convertible Preferred Securities and Convertible Common Securities, the holders of Partnership Preferred Securities and the Holders of Debentures, any benefit or any legal or equitable right, remedy or claim under the Indenture and this First Supplemental Indenture. Section 10.2 Incorporation of Indenture -------------------------- From and after the date hereof, the Indenture, as supplemented by this First Supplemental Indenture, shall be read, taken and construed as one and the same instrument with respect to the Debentures. Section 10.3 Acceptance of Trust. ------------------- The Trustee accepts the trusts created by the Indenture, as hereby supplemented by this First Supplemental Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as so supplemented. Page 40 Section 10.4 Conflict with Trust Indenture Act. --------------------------------- If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this First Supplemental Indenture, such provision of the Act shall control. If any provision of this First Supplemental Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, such provision of the Act shall be deemed to apply to this First Supplemental Indenture only as so modified and if not so excluded, as the case may be. Section 10.5 Governing Law. ------------- This First Supplemental Indenture, and the Debentures, shall be governed by and construed in accordance with the laws of the State of New York. Section 10.6 Recitals. -------- The recitals contained in the Indenture, this First Supplemental Indenture and the Debentures, except the Trustee's certificate of authentication, shall be taken as statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of the Indenture, as supplemented by this First Supplemental Indenture. Section 10.7 Amendments. ---------- Notwithstanding any other provisions hereof, all amendments to the Indenture made hereby shall have effect only with respect to the Debentures, and not with respect to the Securities of any other series created subsequent to the date hereof. Section 10.8 Counterparts. ------------ This First Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Page 41 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date first above written. CITIZENS UTILITIES COMPANY By:______________________________ Title: Vice President and Treasurer Attest: ________________________________ Secretary CHEMICAL BANK, as Trustee By:______________________________ Title: Vice President Attest: _______________________________ Assistant Vice President Page 42 County of Fairfield ) ) ss.: State of Connecticut ) On the day of __________, 1995, before me personally came [Robert DeSantis], to me known, who, being by me duly sworn, did depose and say that he is [Vice President and Treasurer] of CITIZENS UTILITIES COMPANY, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporations; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. __________________________________ Notary Public, State of Connecticut Page 43 County of New York ) ) ss.: State of New York ) On this day of ___________ in the year of 1995 before me personally came _____________________________________________, to me personally known, who being by me duly sworn did depose and say that he resides at _________________________________________________________, that he is Vice President of CHEMICAL BANK, one of the corporations described in and which executed the foregoing indenture; that he knows the seal of said corporation; that the seal affixed to said instrument opposite the execution thereof on behalf of said corporation is the corporate seal of said corporation; that said instrument was signed and said corporate seal was so affixed on behalf of said corporation by authority and order of its board of directors; that he signed his name thereto by like authority; and he acknowledged said instrument to be his free act and deed and the free act and deed of said Chemical Bank. IN WITNESS WHEREOF I have hereunder set my hand and affixed my official seal, at New York in said State of New York, the day and year first above written. __________________________________ Notary Public, State of New York Page 44 ANNEX A Initial Regular Record Dates, Distribution Declaration Dates and Share Transfer and Valuation Dates Distribution Regular Share Transfer Related Cash Declaration Date Record Date and Valuation Date Interest Payment Date - ---------------- ----------- ------------------ --------------------- December 9 December 19 January 18 January 31 March 13 March 23 April 17 April 30 June 13 June 23 July 18 July 31 September 12 September 22 October 18 October 31 If the scheduled Distribution Declaration Date or Share Transfer and Valuation Date falls on a day which is not a Business Day, the Distribution Declaration Date or Share Transfer and Valuation Date, as the case may be, shall be the next preceding day that is a Business Day. Page 45 EXHIBIT A to First Supplemental Indenture (FORM OF DEBENTURE) REGISTERED REGISTERED R- ________ $___________ CITIZENS UTILITIES COMPANY _____% CONVERTIBLE SUBORDINATED DEBENTURE DUE ____________, 2035 CITIZENS UTILITIES COMPANY, a Delaware corporation (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ------------------------------------- or registered assigns, the principal sum of _________________________________ ($_______________) DOLLARS on __________, 2035, and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) thereon from __________, 1995 or from the most recent Cash Interest Payment Date to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on (or, if interest is paid in shares of Common Stock Series A, as provided in the Indenture, computed as of) January 31, April 30, July 31 and October 31 of each year (each such date, a "Cash Interest Payment Date"), commencing on __________, 199_ at the rate per annum specified in the title of this Debenture, until the principal hereof is paid or made available for payment 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 the same rate per annum compounded quarterly. Unless deferred by the Company as provided in the Indenture, the interest so payable, and punctually paid or duly provided for, on or before any Cash Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date, which is a date to be established by the Company by written notice to the Trustee and the Holders prior to such Cash Interest Payment Date. Any such interest not so punctually paid or duly provided for (including any deferred interest referred to on the reverse hereof) shall forthwith cease to be payable to the registered Holder on such Regular Record Date and may be paid to the Person in whose name this Debenture is registered at the close of business on a Special Record Date for the payment of such deferred interest to be fixed by the Company as provided in the Indenture. Page 1 Subject to the requirements of any book-entry security system applicable to this Debenture, payment of the principal of this Debenture and, when interest on the Debenture is payable in cash, payment of the interest of this Debenture will be made at the office or agency of the Trustee maintained for that purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. As more fully provided in the Indenture, so long as the Holder of the Debentures is Citizens Utilities Capital L.P., the Company will have the option to pay the interest becoming due on the quarterly Cash Interest Payment Dates either by delivery of an Equivalent Value of shares of its Common Stock Series A (as described in the Indenture) (which delivery shall be made on the Share Transfer and Valuation Date), or in cash. Interest paid in cash will be paid by check mailed to the address of the Holder as such address shall appear on the Security Register or by wire transfer in immediately available funds at such place and to such account as may be designated by the Holder upon application to the Security Registrar as provided in the Indenture. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness (as defined in the Indenture), and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Debenture, 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. Additional provisions of the Indenture under which this Debenture is issued and to the terms of which it is subject are summarized on the reverse hereof, but the provisions set forth in the Indenture alone shall be definitive as to the respective rights, duties, obligations and covenants of the Company, the Trustee and the Holder of this Debenture. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee for the Debentures by manual signature, this Debenture shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. Page 2 IN WITNESS WHEREOF, CITIZENS UTILITIES COMPANY has caused this Instrument to be duly executed under its corporate seal. Dated: CERTIFICATE OF AUTHENTICATION CITIZENS UTILITIES COMPANY THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED THEREIN REFERRED TO IN THE WITHIN-MENTIONED INDENTURE. By: ____________________________ VICE PRESIDENT AND TREASURER CHEMICAL BANK, TRUSTEE Attest: __________________________ ASSISTANT SECRETARY By: ____________________________ AUTHORIZED OFFICER [FORM OF REVERSE OF DEBENTURE] ------------------------------ This Debenture is one of a duly authorized series of Securities of the Company (herein sometimes referred to as the "Debentures"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of __________, 1995, duly executed and delivered between the Company and Chemical Bank, as Trustee (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of __________, 1995, between the Company and the Trustee (the Indenture as so supplemented, the "Indenture"), 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 Debentures. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Debentures is limited in aggregate principal amount as specified in said First Supplemental Indenture. Deferred Interest. As provided in the Indenture, the Company shall have the - ----------------- right, at any time and from time to time during the term of the Debentures, upon notice delivered to the Holders and the Trustee no later than the date the Company or any Holder or direct or indirect owner is required to give notice of the record date for the next scheduled distribution payable on the Convertible Preferred Securities, the Partnership Preferred Securities or the Debentures to the NYSE, or NASDAQ, or other applicable self-regulatory organization, or to the holders of the Page 3 Convertible Preferred Securities, the Partnership Preferred Securities or the Debentures, to defer the date on which the quarterly interest payment succeeding the date of such notice would otherwise become due and payable; provided that (a) no deferred quarterly interest payment shall remain unpaid for more than 20 consecutive quarters or be deferred beyond the Stated Maturity of the Debentures, (b) no event of default under the Indenture has occurred and is continuing and (c) so long as any deferred interest has not been paid, the Company shall not take certain actions prohibited by the Indenture. In the event of any deferral, any interest payment shall be deemed not due or payable until the date specified for payment in a deferred distribution notice given by the Company to the Trustee and to the Holder. Upon the deferral of any interest payment, interest on such deferred interest payment will be compounded and accrued on each Cash Interest Payment Date at the rate specified in the title of this Debenture until the amount of such deferred interest (including compounded interest thereon) is paid in full. Conversion of Debentures. At the option of the Holder, this Debenture may, - ------------------------ at any time or from time to time on any Business Day to and including, but not after, the close of business on the day which is five Business Days prior to _______ 2035, be converted, in whole, or, if the Debenture is in a principal amount in excess of $50, in part in integral multiples of $50 principal amount, into fully paid and nonassessable shares of Common Stock Series A of the Company, at the Conversion Price in effect at the Date of Conversion. In case a Debenture or a portion thereof is called for redemption, such conversion right in respect of such Debenture or the portion so called, shall expire at the close of business on the day which is five Business Days prior to the Redemption Date, unless the Company defaults in making the payment due upon redemption. If this Debenture is to be converted only in part, it shall be surrendered at any office or agency of the Company designated for that purpose pursuant to the Indenture, and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder hereof without service charge, a new Debenture or Debentures, of any authorized denomination as requested by the Holder, in an aggregate principal amount equal to and in exchange for the unconverted portion of this Debenture so surrendered. In order to exercise the conversion privilege, the Holder shall surrender this Debenture to the Conversion Agent at the office or agency to be maintained by the Company pursuant to the Indenture for the conversion of Debentures with the Notice of Conversion set forth below in this Debenture duly completed and, if so required by the Company, accompanied by instruments of transfer, in form satisfactory to the Company and to the Trustee, duly executed by the Holder or his duly authorized attorney in writing. As promptly as practicable after the surrender of this Debenture with the notice duly completed as aforesaid, the Company shall then issue and deliver at such office or agency to the Holder, or on his written order, a certificate or certificates for the number of the shares of Common Stock Series A then issuable in accordance with the provisions of the Indenture and cash in respect of any fraction of a share of Common Stock Series A otherwise issuable upon such conversion. Any such conversion shall be deemed to have been effected at the time and on the date as specified in the Indenture. The Holder of this Debenture at the close of business on any Regular Record Date for the payment of interest will be entitled to receive the interest payable hereon on the corresponding Cash Interest Payment Date notwithstanding the conversion of such Debenture following such Regular Record Date. Subject to provisions of Sections 5.5 and 5.6 of the First Supplemental Indenture, no payment or adjustment shall be made upon Page 4 conversion on account of any interest accrued or deferred or otherwise unpaid on the principal or any portion thereof of this Debenture so converted or for any dividends or distributions on any shares of Common Stock Series A. Holders of Common Stock Series A received upon such conversion prior to or on a record date for any dividend or distribution on such shares shall be entitled to receive the same dividend or distribution as other holders of record of Common Stock Series A. The initial Conversion Price of the Debentures shall be $________per share of Common Stock Series A, which Conversion Price is subject to adjustment as provided in the Indenture. Optional Redemption. At any time on or after __________, 199_, the Company, - ------------------- at its option, will have the right to redeem the Debentures, in whole or in part, at 100% of the principal amount being redeemed (together with any accrued or deferred but unpaid interest on the portion being so redeemed) (the "Redemption Price"), plus Additional Interest, if any, upon notice and in the manner provided in the Indenture. Special Event Redemption. Upon the occurrence of a Company Event, the - ------------------------ Company shall have the right to redeem the Debentures, in whole or in part, for cash, at the Redemption Price, plus Additional Interest, if any, and upon the occurrence of a Trust Event or a Partnership Event, if the Company cannot obtain a No Recognition Opinion with regard to certain matters, the Company may redeem the Debentures, in whole or in part, for cash, at the Redemption Price, plus Additional Interest, if any, in each case subject only to the obligation of the Company, on or before _____________, 199_, to pursue any reasonable ministerial action in lieu of redemption, that would eliminate the adverse effect of the Special Event. The Company may not redeem any outstanding Debentures unless all accrued or deferred but unpaid interest has been paid on all Debentures to be redeemed for all quarterly interest payment periods terminating on or before the date of redemption. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Debentures under the Indenture at any time by the Company and the Trustee with the consent of the Holders of at least 66 2/3% in aggregate principal amount of the Debentures outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Debentures at the time Outstanding, or voting at a meeting of Holders, on behalf of the Holders of all the Debentures, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Debenture shall be conclusive and binding upon such Holder and upon all future Holders of this Debenture and of any Debenture issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Debenture at the time, place and rate, and in the coin or currency, herein prescribed, or to exchange this Debenture for Common Stock Series A or other Page 5 securities or property for which Debentures are from time to time convertible as provided in the Indenture. In the event of the merger or consolidation of the obligor on the Debentures into, or of the transfer of its assets substantially as an entirety to, a successor corporation, such successor corporation shall assume payment of the Debentures and performance of every covenant of the Indenture on the part of the predecessor corporation to be performed, and shall be substituted for the predecessor corporation under the Indenture; and in the event of any such transfer, such predecessor corporation shall be discharged from all obligations and covenants under the Indenture and the Debentures and may be dissolved and liquidated, all as more fully set forth in the Indenture. If an Event of Default, as defined in the Indenture, with respect to the Debentures shall occur and be continuing, the principal of all the Debentures may be declared due and payable at the time, in the manner and with the effect provided in the Indenture. As provided in the Indenture and subject to certain limitations therein and herein set forth, this Debenture is transferable on the Security Register of the Company, upon surrender of this Debenture for registration of transfer at the office or agency of the Company in any place where principal and interest on the Debentures are payable, or at any other office or agency of the Company maintained for that purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Debentures are issuable only in registered form without coupons in denominations of $50 and any multiple of $50. As provided in the Indenture and subject to certain limitations therein set forth, Debentures are exchangeable for a like aggregate principal amount of Debentures of a like tenor and of different authorized denominations, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with such registration of transfer or exchange, other then certain exchanges not involving any transfer. Prior to due presentment of this Debenture for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Debenture is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture shall be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. This Debenture shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. Page 6 Certain terms used in this Debenture which are defined in the Indenture have the meanings set forth therein. ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________________________________ |_________________________________|_____________________________________ (Name and address of Assignee, including zip code, must be printed or typewritten) _________________________________________________________________________ __________________________________________________________________________ the within Debenture, and all rights thereunder, hereby irrevocably, constituting and appointing _________________________________________________________________Attorney to transfer the said Debenture on the books of Citizens Utilities Company with full power of substitution in the premises. Dated:_______________ ________________________________________ NOTICE: The signature of this assignment must correspond with the name as it appears upon the face of the within Debenture in every particular, without alteration or enlargement or any change whatever. Page 7 FORM OF CONVERSION NOTICE To Citizens Utility Company: The undersigned Holder of this Debenture hereby irrevocably exercises the option to convert this Debenture (or a portion thereof, which is $50.00 or an integral multiple thereof, designated below), into shares of Common Stock Series A of the Company or other securities or other property or cash in accordance with the terms of the Indenture referred to in this Debenture, and directs that the shares, other securities, other property or cash issuable and deliverable upon the conversion, together with any check in payment for fractional shares and any Debentures representing any unconverted principal amount hereof, be issued and delivered to the undersigned unless a different name has been indicated below. If shares are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Dated: ------------------------------ Signature (for exchange only) ------------------------------ (Name) ------------------------------ (Address) ------------------------------ Please print name and address (including zip code or similar number) Fill in for registration of shares Principal Amount of Debentures or other securities and/or Debentures to be converted in an integral if to be issued otherwise than to the multiple of $50.00, if less Holder: than all: - ------------------------------------- (Name) $ _____________________________ - ------------------------------------- (Address) - ------------------------------------- Please print name and address (including zip code or similar number) Page 8 Statement of Common Definitions Exhibit B "Additional Interest" is defined in Section 3.1(17) of the First Supplemental Indenture. "Average Market Price" for Common Stock on any day will be determined by averaging the high and low sales prices of Common Stock for such day as reported in The Wall Street Journal, under "New York Stock Exchange Composite ----------------------- Transactions" or any successor market transaction report on the day in question (the "Date"). If the Common Stock is not listed on the NYSE but is quoted or admitted to trading on another national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc., the Average Market Price shall be determined by reference to the average of the high and low reported sales prices on such exchange if available or, if not so available, the high and low sales prices reported by such National Market System if available, or, if not so available, the high and low bid and asked prices in the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated or a similarly generally accepted reporting service if available, or if not so available, in such manner, as otherwise determined in good faith by the Board of Directors of the Company. If no trading occurs on the NYSE (or such other market for which sales prices or quotations are regularly available) in the Common Stock on the Date, the Average Market Price will be determined by averaging the high and low sales prices per share of Common Stock on the Trading Day immediately preceding the Date. "Business Day" means any day other than a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Cash Interest Payment Date" is defined in Section 3.1(4) of the First Supplemental Indenture. "Change in 1940 Act Law" means the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislature body, court, governmental agency or regulatory authority with respect to the 1940 Act. "Change in Tax Law" means (a) any 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, (b) any change in an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which change is enacted, promulgated, issued or effective or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of the Prospectus. "Citizens" or the "Company" means Citizens Utilities Company, a Delaware corporation. "Citizens Capital" means Citizens Utilities Capital L.P., a special purpose Delaware limited partnership of which the Company is the general partner, also sometimes referred to as the "Partnership." "Common Stock" or "Common Stock Series A" means shares of the Common Stock Series A of the Company, par value $.25 per share, and (i) for the purposes of the making of distributions in shares of capital stock, any successor capital stock of the Company, and (ii) for the purposes of Article 5 of the First Supplemental Indenture, any successor security or property (including cash) into which the Debentures issued under the First Supplemental Indenture may be convertible in accordance with said Article 5. "Company Event" means that the Company shall have obtained a Tax Event Opinion to the effect that, as a result of a Change in Tax Law, there is more than an insubstantial risk that interest payable to the holders of the Convertible Debentures would not be deductible by Citizens for United States federal income tax purposes. "Compound Interest" means, upon any deferral of interest payments permitted by the Indenture, the interest which will be compounded on each Cash Interest Payment Date and accrued until paid at the rate per annum specified in the designation of the Convertible Debentures on any interest so deferred until the amount of such deferred interest (including Compound Interest thereon) is paid in full. "Conversion Agent" means the Person appointed under the Limited Partnership Agreement, the Declaration and the Indenture to act on behalf of the holders of Convertible Preferred Securities, the Partnership Preferred Securities or the Convertible Debentures, as the case may be, in effecting the conversion of Convertible Preferred Securities, the Partnership Preferred Securities or the Convertible Debentures, as the case may be, as and in the manner set forth in the Limited Partnership Agreement, the Declaration or the Indenture, as the case may be. Initially, Chemical Bank shall act as Conversion Agent with respect to the Convertible Preferred Securities and the Company shall act as Conversion Agent with respect to the Partnership Preferred Securities and the Convertible Debentures. "Convertible Common Securities" means common undivided beneficial interests in the assets of Citizens Utilities Trust. "Convertible Debentures" means $___________ aggregate principal amount of the __% Convertible Subordinated Debentures Due 2035, issued pursuant to the Indenture. "Convertible Preferred Securities" means the ___% Citizens Utilities Convertible Preferred Securities, each with a liquidation value of $50, representing preferred undivided beneficial interests in the assets of the Trust. Page 2 "Date" shall have the meaning as specified in the definition of "Average Market Price" contained in this Statement of Common Definitions. "Declaration" means the declaration of trust dated __________, 1995, as amended by the amended and restated declaration of trust dated __________, 1995, by Citizens, as sponsor, and the trustees named therein, establishing the Trust under the Trust Act, as such declaration of trust may be further amended or supplemented. "Delaware Trustee" means a trustee under the Declaration which will have a principal place of business or reside in the State of Delaware. Initially, Chemical Bank Delaware will act as Delaware Trustee. "Distribution Declaration Date" is defined in Section 3.1(4) of the First Supplemental Indenture. "Distribution Declaration Notice" is defined in Section 3.1(4) of the First Supplemental Indenture. "Distribution Payment Date" means January 31, April 30, July 31 and October 31 of each year. "Election Period" means the period of ten Business Days in each year specified in the Distribution Declaration Notice relating to the January 31 Distribution Payment Date, as provided in paragraph (4) of Section 3.1 of the First Supplemental Indenture. "Entitlement Date" means ____________________________________. "Equivalent Value" means the number of shares of Common Stock Series A having a fair market value on the Share Transfer and Valuation Date equivalent to the next scheduled interest payment at the interest rate specified in the title of the Debenture. "Event of Default" for purposes of the Indenture means an Event of Default as defined in Section 5.1 of the Indenture. "Event of Default" for purposes of the Limited Partnership Agreement means an Event of Default as defined in the Limited Partnership Agreement. "Event of Default" for purposes of the Declaration means an Event of Default as defined in the Limited Partnership Agreement. "Expiration Time" is defined in Section 5.5(e) of the First Supplemental Indenture. "First Supplemental Indenture" means the First Supplemental Indenture dated as of _____________, 1995 to the Indenture, as amended or supplemented. Page 3 "General Partner" means Citizens, as general partner of Citizens Capital, or any successor general partner of Citizens Capital. "General Partnership Security" means the general partnership interest of Citizens in Citizens Capital. "Guarantee Agreements" means the Convertible Common Guarantee Agreement and the Convertible Preferred Guarantee Agreement, each with respect to the Trust, and the Partnership Guarantee Agreement with respect to Citizens Capital, each dated ______________, 1995. "Indenture" means the Indenture between Citizens and Chemical Bank, as Trustee, dated as of _______, 1995, as it may, from time to time be supplemented or amended by one or more indentures supplemental thereto, including the First Supplemental Indenture. "Indenture Trustee" means Chemical Bank, as trustee under the Indenture, or any successor trustee under the Indenture. "Investment Company Act Opinion" means an opinion of a nationally recognized independent counsel experienced in practice under the 1940 Act. "Limited Partnership Agreement" means the amended and restated limited partnership agreement of Citizens Capital dated as of ______________, 1995, as amended or supplemented. "Ministerial Action Obligation" shall have the meaning set forth in the following sentence. If at the time of any Special Event, Citizens, Citizens Capital or the Trust is actually aware of an opportunity to eliminate the adverse effect of the Special Event on the Trust, Citizens or Citizens Capital by taking some ministerial action (such as filing a form or making an election or pursuing some other similar reasonable measure) where the taking of such action does not involve a material cost, then neither Citizens, Citizens Capital nor the Trust shall (i) liquidate Citizens Capital or the Trust by reason of such Special Event or (ii) on or before __________, 199_, redeem any securities at any time such opportunity exists, without first having pursued such ministerial action. "1940 Act" means the Investment Company Act of 1940, as amended. "No Recognition Opinion" means the opinion of a nationally recognized independent tax counsel experienced in such matters, which opinion may rely on published revenue rulings, or any other available pronouncements, determinations or available authority of the Internal Revenue Service, or any judicial decisions, to the effect that the holders of the Convertible Preferred Securities or Partnership Preferred Securities, as the case may be, will not recognize any income, gain or loss for United States federal income tax purposes as a result of the liquidation and distribution of Convertible Debentures or Partnership Preferred Securities, as the case may be. Page 4 "NYSE" means the New York Stock Exchange. "Partnership Event" means a Partnership Tax Event or a Partnership Investment Company Act Event. "Partnership Investment Company Act Event" means that the General Partner shall have received an Investment Company Act Opinion that as a result of the occurrence of a Change in 1940 Act Law, there is more than an insubstantial risk that the Partnership is or will be considered an Investment Company which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the first date of issuance of the Partnership Preferred Securities. "Partnership Preferred Securities" means limited partnership interests in Citizens Capital. "Partnership Securities" means the Partnership Preferred Securities and the General Partnership Interest. "Partnership Tax Event" means that the General Partner shall have obtained a Tax Event Opinion to the effect that, as a result of a Change in Tax Law, there is more than an insubstantial risk that (i) Citizens Capital is subject to United States federal income tax with respect to interest accrued or received on the Convertible Debentures or (ii) Citizens Capital is subject to more than a de minimis amount of taxes, duties or other governmental charges. "Person" means 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. "Property Trustee" means the property trustee of the Trust under the Declaration. Initially, Chemical Bank will act as Property Trustee. "Prospectus" shall mean the prospectus dated _____________, 1995 of the Trust, relating to the offering to the public of [$175,000,000] aggregate liquidation amount of Convertible Preferred Securities. "Rating Agency Event" shall occur when, and if, (i) any nationally recognized securities rating agency lowers its rating of the Company's senior, long-term debt to a rating less than Aa3 or [S&P Rating] or the equivalent, and (ii) the Company has elected to transmit notice thereof to the Trust. "Regular Trustees" means the regular trustees of the Trust under the Declaration. Initially, Robert J. DeSantis and Edward O. Kipperman will act as Regular Trustees. "Share Transfer and Valuation Date" means the day on which shares of Common Stock are transferred to the holders of Convertible Debentures pursuant to Section 3.1(5) of the First Page 5 Supplemental Indenture. Currently the Share Transfer and Valuation Date is four Trading Days after the record date next preceding the Cash Interest Payment Date, subject to change to reflect evolving market practices and settlement procedures. "Special Event" means a Partnership Event, a Trust Event or a Company Event. "Special Representative" means the Person appointed (i) to enforce Partnership Preferred Security holders' rights under the Partnership Guarantee, (ii) to enforce Citizens Capital's rights against the Company under the Convertible Debentures or (iii) to exercise rights otherwise exercisable by the General Partner to declare and pay distributions on the Partnership Preferred Securities as provided in Section 6.2(h) of the Limited Partnership Agreement. "Subsidiary" of any Person means (i) a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof. "Tax Event Opinion" shall mean an opinion of a nationally recognized tax counsel experienced in such matters. "Trading Day" means any day on which the NYSE (or any other market used for the determination of Average Market Price) is open for the trading of securities. "Trust" means Citizens Utilities Trust, a statutory business trust created under the Trust Act pursuant to the Declaration. "Trust Act" means the Delaware Business Trust Act, Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Sec. 3801 et seq., as it may be ------------ ---- ---- amended from time to time. "Trust Event" means a Trust Tax Event or a Trust Investment Company Act Event. "Trust Investment Company Act Event" means that Citizens shall have (i) requested and received and (ii) delivered to the Regular Trustees, an Investment Company Act Opinion to the effect that there has occurred a Change in 1940 Act Law such that there is a more than an insubstantial risk that the Trust is or will be considered an investment company which is required to be registered under the 1940 Act. "Trust Tax Event" means that Citizens shall have (i) requested and received, and (ii) delivered to the Regular Trustees, a Tax Event Opinion to the effect that there has occurred a Change in Tax Law such that there is more than an insubstantial risk that (i) the Trust may be subject to United States federal income tax with respect to distributions accrued or received on Page 6 the Partnership Preferred Securities or (ii) the Trust is subject to more than a de minimis amount of taxes, duties or other governmental charges. "Underwriting Agreement" means the agreement dated ____________, 1995, among the Company, Citizens Capital and the Trust and the underwriters named therein relating to the issuance and sale by the Trust to such underwriters of the Convertible Preferred Securities. "Voting Stock" of any Person means capital stock of such Person which ordinarily has voting power for the election of directors (or Persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. Page 7 EX-4 7 CERTIFICATE OF LIMITED PARTNERSHIP OF CITIZENS UTILITIES COMPANY L.P. This Certificate of Limited Partnership of Citizens Utilities Capital L.P. (the "Partnership"), dated as of October 13, 1995, is being duly executed and filed by Citizens Utilities Company a Delaware corporation, as general partner, to form a limited partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del. C. Secs. 17-101, et seq.). (e) Name. The name of the limited partnership formed hereby is ---- Citizens Utilities Capital L.P. (f) Registered Office. The address of the registered office of the ----------------- Partnership in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. (g) Registered Agent. The name and address of the registered agent for ---------------- service of process on the Partnership in the State of Delaware is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. (h) General Partner. The name and the business address of the sole general partner of the Partnership is: Citizens Utilities Company, High Ridge Park, Building No. 3, Stamford, Connecticut 06905. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Limited Partnership as of the date first-above written. Citizens Utilities Company General Partner By \s\ Robert J. DeSantis _____________________________ Name: Robert J. DeSantis Title: Vice President and Treasurer Initial Limited Partner: CITIZENS UTILITIES CAPITAL CORP., a Delaware Corporation By: \s\ Edward O. Kipperman ------------------------ Name: Edward O. Kipperman Title: Vice President, Tax EX-4 8 Draft of October 9, 1995 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CITIZENS UTILITIES CAPITAL L.P. Dated as of ______ __, 1995 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CITIZENS UTILITIES CAPITAL L.P. AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Citizens Utilities Capital L.P., a Delaware limited partnership ("Citizens Capital"), dated as of __________, 1995, among Citizens Utilities Company, a Delaware corporation (the "Company" or "Citizens"), as the general partner, [ ], a [Delaware] corporation, as the initial limited partner (the "Initial Limited Partner") and such other Persons (as defined herein) who become Limited Partners (as defined herein) as provided herein. WHEREAS, Citizens and the Initial Limited Partner entered into an Agreement of Limited Partnership, dated as of __________, 1995 (the "Original Limited Partnership Agreement"); WHEREAS, the Certificate of Limited Partnership of Citizens Capital was filed with the Office of the Secretary of State of the State of Delaware on __________, 1995; WHEREAS, Citizens Utilities Trust, a Delaware business trust (the "Trust"), formed under the Amended and Restated Declaration of Trust, among the Company, as Sponsor, Chemical Bank, as property trustee (the "Property Trustee"), and Chemical Bank Delaware, as Delaware trustee (the "Delaware Trustee"), and Robert J. DeSantis and Edward O. Kipperman, as regular trustees (the "Regular Trustees"), dated as of ______ __, 1995 (the "Declaration") will issue and sell up to ____________ (or _____________ if the over-allotment option is exercised) of its ____% Convertible Trust Preferred Securities (the "Convertible Preferred Securities") with a liquidation preference of $50 per Convertible Preferred Security, having an aggregate liquidation preference with respect to the assets of the Trust of $___________ (or $__________ if the over- allotment option is exercised) pursuant to the Underwriting Agreement (the "Underwriting Agreement") dated ______ __, 1995, among the Company, Citizens Capital, the Trust and the Underwriters named therein; WHEREAS, the trustees of the Trust, on behalf of the Trust, will issue and sell to the Company Convertible Common Securities evidencing an ownership interest in the Trust, registered in the name of the Company, in an aggregate amount equal to at least three percent (3%) of the total capitalization of the Trust, equivalent to at least ________ Convertible Common Securities (or at least __________ Convertible Common Securities if the over-allotment option is exercised), with a liquidation amount of $50 per Convertible Common Security, having an aggregate liquidation amount with respect to the assets of the Trust of at least $___________ (or at least $________ if the over-allotment option is exercised) (the "Convertible Common Securities"); WHEREAS, the Trust will use all the proceeds from the sale of the Convertible Preferred Securities and the Convertible Common Securities to purchase Partnership Preferred Securities (as hereinafter defined) in an aggregate liquidation preference of $____________ (or $______________ if the over-allotment option is exercised); WHEREAS, the Company is guaranteeing the payment of distributions on the Partnership Preferred Securities, and payments upon and liquidation with respect to the Partnership Preferred Securities, to the extent provided in the Partnership Preferred Securities Guarantee Agreement (the "Partnership Guarantee Agreement") executed by the Company for the benefit of the holders of the Partnership Preferred Securities from time to time; WHEREAS, so long as any Convertible Preferred Securities are outstanding, the Declaration provides that the holders of Convertible Preferred Securities may cause the Conversion Agent to (a) exchange such Convertible Preferred Securities for Partnership Preferred Securities or Convertible Debentures (as hereinafter defined), as the case may be, held by the Trust, (b) in the event Partnership Preferred Securities are held by the Trust, direct the General Partner to exchange such Partnership Preferred Securities for Convertible Debentures held by Citizens Capital and (c) immediately convert such Convertible Debentures into Common Stock (as hereinafter defined); WHEREAS, the Company wishes to sell to Citizens Capital, and Citizens Capital wishes to purchase from the Company, Convertible Debentures in an aggregate principal amount equal to ___________________, the aggregate stated liquidation preference of the Partnership Preferred Securities issued and sold by Citizens Capital; and WHEREAS, the Partners desire to continue Citizens Capital under the Act (as defined herein) and to amend and restate the Original Limited Partnership Agreement in its entirety. NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Original Limited Partnership Agreement as follows: ARTICLE I DEFINED TERMS Section 1.1 DEFINITIONS. Unless the context otherwise requires, the terms defined in this Article I shall, for the purposes of this Agreement, have the meanings herein specified. "Act" means the Delaware Revised Uniform Limited Partnership Act, as amended from time to time. "Action" means any action permitted to be taken by the General Partner under this Agreement relating to the terms of the Partnership Preferred Securities, which action shall be in writing. "Additional Distributions" means Distributions that shall be declared and paid by Citizens Capital on any Distribution arrearages in respect of the Partnership Preferred Securities at the rate of __% per annum compounded quarterly. "Additional Interest" has the meaning set forth in Annex C hereto. "Affiliate" means, with respect to a specified Person, (a) any Person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities or other ownership interests of the specified Person, (b) any Person 10% or more of whose outstanding voting securities or other ownership interests are directly or indirectly owned, controlled or held with power to vote by the specified Person, (c) any Person directly or indirectly controlling, controlled by, or under common control with the specified Person, (d) a partnership in which the specified Person is a general partner, (e) any officer or director of the specified Person and (f) if the specified Person is an officer, director, general partner or employee, any other entity for which the specified Person acts in any such capacity. "Agreement" means the Limited Partnership Agreement. "Book-Entry Interest" means a beneficial interest in the LP Certificates, ownership and transfers of which shall be made through the book-entry system of a Clearing Agency as described in Section 10.4. "Business Day" has the meaning set forth in Annex C hereto. "Capital Account" has the meaning set forth in Section 3.3. "Cash Equivalent Amount" has the meaning set forth in Section 6.4(c)(iii). "Citizens Capital" has the meaning set forth in Annex C hereto. "Certificate" means the Certificate of Limited Partnership of Citizens Capital filed with the Secretary of State of the State of Delaware on August __, 1995, as it may be amended and restated from time to time. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depository for the Partnership Preferred Securities and in whose name (or nominee's name) shall be registered one or more global LP Certificates and which shall undertake to effect book- entry transfers and pledges of the Partnership Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of interest in securities deposited with the Clearing Agency. "Closing Date" means the Closing Time and each "Date of Delivery" under the Underwriting Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding federal tax statute enacted after the date of this Agreement. A reference to a specific section (Section) of the Code refers not only to such specific section but also to any corresponding provision of any federal tax statute enacted after the date of this Agreement, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Agreement containing such reference. "Common Stock" has the meaning set forth in Annex C hereto. "Company" has the meaning set forth in the forepart of this Agreement and Annex C hereto. "Company Event" has the meaning set forth in Annex C hereto. "Conversion Agent" has the meaning set forth in Annex C hereto. "Conversion Date" has the meaning set forth in Section 6.3(b) of this Agreement. "Conversion Price" has the meaning set forth in Section 6.3(a) of this Agreement. "Convertible Common Securities" has the meaning set forth in Annex C hereto. "Convertible Debentures" has the meaning set forth in Annex C hereto. "Convertible Preferred Securities" has the meaning set forth in Annex C hereto. "Declaration" has the meaning set forth in Annex C hereto. "Deferred Interest" means interest that shall accrue on any interest on the Convertible Debentures that is not paid quarterly and that shall accrue at the rate of __% per annum compounded quarterly. "Definitive LP Certificates" has the meaning set forth in Section 10.4(a) of this Agreement. "Distributions" means the cumulative distributions in cash or Common Stock, as the case may be, from the Partnership with respect to the Interests represented by the Partnership Preferred Securities, accruing from the first Closing Date and payable quarterly in arrears as set forth herein, commencing __________, 1995. "Distribution Declaration Date" has the meaning set forth in Annex C hereto. "Distribution Declaration Notice" has the meaning set forth in Annex C hereto. "Distribution Payment Date" has the meaning set forth in Section 6.2(b)(ii) of this Agreement. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Election Agent" shall have the meaning set forth in Annex C hereto. "Election Period" has the meaning set forth in Annex C hereto. "Eligible Institution" means (a) the Fiscal Agent or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), (1)(i) which has either (A) a long-term unsecured debt rating of AAA or better by S&P and Aaa or better by Moody's or (B) a short-term unsecured debt rating or a certificate of deposit rating of A-1+ or better by S&P and P-1 or better by Moody's and (ii) whose deposits are insured by the FDIC or (2)(i) the parent of which has a long-term or short-term unsecured debt rating which signifies investment grade and (ii) whose deposits are insured by the FDIC. "Eligible Investment Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the Untied States of America or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution shall have a credit rating from each Rating Agency in one of its generic rating categories which signifies investment grade. "Eligible Investment" mean book-entry securities, negotiable instruments, cash or securities represented by instruments in bearer or registered form which evidence: (a) direct obligations of, and obligations fully guaranteed as to timely payment by, the Government of the United States of America; (b) demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by federal or state banking or depository institution authorities; PROVIDED, HOWEVER, that at the time of the investment or contractual commitment to invest therein, the commercial paper or other short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) thereof shall have a credit rating from each of S&P, Moody's and, if rated by Fitch, Fitch in the highest investment category granted thereby; (c) commercial paper having, at the time of the investment or contractual commitment to invest therein, a rating from each of S&P, Moody's and, if rated by Fitch, Fitch in the highest investment rating category granted thereby; (d) investments in money market funds having a rating from each of S&P and Moody's in the highest investment rating category granted thereby; (e) demand deposits, time deposits and certificates of deposit which are fully insured by the FDIC; (f) bankers' acceptances issued by any depository institution or trust company referred to in clause (b) above; or (g) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the Government of the United States of America or any agency or instrumentality thereof, the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with (i) a depository institution or trust company (acting as principal) described in clause (b) or (ii) a depository institution or trust company which is an Eligible Institution and the deposits of which are insured by the FDIC. "Equivalent Value" has the meaning set forth in Annex C hereto. "Event of Default" has the meaning set forth in Annex C hereto. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "FDIC" means the Federal Deposit Insurance Corporation or any successor thereto. "Fiscal Agent" means ______________. "Fiscal Period" means each calendar quarter. "Fiscal Year" means (i) the period commencing upon the formation of Citizens Capital and ending on December 31, 1995, and (ii) any subsequent twelve (12) month period commencing on January 1 and ending on December 31. "Fitch" means Fitch Investors Service, Inc. or any successor thereto. "General Partner" has the meaning set forth in Annex C hereto. "General Partnership Security" has the meaning set forth in Annex C hereto. "Guarantee Agreements" has the meaning set forth in Annex C hereto. "Holder" or "Partnership Preferred Security Holder" means a Limited Partner in whose name an LP Certificate representing Partnership Preferred Securities is registered. "Indenture" has the meaning set forth in Annex C hereto. "Indenture Trustee" has the meaning set forth in Annex C hereto. "Initial Limited Partner" means _____________, a [Delaware] corporation. "Interest" means the entire ownership interest of a Partner in Citizens Capital at any particular time, including, without limitation, its interest in the capital, profits, losses and distributions of Citizens Capital. "Limited Partner" means any Person who is admitted to Citizens Capital as a Limited Partner pursuant to the terms of this Agreement. "Liquidation Distribution" has the meaning set forth in Section 6.2(g). "Liquidator" has the meaning specified in Section 11.3 of this Agreement. "LP Certificate" means a certificate substantially in the form attached hereto as Annex A, evidencing the Partnership Preferred Securities held by a Limited Partner. "Majority or Other Stated Percentage in Liquidation Preference" means Holder(s) of Partnership Preferred Securities who are the record owners of Partnership Preferred Securities whose aggregate liquidation preferences represent not less than 50% or not less than such stated percentage of the aggregate liquidation preference of all Partnership Preferred Securities then outstanding. "Maximum Stock Sales Proceeds" has the meaning set forth in Section 6.4(c)(ii). "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "Net Income" and "Net Loss", respectively, for any Fiscal Period mean the income and loss, respectively, of Citizens Capital for such Fiscal Period as determined in accordance with the method of accounting followed by Citizens Capital for federal income tax purposes, including, for all purposes, the net income, if any, from Eligible Investments and any income exempt from tax expenditures of Citizens Capital which are described in the Code; provided, however, that any item allocated under Sections 4.2 and 4.3 shall be excluded from the computation of Net Income and Net Loss. "No Recognition Opinion" has the meaning set forth in Annex C hereto. "Notice of Conversion" has the meaning set forth in Section 4.2(a) of this Agreement. "Original Limited Partnership Agreement" has the meaning set forth in the recitals to this Agreement. "Partners" means the General Partner and, if appointed pursuant to Section 6.2(h), any Special Representative and the Limited Partners, collectively, where no distinction is required by the context in which the term is used. "Partnership Distribution Account" has the meaning specified in Section 3.6(b) of this Agreement. "Partnership Event" has the meaning set forth in Annex C hereto. "Partnership Guarantee Agreement" means the Partnership Preferred Securities Guarantee Agreement dated as of __________, 1995 of Citizens in favor of the Partnership Preferred Security Holders with respect to the Partnership Preferred Securities. "Partnership Investment Company Act Event" has the meaning set forth in Annex C hereto. "Partnership Preferred Securities" has the meaning set forth in Annex C hereto. "Partnership Preferred Security Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency or Clearing Agency Participant). "Partnership Purchase Agreement" means the partnership purchase agreement between the Trust and Citizens Capital providing for the purchase of the Partnership Preferred Securities. "Partnership Securities" has the meaning set forth in Annex C hereto. "Partnership Tax Event" has the meaning set forth in Annex C hereto. "Paying Agent" shall have the meaning set forth in Annex C hereto. "Person" has the meaning set forth in Annex C hereto. "Power of Attorney" means the Power of Attorney granted pursuant to Section 13.2. "Property Trustee" has the meaning set forth in Annex C hereto. "Purchase Price" for any Partnership Preferred Security means the amount paid per Partnership Preferred Security pursuant to the Partnership Purchase Agreement. "Redemption Price" has the meaning set forth in Section 6.2(c). "Rating Agencies" means Fitch, Moody's and S&P. "Rating Agency Event" has the meaning set forth in Annex C hereto. "Securities Act" means the Securities Act of 1933, as amended. "Share Transfer and Valuation Date" has the meaning set forth in Annex C hereto. "Shortfall Amount" has the meaning set forth in Section 6.4(c)(ii). "Special Representative" means the Person appointed (i) to enforce Partnership Preferred Security Holders' rights under the Partnership Guarantee Agreement, (ii) to enforce Citizens Capital's rights against Citizens under the Convertible Debentures or (iii) to exercise rights otherwise exercisable by the General Partner to declare and pay distributions on the Partnership Preferred Securities as provided in Section 6.2(h) of this Agreement. "S&P" means Standard & Poor's Ratings Group or any successor thereof. "Tax Matters Partner" means the General Partner designated as such in Section 9.8 hereof. "Trading Day" has the meaning set forth in Annex C hereto. "Transfer Agent" means Chemical Bank and its successors and assigns. "Treasury Regulations" means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust" has the meaning set forth in Annex C hereto. "Trust Event" has the meaning set forth in Annex C hereto. "Trust Investment Company Act Event" has the meaning set forth in Annex C hereto. "Trust Securities" means the Convertible Common Securities and the Convertible Preferred Securities. "Trust Tax Event" has the meaning set forth in Annex C hereto. "Underwriters" means the underwriters named in Schedule I to the Underwriting Agreement. "Underwriting Agreement" means the Underwriting Agreement dated __________, 1995, among the Company, Citizens Capital, the Trust and the several Underwriters named therein relating to the issuance and sale of the Convertible Preferred Securities. Section 1.2 HEADINGS. The headings and subheadings in this Agreement are included for convenience and identification purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. ARTICLE II CONTINUATION OF CITIZENS CAPITAL; ADMISSION OF PARTNERSHIP PREFERRED SECURITIES HOLDERS; WITHDRAWAL OF INITIAL LIMITED PARTNER Section 2.1 CONTINUATION OF CITIZENS CAPITAL. The parties hereto agree to continue Citizens Capital in accordance with the terms of this Agreement. The General Partner, for itself and as agent for the Limited Partners, shall make every reasonable effort to assure that an amendment to the Certificate of Limited Partnership reflecting this Agreement, and all other certificates and documents, are properly executed and shall accomplish all filing, recording, publishing and other acts necessary or appropriate for compliance with all the requirements for the continuation of Citizens Capital as a limited partnership under the Act and under all other laws of the State of Delaware or such other jurisdictions in which the General Partner determines that Citizens Capital may conduct business. The rights and duties of the Partners shall be as provided herein and, subject to the terms hereof, the Act. Section 2.2 NAME. The name of Citizens Capital is "Citizens Utilities Capital L.P.", as such name may be modified from time to time by the General Partner following written notice to the Limited Partners. Section 2.3 BUSINESS OF CITIZENS CAPITAL. The purposes of Citizens Capital are (a) to issue limited partnership interests in Citizens Capital in the form of Partnership Preferred Securities, and to use substantially all of the proceeds thereof and substantially all of the proceeds from the capital contributed to Citizens Capital by the General Partner to purchase the Convertible Debentures of Citizens, (b) to invest, at all times, at least 1% of the total capital contributed to Citizens Capital by the Partners, (c) to receive interest and other payments on the Convertible Debentures in the form of cash or Common Stock and distribute such cash or Common Stock to the Partners as distributions on Citizens Capital or sell such number of shares of Common Stock in the market to generate cash to pay cash distributions on the Partnership Preferred Securities, (d) to effect the conversion of Partnership Preferred Securities into Common Stock and (e) except as otherwise limited herein, to enter into, make and perform all contracts and other undertakings, and engage in all activities and transactions as the General Partner may reasonably deem necessary or advisable for the carrying out of the foregoing purposes of Citizens Capital. Citizens Capital may not conduct any other business or operations except as contemplated by the preceding sentence. Section 2.4 TERM. The term of Citizens Capital shall commence upon the filing of the Certificate in the Office of the Secretary of State of the State of Delaware and shall continue for 45 years from the initial Closing Date, unless dissolved before such date in accordance with the provisions of this Agreement. Section 2.5 REGISTERED AGENT AND OFFICE. Citizens Capital's registered agent and office in Delaware shall be The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. At any time, the General Partner may designate another registered agent and/or registered office. Section 2.6 PRINCIPAL PLACE OF BUSINESS. The principal place of business of Citizens Capital shall be c/o Citizens Utilities Company, High Ridge Park, P.O. Box 3801, Stamford, Connecticut 06905. Upon ten days written notice to the Partners, the General Partner may change the location of Citizens Capital's principal place of business, provided that such change has no material adverse effect upon any Partner. Section 2.7 NAME AND BUSINESS ADDRESS OF GENERAL PARTNER. The name and address of the General Partner are as follows: Citizens Utilities Company High Ridge Park P.O. Box 3801 Stamford, Connecticut 06905 Attention: ____________ The General Partner may change its name or business address from time to time, in which event the General Partner shall promptly notify the Limited Partners of any such change. Section 2.8 QUALIFICATION TO DO BUSINESS. The General Partner shall cause Citizens Capital to become qualified, formed or registered under the applicable qualification, fictitious name or similar laws of any jurisdiction in which Citizens Capital transacts business. Section 2.9 ADMISSION OF HOLDERS OF PARTNERSHIP PREFERRED SECURITIES; WITHDRAWAL OF INITIAL LIMITED PARTNER. (a) Without execution of this Agreement, upon the acquisition of an LP Certificate by a Person, whether by purchase, gift, devise or otherwise, which acquisition shall be deemed to constitute a request by such Person that the books and records of Citizens Capital reflect such Person's admission as a Limited Partner, such Person shall be admitted to Citizens Capital as a Limited Partner and shall become bound by this Agreement. (b) Following the first admission of a Partnership Preferred Security Holder to Citizens Capital as a Limited Partner, the Initial Limited Partner shall withdraw from Citizens Capital and shall receive the return of its capital contribution without interest or deduction. (c) The name and mailing address of each Partner and the amount contributed by such Partner to the capital of Citizens Capital shall be listed on the books and records of Citizens Capital. The General Partner shall be required to update the books and records from time to time as necessary to accurately reflect such information. ARTICLE III CAPITAL CONTRIBUTIONS; REPRESENTATION OF PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS Section 3.1 CAPITAL CONTRIBUTIONS. (a) The General Partner has, on or prior to the first Closing Date, contributed an aggregate of $3.00 to the capital of Citizens Capital. The General Partner shall on or prior to each subsequent Closing Date, make such additional capital contributions as are necessary to maintain its Capital Account balance at an amount equal to at least 3% of the aggregate positive Capital Account balances of all Partners as of the time of each such Closing Date. (b) The Initial Limited Partner has, prior to the date hereof, contributed the amount of $97.00 to the capital of Citizens Capital, which amount will be returned to the Initial Limited Partner as contemplated by Section 2.9(b). (c) On each Closing Date, each Person who acquires a Partnership Preferred Security from Citizens Capital shall, in connection with the acquisition of such Partnership Preferred Security, contribute to the capital of Citizens Capital an amount in cash equal to the Purchase Price for such Partnership Preferred Security. (d) No Limited Partner shall at any time be required to make any additional capital contributions to Citizens Capital, except as may be required by law. Section 3.2 PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST REPRESENTED BY L.P. CERTIFICATE. A Partnership Preferred Security Holder's Interest shall be represented by the L.P. Certificate held by or on behalf of such Holder. Each Partnership Preferred Security Holder's respective ownership of Partnership Preferred Securities shall be set forth on the books and records of Citizens Capital. Each Holder hereby agrees that its Interest represented by its L.P. Certificate shall for all purposes be personal property. A Partnership Preferred Security Holder shall have no interest in specific Partnership property. Section 3.3 CAPITAL ACCOUNTS. An individual capital account (a "Capital Account") shall be established and maintained on the books of Citizens Capital for each Partner in compliance with Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-2, as amended. Subject to the preceding sentence, each Capital Account will be increased by the amount of the capital contributions (including the Purchase Price) made by, and the Net Income allocated to, such Partner (or predecessor in interest) and reduced by the amount of distributions made by Citizens Capital, and Net Losses allocated, to the Partner (or predecessor thereof). In addition, a Partner's Capital Account shall be increased or decreased, as the case may be, for any items specifically allocated to such Partner under Section 4.2 of this Agreement, and, to the extent permitted under the applicable Treasury Regulation, the General Partner's Capital Account will be increased to the extent the General Partner pays any costs or expenses of Citizens Capital directly out of the General Partner's own funds. If any property is distributed in kind to any Partner, the amount of such distribution shall, solely for purposes of reducing a Partner's Capital Account, and not for tax purposes, be equal to the fair market value of such Property at the time of distribution. Section 3.4 INTEREST ON CAPITAL CONTRIBUTIONS. Except as provided herein, no Partner shall be entitled to interest on or with respect to any capital contribution to Citizens Capital. Section 3.5 WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS. Subject to Section 3.1(b), no Partner shall be entitled to withdraw any part of such Partner's capital contribution to Citizens Capital. No Partner shall be entitled to receive any distributions from Citizens Capital, except as provided in this Agreement. Section 3.6 INVESTMENT OF CAPITAL CONTRIBUTIONS. (a) The General Partner may establish and maintain in the name of Citizens Capital an Eligible Investment Account bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Partners. On each Closing Date, the General Partner shall deposit from the proceeds of the aggregate capital contributions received from the Partners an amount equal to at least 1% of such aggregate capital contributions into the Eligible Investment Account. On the first Closing Date, the amount deposited by the General Partner shall equal $_____. (b) Funds on deposit in the Eligible Investment Account shall be invested by the General Partner; PROVIDED, HOWEVER, it is understood and agreed that the General Partner shall not be liable for any loss arising from such investment in Eligible Investments; PROVIDED FURTHER that none of the funds deposited in the Eligible Investment Account shall be invested in an Eligible Investment or Eligible Investments issued by the General Partner or an Affiliate thereof for a period of five years following the Closing Date. All such Eligible Investments shall be held by the General Partner for the benefit of Citizens Capital, PROVIDED, HOWEVER, that on the day preceding each Distribution Payment Date all interest and other investment income (net of losses and investment expenses) on funds on deposit in the Eligible Investment Account shall be deposited into Citizens Capital's account maintained by Citizens Capital for receipt of income on the Convertible Debentures (the "Partnership Distribution Account") and shall constitute a portion of Citizens Capital's Net Income eligible for distribution to the Partners. Funds on deposit in the Eligible Investment Account shall be invested in Eligible Investments that will mature prior to the next succeeding Distribution Payment Date. ARTICLE IV ALLOCATIONS Section 4.1 PROFITS AND LOSSES. After giving effect to the special allocations set forth in Sections 4.2 and 4.3 and subject to further modification by Section 4.4, which special allocations shall take precedence over any allocations made pursuant to this Section 4.1, (a) Citizens Capital's Net Income for each Fiscal Period of Citizens Capital shall be allocated as follows: (i) First, among Holders of Partnership Preferred Securities, as of the close of business on the record date for such Fiscal Period, an amount of Net Income equal to the excess of (x) the Distributions accrued on each Holder's Partnership Preferred Securities from the first Closing Date through and including the close of business on the record date for such Fiscal Period, including any Additional Distributions payable with respect thereto, over (y) the amount of Net Income allocated to each such Holder pursuant to this Section 4.1(a)(i) in all prior Fiscal Periods, including any Additional Distributions payable with respect thereto. (ii) Second, to each Holder of a Partnership Preferred Security in an amount equal to the excess of (x) all Net Losses, if any, allocated to each such Holder from the date of issuance of the Partnership Preferred Security through and including the close of such Fiscal Period pursuant to Section 4.1(b)(ii) over (y) the amount of Net Income, if any, allocated to each such Holder pursuant to this Section 4.1(a)(ii) in all prior Fiscal Periods. (iii) Any remaining Net Income shall be allocated to the General Partner. (b) Citizens Capital's Net Loss for any Fiscal Period shall be allocated as follows: (i) First, to the General Partner until the balance of the General Partner's Capital Account is reduced to zero. (ii) Second, among the Holders in proportion to their respective aggregate Capital Account balances, until the Capital Account balances of such Holders are reduced to zero, provided, however, that the General Partner shall make appropriate adjustments in these allocations, in accordance with Section 4.1(c), with respect to any Partnership Preferred Securities as to which Net Income has been allocated with respect to Distributions that accrued but were not paid. (iii) Any remaining Net Loss shall be allocated to the General Partner. (c) The General Partner shall make such changes to the allocations in Sections 4.1(a) and 4.1(b) as it deems reasonably necessary so that, in the year of Citizens Capital's liquidation, amounts distributed to the Partnership Preferred Security Holders in accordance with Section 11.4(ii) shall equal their Liquidation Distributions. Section 4.2 SPECIAL ALLOCATIONS. (a) CONVERSION INTO COMMON STOCK. If a Holder delivers an irrevocable notice of conversion ("Notice of Conversion") to the Conversion Agent which instructs the Conversion Agent to exchange some or all of such Holder's Partnership Preferred Securities for a portion of the Convertible Debentures held by Citizens Capital and to immediately convert such Convertible Debentures into Common Stock pursuant to Section 6.3(b) of this Agreement, such Holder shall be allocated any interest (including original issue discount) accruing on a daily basis on the Convertible Debentures so converted until, but not including, the date of such conversion, but only to the extent such interest (including original issue discount) was not previously allocated to the Partners in a prior Fiscal Period as part of Net Income under Section 4.1(a) of this Agreement. (b) DISTRIBUTIONS IN COMMON STOCK. If a Holder delivers a Notice of Distribution Election to the General Partner which instructs Citizens Capital to have distributions paid on a specified portion of the Partnership Preferred Securities in the form of Common Stock (rather than cash) on the next Distribution Payment Date or is deemed to have made such election of any such distribution in the form of Common Stock (rather than cash) on such Distribution Payment Date pursuant to Section 6.4, such Holder shall, solely for purpose of adjusting its Capital Account, and not for tax purposes, be allocated Net Income or Net Loss, as the case may be, in addition to Net Income and Net Loss allocated pursuant to Section 4.1(a), equal to the difference between the fair market value and the book value of the Common Stock at the time of its distribution. (c) INCOME FROM SALE OF COMMON STOCK. Any income, gain or loss resulting from the sale of any shares of Common Stock, and any expenditures resulting from or related to the sale of any shares of Common Stock, shall be allocated entirely to the General Partner. (d) INCOME FROM ELIGIBLE INVESTMENTS. Any income, gain or loss resulting from purchase, ownership or disposition of Eligible Investments shall be allocated entirely to the General Partner. (e) PROPERTY AFTER PAYMENT DATES. Any cash or shares of Common Stock or other property remaining in the Partnership after a Payment Date after the satisfaction of obligations to the Limited Partners shall be allocated entirely to the General Partner. 4.3 OTHER ALLOCATION PROVISIONS (a) All expenditures described in Code Section 705(a)(2)(B) that are incurred by, or on behalf of, Citizens Capital and paid or otherwise reimbursed by the General Partner shall be allocated entirely to the General Partner. (b) In the event any Holder unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704- 1(b)(2)(ii)(d)(4), (5) or (6), items of Net Income shall be specially allocated to such Holder in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit, if any, in the balance of the Capital Account of such Holder as quickly as possible. This Section 4.3(b) is intended to comply with then qualified income offset provision in Section 1.704(b)(2)(ii)(d) of the Treasury Regulations. (c) For purposes of determining the profits, losses or any other items allocable to any period, profits, losses and any such other items shall be determined on a daily basis, unless the General Partner determines that another method is permissible under Section 704 of the Code and the Treasury Regulations promulgated thereunder. Unless otherwise specified, such profits, losses or other items shall be determined for each Fiscal Period. (d) The Partners are aware of the income tax consequences of the allocations made by this Article IV and hereby agree to be bound by the provisions of this Article IV in reporting their shares of Net Income and Net Loss for U.S. federal income tax purposes. (e) Notwithstanding anything to the contrary that may be expressed or implied in this Article IV, the interest of the General Partner in each item of income, gain, loss, deduction and credit will be equal to at least (i) at any time that aggregate capital contributions to Citizens Capital are equal to or less than $50,000,000, 1% of each such item and (ii) at any time that aggregate capital contributions to Citizens Capital are greater than $50,000,000, at least 1%, multiplied by a fraction (not exceeding one and not less than 0.2), the numerator of which is $50,000,000 and the denominator of which is the lesser of (A) the aggregate Capital Account balances of the Capital Accounts of all Partners at such time and (B) the aggregate capital contributions to Citizens Capital of all Partners at such time. (f) The Partners intend that the allocations under Section 4.1 conform to Treasury Regulations Sections 1.704-1(b) and 1.704-2 (including, without limitation, the minimum gain chargeback, chargeback of partner nonrecourse debt minimum gain, qualified income offset and partner nonrecourse debt provisions of such Treasury Regulations), and the General Partner shall make such changes in the allocations under Section 4.1 as it believes are reasonably necessary to meet the requirements of such Treasury Regulations. (g) Solely for the purpose of adjusting the Capital Accounts of the Partners, and not for tax purposes, if any property (including, without limitation, shares of Common Stock) is distributed in kind to any Partner, the difference between the fair market value of such property and its book value at the time of distribution shall be treated as gain or loss recognized by Citizens Capital and allocated pursuant to the provisions of Sections 4.1, 4.2 and 4.3. Section 4.4 ALLOCATIONS FOR INCOME TAX PURPOSES. The income, gains, losses, deductions and credits of Citizens Capital (including the character of such items of income, gain, loss, deductions and credits) shall be allocated in the same manner as the items entering into the computation of Net Income and Net Loss are allocated under Sections 4.1, 4.2 and 4.3; provided, however, that solely for federal, state and local income and franchise tax purposes, but not for book or Capital Account purposes, income, gain, loss and deductions with respect to any property properly carried on Citizens Capital's books at a value other than the tax basis of such property shall be allocated in a manner determined in the General Partner's discretion, so as to take into account (consistently with Code Section 704(c) principles) the difference between such property's book value and its tax basis. Notwithstanding anything to the contrary set forth in this Agreement, the General Partner is authorized to modify the allocations of this Section 4.4, and Sections 4.1, 4.2 and 4.3, if necessary or appropriate, in the General Partner's sole discretion, for the allocations to fairly reflect the economic gain, income or loss to each of the Partners, or as otherwise required by the Code or the Treasury Regulations. Any Net Income or Net Loss resulting from a difference between the fair market value of property distributed in kind (including, without limitation, shares of Common Stock) that is deemed to result under Section 4.2(b) or 4.3(g), shall not be deemed to constitute Net Income or Net Loss, as the case may be, for purposes of allocating income, gains or losses to the Partners for federal, state or local tax purposes. Section 4.5 WITHHOLDING. Citizens Capital shall comply with withholding requirements under federal, state and local law and shall remit amounts withheld to and file required forms with applicable jurisdictions. To the extent that Citizens Capital is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Partner, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Partner. In the event of any claimed over-withholding, Partners shall be limited to an action against the applicable jurisdiction. If the amount withheld was not withheld from actual distributions, Citizens Capital may reduce subsequent distributions by the amount of such withholding. Each Partner agrees to furnish Citizens Capital with any representations and forms as shall reasonably be requested by Citizens Capital to assist it in determining the extent of, and in fulfilling, its withholding obligations. ARTICLE V DISTRIBUTIONS Section 5.1 DISTRIBUTIONS. Limited Partners shall receive periodic Distributions, if any, redemption payments and liquidation distributions in accordance with the terms of the Partnership Preferred Securities set forth in Article VI. Subject to the rights of the Partnership Preferred Security Holders, all cash and other property remaining in the Partnership Distribution Account shall be distributed to the General Partner at such time as the General Partner shall determine. Section 5.2 LIMITATIONS ON DISTRIBUTIONS. Citizens Capital shall not make a distribution to any Partner on account of such Partner's Interest if such distribution would violate Section 17-607 of the Act or other applicable law. ARTICLE VI ISSUANCE OF PARTNERSHIP PREFERRED SECURITIES Section 6.1 GENERAL PROVISIONS REGARDING PARTNERSHIP PREFERRED SECURITIES. (a) There is hereby authorized for issuance and sale Partnership Preferred Securities having an aggregate liquidation preference not greater than $[ ] and having the designation, annual distribution rate, liquidation preference, redemption terms, conversion and exchange rights and other powers, preferences and special rights and limitations set forth in this Article VI. The aggregate liquidation preference of Partnership Preferred Securities authorized hereunder shall be reduced 30 days after the first Closing Date to the amount purchased by the Underwriters. (b) The payment of distributions (including payments of distributions by Citizens Capital in liquidation or on redemption in respect of Partnership Preferred Securities shall be guaranteed by the Company pursuant to the Partnership Guarantee Agreement. In the event of an appointment of a Special Representative pursuant to Section 6.2(h), among other things, to enforce the Partnership Guarantee Agreement, the Special Representative may take possession of the Partnership Guarantee Agreement for such purpose. The Partnership Preferred Security Holders, by acceptance of such Partnership Preferred Securities, acknowledge and agree to the subordination provisions in, and other terms of, the Partnership Guarantee Agreement. (c) The proceeds received by Citizens Capital from the issuance of Partnership Preferred Securities, together with the proceeds of the capital contributed by the General Partner pursuant to Section 3.1(a) of this Agreement, but less any amounts deposited by the General Partner in the Eligible Investment Account pursuant to Section 3.6(a), shall be invested by Citizens Capital in Convertible Debentures with (i) an aggregate principal amount equal to such aggregate proceeds (less accrued interest, if any) and (ii) an interest rate at least equal to the distribution rate of the Partnership Preferred Securities. (d) Citizens Capital may not issue any other interests in Citizens Capital, without the approval of the Holders of not less than 66-2/3% in Liquidation Preference of the Partnership Preferred Securities; provided, however, that Citizens Capital may issue a general partnership security to the Special Representative. All Partnership Preferred Securities shall rank senior to all other Interests in Citizens Capital in respect of the right to receive Distributions or other distributions and the right to receive payments out of the assets of Citizens Capital upon voluntary or involuntary liquidation, dissolution, winding-up or termination of Citizens Capital. All Partnership Preferred Securities redeemed, purchased or otherwise acquired by Citizens Capital (including Partnership Preferred Securities surrendered for conversion or exchange) shall be canceled. The Partnership Preferred Securities will be issued in registered form only. Distributions on all Partnership Preferred Securities shall be cumulative. (e) No Holder shall be entitled as a matter of right to subscribe for or purchase, or have any preemptive right with respect to, any part of any new or additional limited partnership interests, or of securities convertible into any Partnership Preferred Securities or other limited partnership interests, whether now or hereafter authorized and whether issued for cash or other consideration or by way of a distribution. (f) Neither the Company nor any Affiliate of the Company shall have the right to vote or give or withhold consent with respect to any Partnership Preferred Security owned by it, directly or indirectly, and, for purposes of any matter upon which the Limited Partners may vote or give or withhold consent as provided in this Agreement, Partnership Preferred Securities owned by the Company or any Affiliate shall be treated as if they were not outstanding. Section 6.2 PARTNERSHIP PREFERRED SECURITIES. (a) DESIGNATION. The Partnership Preferred Securities, liquidation preference $50 per Partnership Preferred Security, are hereby designated as " % Convertible Partnership Preferred Securities". (b) DISTRIBUTIONS. (i) Partnership Preferred Security Holders shall be entitled to receive, when, as and if declared by the General Partner, cumulative Distributions at a rate per annum of % of the stated liquidation preference of $50 per Partnership Preferred Security, calculated on the basis of a 360-day year consisting of 12 months of 30 days each. For any period shorter than a full quarter period, Distributions will be computed on the basis of the actual number of days elapsed in such period. Distributions shall be payable quarterly in arrears in United States dollars and, to the extent Partnership Preferred Security Holders deliver a Notice of Distribution Election instructing the General Partner to pay Distributions on a specified portion of the Interests in Common Stock, subject to the provisions of Section 6.4, in Common Stock. If all or a portion of a distribution is made in Common Stock as a result of a Notice of Distribution Election, the amount of such distribution on a Partnership Preferred Security that a Holder shall be entitled to receive shall be an Equivalent Value of Common Stock at the Share Transfer and Valuation Date regardless of the fair market value of such stock at the time of its distribution by Citizens Capital. Such Distributions will accrue and be cumulative whether or not they have been declared and whether or not there are funds of Citizens Capital legally available for the payment of Distributions. Distributions on the Partnership Preferred Securities shall be cumulative from the first Closing Date. Additional Distributions upon any Distribution arrearages shall be declared and paid in order to provide, in effect, quarterly compounding on such Distribution arrearages at a rate of ___% per annum compounded quarterly, and such Additional Distributions shall accumulate. In the event that any date on which Distributions are payable on the Partnership Preferred Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day which 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. (ii) Distributions on the Partnership Preferred Securities must be declared quarterly and be paid in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on __________, 1996 (each a "Distribution Payment Date") to the extent that Citizens Capital has, on such date, (x) funds (including Common Stock and to the extent Partnership Preferred Security Holders have elected or are deemed to have elected to receive Common Stock) legally available for the payment of such Distributions and (y) cash and, where applicable, Common Stock, on hand sufficient to permit such payments, it being understood that to the extent that funds (including, where applicable, Common Stock) are not available to pay in full all accumulated and unpaid Distributions, Citizens Capital may pay partial Distributions to the extent of funds (including, where applicable, Common Stock) legally available therefor. For purposes of this Section 6.2(b), net interest and investment income from funds on deposit in the Eligible Investment Account that is transferred into the Partnership Distribution Account shall be considered funds available for the payment of Distributions; provided, however, that the principal amount of Eligible Investments shall not be available as Distributions or otherwise except in connection with a liquidating distribution pursuant to Section 11.4 of this Agreement. Distributions will be payable to the Holders as they appear on the books and records of Citizens Capital on the Regular Record Date (as such term is defined in the Indenture) immediately preceding the applicable Distribution Payment Date. Distributions payable on any Partnership Preferred Securities that are not punctually paid on any Distribution Payment Date, as a result of the Company having failed to make a payment on the Convertible Debentures, will cease to be payable to the Person in whose name such Partnership Preferred Securities are registered on the relevant record date, and such late Distribution will instead be payable to the Person in whose name such Partnership Preferred Securities are registered on the special record date or other specified date determined in accordance with the Limited Partnership Agreement. If any date on which Distributions are payable on the Partnership Preferred 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 date. In the event of any extended interest payment period with respect to the Convertible Debentures resulting in the deferral of the payment of Distributions on the Partnership Preferred Securities, the General Partner shall notify the Holders as to such extended interest payment period. (iii) Citizens Capital shall not: (1) pay, declare or set aside for payment, any distributions on any other Interests in Citizens Capital; or (2) redeem, purchase or otherwise acquire or make any liquidation payment with respect to any other Interests in Citizens Capital; until, in each case, such time as all accumulated and unpaid Distributions on all of the Partnership Preferred Securities, including any Additional Distributions thereon, shall have been paid in full for all Distribution periods terminating on or prior to the date of such payment or the date of such redemption, purchase or acquisition, as the case may be. (iv) In the event of an election by the Holder to convert all or any portion of its Partnership Preferred Securities through the Conversion Agent into Common Stock pursuant to Section 6.3 of this Agreement, neither the Company nor Citizens Capital shall make, or be required to make, any payment, allowance or adjustment with respect to accumulated and unpaid Distributions on such Partnership Preferred Securities; provided that Holders of Partnership Preferred Securities at the close of business on any record date for the payment of Distributions will be entitled to receive the Distribution payable on such Partnership Preferred Securities on the corresponding Distribution Payment Date notwithstanding the conversion of such Partnership Preferred Securities into Common Stock following such record date. (c) MANDATORY REDEMPTION. Upon repayment of the Convertible Debentures at maturity, prepayment or redemption of the Convertible Debentures, including as a result of the acceleration of the Convertible Debentures upon the occurrence of an Event of Default under the Indenture with respect to the Convertible Debentures, the proceeds from such repayment, prepayment or redemption simultaneously shall be applied to redeem the Partnership Preferred Securities at a redemption price equal to the liquidation preference per Partnership Preferred Security plus accumulated and unpaid Distributions (whether or not earned or declared) to the date fixed for redemption, including any Additional Distributions accrued thereon, payable in cash (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days' notice of such redemption. (d) OPTIONAL REDEMPTION. Partnership Preferred Securities shall be redeemable at the option of Citizens Capital (subject to the prior consent of the Company), in whole or in part from time to time, on or after __________ __, 1998 at the Redemption Price. Citizens Capital may not redeem the Partnership Preferred Securities in part unless all accumulated and unpaid distributions (whether or not earned or declared), including any Additional Distributions, have been paid in full on all Partnership Preferred Securities for all quarterly distribution periods terminating on or prior to the date of redemption. The Company shall have the right to cause Citizens Capital to exercise such redemption option. (e) SPECIAL REDEMPTION. If, at any time, a Partnership Event shall occur and be continuing, the General Partner may dissolve Citizens Capital and, after satisfaction of creditors, either (i) upon receipt by the Company of a No Recognition Opinion with respect to the Convertible Debentures and delivery of such No Recognition Opinion to Citizens Capital, cause the Convertible Debentures held by the General Partner, having an aggregate stated principal amount equal to the aggregate stated liquidation preference of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid distributions on and having the same record date for payment as the Partnership Preferred Securities, to be distributed to the holders of the Partnership Preferred Securities, in liquidation of such holders' interests in Citizens Capital or (ii) in the event the Company cannot receive a No Recognition Opinion, at the direction of the Company, as Debenture Issuer, and following the redemption, in whole or in part, of the Convertible Debentures in the manner set forth in the Indenture redeem, in whole or in part, the Partnership Preferred Securities in the manner set forth in this Agreement, provided that the General Partner is unable to avoid such Partnership Event by taking some ministerial action such as filing a form or making an election or pursuing some other reasonable measure that, in the sole judgment of the General Partner, will have no adverse effect on Citizens Capital, the General Partner or the Holders, if any, of the Trust Securities and will involve no material cost ("Ministerial Action"). In the event that the General Partner undertakes the actions specified in item (i) of this paragraph, the Company, as Sponsor, may dissolve the Trust, if in existence, and thereby cause the Convertible Debentures to be distributed to the Holders, if any, of the Trust Securities. In the event that (a) the Convertible Debentures are distributed in connection with a Partnership Event and (b) the Company, as Sponsor of the Trust, causes or has caused the Trust to be liquidated, the Company will use its best efforts to have the Convertible Debentures listed on the NYSE or, if the Trust Securities or the Partnership Preferred Securities, as the case may be, are not then listed on the NYSE, such other exchange on which the Trust Securities or the Partnership Preferred Securities, as the case may be, may then be listed. If, at any time, a Company Event shall occur and be continuing, the Company, as Debenture Issuer, may cause the redemption, in whole but not in part, of the Partnership Preferred Securities by redeeming, in whole but not in part, the Convertible Debentures in the manner set forth in the Indenture, which redemption shall in turn cause the redemption of the Partnership Preferred Securities in the manner set forth in this Agreement, provided that the Company is unable to avoid such Company Event by taking a Ministerial Action. In the case of a Company Event, the Company may also elect to cause the Convertible Debentures and, hence, the Partnership Preferred Securities to remain outstanding. If, at any time, a Trust Event shall occur and be continuing the Company shall (i) after receipt by the Company of a No Recognition Opinion with respect to the Partnership Preferred Securities and delivery of such No Recognition Opinion to the Trust, dissolve the Trust and, after satisfaction of creditors, cause the Partnership Preferred Securities held by the Property Trustee, having an aggregate stated liquidation preference equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid distributions on and having the same record date for payment as the Trust Securities, to be distributed to the holders of the Trust Securities, in liquidation of such holders' interests in the Trust, in the manner set forth in the Declaration, or (ii) after receipt by the Company of No Recognition Opinions with respect to the Partnership Preferred Securities and the Convertible Debentures and delivery of the appropriate No Recognition Opinion to each of the Trust and Citizens Capital, and following the dissolution of Citizens Capital in the manner set forth in this Agreement, dissolve the Trust, and, after satisfaction of creditors, cause the Convertible Debentures held by the General Partner, having aggregate stated principal amount equal to the aggregate stated liquidation amount of, with an interest payment rate identical to the distribution rate of and accrued and unpaid interest equal to accrued and unpaid distributions on and having the same record date for payment as the Trust Securities, to be distributed to the holders of the Trust Securities, in liquidation of such holders' interests in the Trust, in the manner set forth in the Declaration, or, in the event the Company cannot receive a No Recognition Opinion with respect to the Partnership Preferred Securities, the Company may dissolve the Trust and, after satisfaction of creditors, at the direction of the Company, as Debenture Issuer, and following the redemption, in whole or in part, of the Convertible Debentures in the manner set forth in the Indenture and the Partnership Preferred Securities in the manner set forth in this Agreement, redeem, in whole or in part, the Trust Securities in the manner set forth in the Declaration; provided that the Company and the Trust are unable to avoid such Trust Event by taking a Ministerial Action. Upon the distribution of the Partnership Preferred Securities or the Convertible Debentures in connection with a Trust Event, the Company will use its best efforts to have such Partnership Preferred Securities or Convertible Debentures, as the case may be, listed on the NYSE or, if the Trust Securities or Partnership Preferred Securities, as the case may be, are not then listed on the NYSE, such other exchange on which such Trust Securities or Partnership Preferred Securities may then be listed. If, at any time, a Rating Agency Event shall occur and be continuing the Company shall either (i) after dissolution of the Trust, if still in existence, in the manner set forth in the Declaration and after satisfaction of creditors, cause the Partnership Preferred Securities having an aggregate liquidation preference equal to the aggregate liquidation amount of the Trust Securities to be distributed to the holders of the Trust Securities in liquidation of the Trust or (ii) upon dissolution of Citizens Capital as set forth in this Agreement and after satisfaction of creditors, cause the Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation preference of the Partnership Preferred Securities to be distributed to the holders of the Partnership Preferred Securities in liquidation of Citizens Capital. Upon the distribution of Partnership Preferred Securities or Convertible Debentures in connection with a Rating Agency Event, the Company will use its best efforts to have such Partnership Preferred Securities or Convertible Debentures listed on the NYSE or, if the Trust Securities or Partnership Preferred Securities, as the case may be, are not then listed on the NYSE, such other exchange on which such Trust Securities or Partnership Preferred Securities may then be listed. (f) REDEMPTION PROCEDURES. (i) Notice of any redemption (a "Notice of Redemption") of the Partnership Preferred Securities to be redeemed will be given by Citizens Capital by mail to each Holder of Partnership Preferred Securities not fewer than 30 nor more than 60 days prior to the date fixed for redemption thereof following the issuance of a notice of prepayment or redemption of the Convertible Debentures by Citizens to Citizens Capital. For purposes of the calculation of the date of redemption and the dates on which notices are given pursuant to this paragraph (f)(i), a Notice of Redemption shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to each Holder of Partnership Preferred Securities. Each Notice of Redemption shall be addressed to each Holder of Partnership Preferred Securities at the address of the Holder appearing in the books and records of Citizens Capital. No defect in the Notice of Redemption or in the mailing thereof with respect to any Partnership Preferred Security shall affect the validity of the redemption proceedings with respect to any other Partnership Preferred Security. (ii) If, following a notice of prepayment of all outstanding Convertible Debentures, Citizens Capital issues a Notice of Redemption, then, by 12:00 noon, New York time, on the redemption date, Citizens will repay to Citizens Capital an aggregate principal amount of the Convertible Debentures, which, together with accrued and unpaid interest and any Deferred Interest thereon, will be an amount sufficient to pay the Redemption Price for all Partnership Preferred Securities then outstanding. If a Notice of Redemption shall have been issued and funds deposited as required or a check deposited in the U.S. mails postage prepaid, then upon the date of such deposit, all rights of the Partnership Preferred Security Holders who hold such Partnership Preferred Securities so called for redemption will cease, except the right of the Holders of such securities to receive the Redemption Price, but without interest from and after such redemption date. In the event that any date fixed for redemption of Partnership Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which 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 the event that payment of the Redemption Price in respect of Partnership Preferred Securities is improperly withheld or refused and not paid either by Citizens Capital or by Citizens pursuant to the Partnership Guarantee Agreement, Distributions on such Partnership Preferred Securities (including any Additional Distributions thereon) will continue to accumulate at the then applicable rate, from the original redemption date to the date that the Redemption Price is actually paid. (iii) Redemption/Distribution Notices shall be sent by Citizens Capital to the Holders of the Partnership Preferred Securities. (iv) If a Notice of Redemption shall have been issued, the conversion rights set forth in Section 6.3 shall terminate at the close of business five Business Days prior to the redemption date. (g) LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of Citizens Capital, the Holders of Partnership Preferred Securities at the time outstanding will be entitled to receive out of the assets of Citizens Capital (including any Eligible Investments or amounts deposited in the Eligible Investment Account) legally available for distribution to Partners after satisfaction of liabilities of creditors as required by the Act before any distribution of assets is made with respect to any other Interest in Citizens Capital, an amount equal to the aggregate of the stated liquidation preference of $50 per Partnership Preferred Security payable in cash and accumulated and unpaid Distributions (whether or not earned or declared) to the date of payment, including any Additional Distributions accrued thereon (the "Liquidation Distribution") payable in cash or in Common Stock. (h) VOTING RIGHTS -- SPECIAL REPRESENTATIVE. (i) If (x) Citizens Capital fails to pay Distributions in full on the Partnership Preferred Securities for six (6) consecutive quarters (other than as a result of a determination by Citizens to extend the interest payment period of the Convertible Debentures in accordance with the terms thereof), (y) an Event of Default under the Indenture occurs and is continuing or (z) Citizens is in default on any of its payment obligations under the Partnership Guarantee Agreement, then the Holders, upon the affirmative vote of at least a Majority in Liquidation Preference of the Partnership Preferred Securities, will be entitled to appoint and authorize a Special Representative to enforce Citizens Capital's rights as a creditor under the Convertible Debentures, enforce the rights of the Holders under the Partnership Guarantee Agreement and to declare and pay Distributions (including Additional Distributions) on the Partnership Preferred Securities. Upon the appointment of a Special Representative, the Special Representative shall be authorized, and shall to the extent of legally available funds, declare and pay Distributions (including Additional Distributions) on the Partnership Preferred Securities. So long as the appointment of the Special Representative is effective, the Special Representative shall manage the business and affairs of Citizens Capital to the exclusion of the General Partner. (ii) In furtherance of the foregoing, and without limiting the powers of any Special Representative so appointed and for the avoidance of any doubt concerning the powers of the Special Representative, any Special Representative, in its own name and as Special Representative of Citizens Capital, may institute a proceeding, including, without limitation, any suit in equity, an action at law or other judicial or administrative proceeding, to enforce Citizens Capital's rights directly against Citizens, or any other obligor in connection with such obligations on behalf of Citizens Capital, and may prosecute such proceeding to judgment or final decree, and enforce the same against Citizens or any other obligor in connection with such obligations and collect, out of the property, wherever situated, of Citizens or any such other obligor upon such obligations, the monies adjudged or decreed to be payable in the manner provided by law. (iii) For purposes of determining whether Citizens Capital has failed to pay Distributions in full for six (6) consecutive quarters, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions have been or contemporaneously are declared and paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such full cumulative Distributions. Not later than 30 days after such right to appoint a Special Representative arises, the General Partner will convene a meeting for election of a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the Holders of not less than 10% in Liquidation Preference of the Partnership Preferred Securities will be entitled to convene such meeting. The provisions of Section 12.3 relating to the convening and conduct of meetings of the Partners will apply with respect to any such meeting. Any Special Representative so appointed shall vacate office immediately if Citizens Capital (or Citizens pursuant to the Partnership Guarantee Agreement) shall have paid in full all accumulated and unpaid Distributions (including any Additional Distributions) on the Partnership Preferred Securities or such Event of Default or default, as the case may be, shall have been cured. (i) VOTING RIGHTS -- CERTAIN AMENDMENTS. (i) If any proposed amendment of this Agreement provides for, or the General Partner otherwise proposes to effect, (x) any action that would have a material adverse affect on the powers, preferences or rights of the Partnership Preferred Securities, whether by way of amendment of this Agreement or otherwise or (y) the liquidation, dissolution, winding-up or termination of Citizens Capital, then the Holders of outstanding Partnership Preferred Securities will be entitled to vote on such amendment or action of the General Partner (but not on any other amendment or action) and such amendment or action shall not be effective except with the approval of Holders of not less than 66-2/3% in Liquidation Preference of the Partnership Preferred Securities; provided, however, that no such approval shall be required if the liquidation, dissolution, winding-up or termination of Citizens Capital is proposed or initiated pursuant to Section 11.2 hereof. (ii) Any required approval of Holders may be given at a separate meeting of such Holders convened for such purpose or pursuant to written consent. Citizens Capital will cause a notice of any meeting at which Holders 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. Each such notice will include a statement setting forth (x) the date of such meeting or the date by which such action is to be taken, (y) a description of any matter on which such Holders are entitled to vote or upon which written consent is sought and (z) instructions for the delivery of proxies or consents. No vote or consent of the Holders will be required for Citizens Capital to redeem and cancel Partnership Preferred Securities in accordance with this Agreement. (iii) Except as provided in this Section 6.2, Holders shall have no voting rights, and the Holders may not remove the General Partner. Section 6.3 CONVERSION RIGHTS OF PARTNERSHIP PREFERRED SECURITIES. The Holders of Partnership Preferred Securities shall have the right, at their option, at any time before the close of business five days prior to maturity of the Partnership Preferred Securities or as otherwise set forth in this Agreement, to cause the Conversion Agent to convert Partnership Preferred Securities, on behalf of the converting Holders, into shares of Common Stock in the manner described herein on and subject to the following terms and conditions: (a) The Partnership Preferred Securities will be convertible at the office of the Conversion Agent into fully paid and nonassessable shares of Common Stock pursuant to the Holder's direction to the Conversion Agent to exchange such Partnership Preferred Securities for a portion of the Convertible Debentures theretofore held by Citizens Capital on the basis of one Partnership Preferred Security per $50 principal amount of Convertible Debentures, and immediately convert such amount of Convertible Debentures into fully paid and nonassessable shares of Common Stock at an initial rate of shares of Common Stock per $50 principal amount of Convertible Debentures (which is equivalent to a conversion price of $____ per share of Common Stock, subject to certain adjustments set forth in the terms of the Convertible Debentures (as so adjusted, the "Conversion Price")). (b) In order to convert Partnership Preferred Securities into Common Stock, the Holder shall surrender the Partnership Preferred Securities to be converted to the Conversion Agent at the office referred to above, together with an irrevocable Notice of Conversion (i) setting forth the number of Partnership Preferred Securities to be converted and the name or names, if other than the Holder, in which the shares of Common Stock should be issued and (ii) directing the Conversion Agent (a) to exchange such Partnership Preferred Securities for a portion of the Convertible Debentures held by Citizens Capital (at the rate of exchange specified in the preceding paragraph) and (b) to immediately convert such Convertible Debentures, on behalf of such Holder, into Common Stock (at the conversion rate specified in the preceding paragraph). If the Notice of Conversion is delivered in a timely manner, the Conversion Agent shall notify Citizens Capital of the Holder's election to exchange Partnership Preferred Securities for a portion of the Convertible Debentures held by Citizens Capital and Citizens Capital shall, upon receipt of such notice, deliver to the Conversion Agent the appropriate principal amount of Convertible Debentures for exchange in accordance with this Section. The Conversion Agent shall thereupon notify Citizens of the Holder's election to convert such Convertible Debentures into shares of Common Stock. Holders of Partnership Preferred Securities at the close of business on a Distribution payment record date will be entitled to receive the Distribution payable on such securities on the corresponding Distribution Payment Date notwithstanding the conversion of such Partnership Preferred Securities following such Distribution payment record date. Except as provided above, no payment, allowance or adjustment shall be made by Citizens Capital or Citizens upon any conversion on account of any accumulated and unpaid Distributions accrued on the Partnership Preferred Securities (including any Additional Distributions accrued thereon) surrendered for conversion, or on account of any accumulated and unpaid distributions on the shares of Common Stock issued upon such conversion. Partnership Preferred Securities shall be deemed to have been converted immediately prior to the close of business on the day on which a Notice of Conversion relating to such Partnership Preferred Securities is delivered in accordance with the foregoing provisions (the "Conversion Date"). The Person or Persons entitled to receive the Common Stock issuable upon conversion of the Convertible Debentures shall be treated for all purposes as the record holder or holders of such Common Stock at such time. No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, such fractional interest will be paid in cash by Citizens. As promptly as practicable on or after the Conversion Date, Citizens shall issue and deliver at the office of the Conversion Agent a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same, unless otherwise directed by the Holder in the notice of conversion and the Conversion Agent shall distribute such certificate or certificates to such Person or Persons. (c) Each Holder of a Partnership Preferred Security by his acceptance thereof appoints the Transfer Agent for the Partnership Preferred Securities as Conversion Agent for the purpose of effecting the conversion of Partnership Preferred Securities in accordance with this Section. In effecting the conversion transactions described in this Section, the Conversion Agent shall be acting as agent of the Holders of Partnership Preferred Securities directing it to effect such conversion or exchange transactions. The Conversion Agent is hereby authorized (i) to exchange Partnership Preferred Securities from time to time for Convertible Debentures held by Citizens Capital in connection with the conversion of such Partnership Preferred Securities in accordance with this Section hereof, and (ii) to convert all or a portion of the Convertible Debentures into Common Stock and thereupon to deliver such shares of Common Stock in accordance with the provisions of this Section and to deliver to Citizens Capital a new Convertible Debenture or Convertible Debentures for any resulting unconverted principal amount. (d) No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, such fractional interest will be paid in cash by Citizens to Citizens Capital, which in turn will make such payment to the Holder or Holders of Partnership Preferred Securities so converted. (e) Citizens shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of the Convertible Debentures, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the Convertible Debentures then outstanding. Notwithstanding the foregoing, Citizens shall be entitled to deliver upon conversion of Convertible Debentures, shares of Common Stock reacquired and held in the treasury of Citizens (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such treasury shares, upon delivery, are free and clear of all liens, charges, security interests or encumbrances. Any shares of Common Stock issued upon conversion of the Convertible Debentures shall be duly authorized, validly issued and fully paid and nonassessable. Citizens Capital shall deliver the shares of Common Stock received upon conversion of the Convertible Debentures to the converting Holder free and clear of all liens, charges, security interests and encumbrances, except for United States withholding taxes. Each of Citizens and Citizens Capital shall prepare and shall use its best efforts to obtain and keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all applicable requirements as to registration or qualification of the Common Stock (and all requirements to list the Common Stock issuable upon conversion of Convertible Debentures that are at the time applicable), in order to enable Citizens to lawfully issue Common Stock to Citizens Capital upon conversion of the Convertible Debentures and Citizens Capital to lawfully deliver the Common Stock to each Holder upon conversion of the Partnership Preferred Securities. (f) Citizens will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Convertible Debentures and the delivery of the shares of Common Stock by Citizens Capital upon conversion of the Partnership Preferred Securities. Citizens shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Partnership Preferred Securities so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Citizens Capital the amount of any such tax, or has established to the satisfaction of Citizens Capital that such tax has been paid. (g) Nothing in Section 6.3(f) shall limit the requirement of Citizens Capital to withhold taxes pursuant to Section 4.5 or otherwise require the General Partner or Citizens Capital to pay any amounts on account of such withholdings. Section 6.4 DISTRIBUTION ELECTION. (a) DECLARATION BY COMPANY. For so long as Citizens Capital shall hold the Convertible Debentures, the Company shall have by the Distribution Declaration Date immediately preceding a Distribution Payment Date declared by Distribution Declaration Notice the form of payment in which it intends to pay the interest on the Convertible Debentures held by the Citizens Capital. If the Company shall have by the Distribution Declaration Date in respect of a Distribution Payment Date, declared to pay interest on the Convertible Debentures in the form of cash, the holders of the Partnership Preferred Securities will receive payments of distributions from Citizens Capital only in the form of cash, notwithstanding any election by the holder to the contrary. If the Company shall have by the Distribution Declaration Date declared to pay interest on the Convertible Debentures in the form of shares of Common Stock, the holders of the Partnership Preferred Securities may receive distributions on the Partnership Preferred Securities in the form of cash or shares of Common Stock subject to the provision of this Section 6.4. If the Company fails to make a timely declaration, the Company shall be deemed to have elected to pay interest in the form of shares of Common Stock. (b) ELECTION BY HOLDER. Distributions on the Partnership Preferred Securities may be payable in cash or an Equivalent Value of shares of Common Stock as set forth in this Section 6.4. Subject to Sections 6.4(a) and 6.4(d), each Holder may during an Election Period elect to receive Distributions for the next four Distribution Payment Dates in either (a) an Equivalent Value of shares of Common Stock (a "Stock Distribution Election") or (b) cash (a "Cash Distribution Election"), in each case by submitting to the Election Agent a notice of distribution election substantially in the form of Annex B ("Notice of Distribution Election"); provided however, that so long as the Property Trustee of the Trust or a Clearing Agency is the Holder of the Partnership Preferred Securities, the Holder may elect to receive Distributions in a combination of cash and Common Stock by specifying the aggregate number of the Partnership Preferred Securities for each respective form of payment. The Notice of Distribution Election shall specify the form of payment (or, if the Property Trustee or Clearing Agency is the Holder of the Partnership Preferred Securities, the aggregate amount for each respective form of payment) in which the Holder elects to receive Distributions. If a Holder fails to submit a Notice of Distribution Election during the Election Period, the Holder shall be deemed to have elected to receive distributions in the form of cash. If a Holder transfers any or all Partnership Preferred Securities in such Holder's possession, the subsequent Holder(s) of such transferred Partnership Preferred Securities shall be deemed to have made a Cash Distribution Election for the remaining Distribution Payment Dates prior to the next Election Period for which such subsequent Holder(s) appear as the Holder(s) of record. (c) COMMON STOCK ELECTION BY COMPANY. If the Company has (or is deemed to have) elected to pay interest on the Convertible Debentures in the form of shares of Common Stock, Citizens Capital shall take such actions and pay Distributions on Partnership Preferred Securities in accordance with this Section 6.4(c). On the Share Transfer and Valuation Date, the Company shall issue and deliver to the office of the Paying Agent such certificate or certificates of shares of Common Stock representing Equivalent Value of Common Stock (or in the names of such Persons as the Paying Agent shall so designate to the Company) to satisfy in full the obligation of the Company to pay interest on the Convertible Debentures for the applicable Interest Payment Date. No fractional shares of Common Stock will be issued as a result of the Company's election to pay interest on the Convertible Debentures in Common Stock, but in lieu thereof, such fractional interest will be paid to Citizens Capital in cash by the Company. No fractional shares of Common Stock will be issued as a result of the Holder's election to receive payments of Distribution in the form of Common Stock, but in lieu thereof such fractional interests will be paid for in cash by Citizens Capital to the Partnership Preferred Security Holders. (i) To the extent Holders have elected to receive payment of Distributions in shares of Common Stock, the Paying Agent shall distribute Equivalent Value of Common Stock equal to the amount of such Distribution, together with the cash payment, if any, in lieu of any fractional share of Common Stock to such Partnership Preferred Security Holders at the address specified on the register of Citizens Capital. If, on any Interest Payment Date, the Trust or a Clearing Agency is the holder of record of all or substantially all the Partnership Preferred Securities, then in determining the amount of cash to deliver in lieu of fractional shares of Common Stock, the beneficial holders of the Trust Securities shall each be treated as if it were a holder of record of its proportionate share of the Partnership Preferred Securities rather than the Trust itself. (ii) To the extent Holders have elected to receive payment of Distributions in cash, Citizens Capital shall sell in accordance with applicable law such number of shares of Common Stock held by Citizens Capital in the open market through designated brokers or sell shares of Common Stock back to the Company to generate cash in a dollar amount equal to the amount (the "Cash Equivalent Amount") necessary to pay all Holders that elect to receive cash Distributions (or, if the Property Trustee or a Clearing Agency is the Holder of the Partnership Preferred Securities, wholly or partially in cash). If the sales proceeds after the payment of expenses, if any, relating to such sales (the "Maximum Stock Sales Proceeds") from the sale of all shares of Common Stock held by Citizens Capital for a Distribution Payment Date is less than the Cash Equivalent Amount, the General Partner shall be liable for and shall promptly pay to Citizens Capital the amount (the "Shortfall Amount") equal to the difference between the Cash Equivalent Amount and the Maximum Stock Sales Proceeds. (iii) To the extent there are any shares of Common Stock or any cash remaining (collectively "Excess Property") after satisfying the obligations of the holders of the Partnership Preferred Securities in respect of any Distribution Payment Date, such Excess Property shall belong to, be allocated to and inure to the sole benefit of the General Partner. (d) ELECTION BY THE COMPANY. Notwithstanding the foregoing sections, Citizens has the right (the "Company Cash Option") on and after the Distribution Declaration Date but before the Cash Interest Payment Date (as such term is defined in the Indenture) to cause all Holders of Partnership Preferred Securities to receive payment of Distributions in the form of cash by paying interest on the Convertible Debentures in cash. The Company may exercise the Company Cash Option if the Company shall have provided written notice to the Trust and the holders of the Trust Securities (a "Cash Payment Notice"). (e) CALL OPTION ON COMMON STOCK. On or after the Share Transfer and Valuation Date, the Company may cause Citizens Capital or some or all the holders of Partnership Preferred Securities to receive Distributions in the form of cash by purchasing from Citizens Capital shares of Common Stock, distributed by the Company as interest payment on the Convertible Debentures, that have not yet been sold for cash or distributed to the holders of the Partnership Preferred Securities at a price equal to the Equivalent Value (the "Company Call Option"). The Company may exercise the Company Call Option if the Company shall have provided a Cash Payment Notice. ARTICLE VII BOOKS OF ACCOUNT, RECORDS AND REPORTS Section 7.1 BOOKS AND RECORDS. (a) Proper and complete records and books of account of Citizens Capital shall be kept by the General Partner in which shall be entered fully and accurately all transactions and other matters relative to Citizens Capital's businesses as are usually entered into records and books of account maintained by Persons engaged in businesses of a like character, including a Capital Account for each Partner. The books and records of Citizens Capital, together with a certified copy of this Agreement and of the Certificate, shall at all times be maintained at the principal office of the General Partner and shall be open to the inspection and examination of the Partners or their duly authorized representatives for a proper purpose during reasonable business hours. (b) The General Partner may, for such period of time that the General Partner deems reasonable, keep confidential from the Partners any information with respect to Citizens Capital the disclosure of which the General Partner reasonably believes is not in the best interests of Citizens Capital or is adverse to the interests of Citizens Capital or which Citizens Capital or the General Partner is required by law or by an agreement with any Person to keep confidential. (c) Within one month after the close of each Fiscal Year, the General Partner shall transmit to each Partner, a statement indicating such Partner's share of each item of Partnership income, gain, loss, deduction or credit for such Fiscal Year for federal income tax purposes. Section 7.2 ACCOUNTING METHOD. For both financial and tax reporting purposes and for purposes of determining profits and losses, the books and records of Citizens Capital shall be kept on the accrual method of accounting applied in a consistent manner and shall reflect all Partnership transactions and be appropriate and adequate for Citizens Capital's business. Section 7.3 ANNUAL AUDIT. As soon as practical after the end of each Fiscal Year, but not later than 90 days after such end, the financial statements of Citizens Capital shall be audited by a firm of independent certified public accountants selected by the General Partner, and such financial statements shall be accompanied by a report of such accountants containing their opinion. The cost of such audits will be an expense of Citizens Capital and paid by Citizens. ARTICLE VIII POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS Section 8.1 LIMITATIONS. Other than as set forth in this Agreement, the Limited Partners shall not participate in the management or control of Citizens Capital's business, property or other assets nor shall the Limited Partners transact any business for Citizens Capital, nor shall the Limited Partners have the power to act for or bind Citizens Capital, said powers being vested solely and exclusively in the General Partner (and, upon appointment, the Special Representative). Except for shares of Common Stock deliverable upon conversion or exchange of the Partnership Preferred Securities, the Limited Partners shall have no interest in the properties, or assets of the General Partner, or any equity therein, or in any proceeds of any sales thereof (which sales shall not be restricted in any respect, by virtue of acquiring or owning an Interest in Citizens Capital). Section 8.2 LIABILITY. Subject to the provisions of the Act, no Limited Partner shall be liable for the repayment, satisfaction or discharge of any debts or other obligations of Citizens Capital in excess of the Capital Account balance of such Limited Partner. Section 8.3 PRIORITY. No Limited Partner shall have priority over any other Limited Partner as to Partnership allocations or distributions. ARTICLE IX POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER Section 9.1 AUTHORITY. Subject to the limitations provided in this Agreement, the General Partner or, upon appointment pursuant to Section 6.2(h), the Special Representative, shall have exclusive and complete authority and discretion to manage the operations and affairs of Citizens Capital and to make all decisions regarding the business of Citizens Capital. Any action taken by the General Partner or, upon appointment pursuant to Section 6.2(h), the Special Representative, shall constitute the act of and serve to bind Citizens Capital. In dealing with the General Partner or, upon appointment pursuant to Section 6.2(h), the Special Representative, acting on behalf of Citizens Capital no Person shall be required to inquire into the authority of the General Partner or, upon appointment pursuant to Section 6.2(h), the Special Representative, to bind Citizens Capital. Persons dealing with Citizens Capital are entitled to rely conclusively on the power and authority of the General Partner or, upon appointment pursuant to Section 6.2(h), the Special Representative, as set forth in this Agreement. Section 9.2 POWER AND DUTIES OF GENERAL PARTNER. Except as otherwise specifically provided herein, the General Partner (or, upon appointment pursuant to Section 6.2(h), the Special Representative), shall have all rights and powers of a general partner under the Act, and shall have all authority, rights and powers in the management of Citizens Capital business to do any and all other acts and things necessary, proper, convenient or advisable to effectuate the purposes of this Agreement, including by way of illustration but not by way of limitation, the following: (a) to secure the necessary goods and services required in performing the General Partner's duties for Citizens Capital; (b) to exercise all powers of Citizens Capital, on behalf of Citizens Capital, in connection with enforcing Citizens Capital's rights under the Convertible Debentures and the Partnership Guarantee Agreement; (c) to issue Partnership Preferred Securities and to admit Limited Partners in connection therewith in accordance with this Agreement; (d) to act as registrar and transfer agent for the Partnership Preferred Securities or designate an entity to act as registrar and transfer agent; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including with respect to Distributions and voting rights and to make determinations as to the payment of Distributions, and make or cause to be made all other required payments to Holders and to the General Partner; (f) to open, maintain and close bank accounts and to draw checks and other orders for the payment of money; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against Citizens Capital; (h) to deposit, withdraw, invest, pay, retain and distribute Citizens Capital's funds in a manner consistent with the provisions of this Agreement; (i) to take all action which may be necessary or appropriate for the preservation and the continuation of Citizens Capital's valid existence, rights, franchises and privileges as a limited partnership 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 Limited Partner or to enable Citizens Capital to conduct the business in which it is engaged; (j) to cause Citizens Capital to enter into and perform, on behalf of Citizens Capital, the Underwriting Agreement and to cause Citizens Capital to purchase the Convertible Debentures without any further act, vote or approval of any Partner; and (k) to execute and deliver any and all documents or instruments, perform all duties and powers and do all things for and on behalf of Citizens Capital in all matters necessary or desirable or incidental to the foregoing. Section 9.3 OBLIGATIONS AND EXPENSES PAYABLE BY GENERAL PARTNER. (a) The General Partner hereby assumes and shall be liable for the debts, obligations and liabilities of the Partnership, including any liabilities arising under the Securities Act of 1933 and Securities Exchange Act of 1934, and agrees to pay to each Person to whom Citizens Capital is now or hereafter becomes indebted or liable, the "Beneficiaries," whether such indebtedness, obligations or liabilities arise in contract, tort or otherwise, (including, without limitation, payment obligations arising under Sections 7.3 of this Agreement, but excluding payment obligations of the Company to Holders of the Partnership Preferred Securities in such Holders' capacities as Holders of such Partnership Preferred Securities, such obligations being separately guaranteed under the Partnership Guarantee Agreement) the full payment of such indebtedness and any and all liabilities, when and as due. This Agreement is intended to be for the benefit of and to be enforceable by all such Beneficiaries whether or not such Beneficiaries have received notice hereof. (b) The General Partner agrees to pay for and be responsible for: (i) all costs and expenses relating to the sale of shares of the Citizens Utility Common Stock received as interest payments on the Convertible Debentures (including brokerage, transfer and custodial fees); (ii) all costs and expenses of Citizens Capital (including, but not limited to, costs and expenses relating to the organization of Citizens Capital, the offering, sale and issuance of Partnership Preferred Securities, the costs and expenses relating to the operation of Citizens Capital, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agents), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Partnership assets); and (iii) any and all taxes (other than United States withholding taxes attributable to Citizens Capital or its assets) and all liabilities, costs and expenses with respect to such taxes of Citizens Capital. Section 9.4 LIABILITY. Except as expressly set forth in this Agreement or in the Guarantee Agreements, (a) the General Partner shall not be personally liable for the return of any portion of the capital contributions (or any return thereon) of the Limited Partners; (b) the return of such capital contributions (or any return thereon) shall be made solely from assets of Citizens Capital; and (c) the General Partner shall not be required to pay to Citizens Capital or to any Limited Partner any deficit in any Limited Partner's Capital Account upon dissolution or otherwise. Other than as expressly provided in this Agreement or under the Act, no Limited Partner shall have the right to demand or receive property other than cash for its respective Interest in Citizens Capital. Otherwise, the General Partner shall be liable to an unlimited extent for the debts and other obligations of Citizens Capital. Section 9.5 INVESTMENT COMPANY OR TAX ACTIONS. The General Partner is authorized and directed to conduct its affairs and to operate Citizens Capital in such a way that Citizens Capital would not be deemed to be an "investment company" required to be registered under the Investment Company Act of 1940 (the "1940 Act") or classified as an association taxable as a corporation for federal income tax purposes and so that the Convertible Debentures will be treated as indebtedness of Citizens for federal income tax purposes. In this connection, the General Partner is authorized to take any action not inconsistent with applicable law or this Agreement, and that does not materially and adversely affect the interests of Holders, that the General Partner determines in its discretion to be necessary or desirable for such purposes. Section 9.6 OUTSIDE BUSINESSES. Any Partner or Affiliate thereof 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 Citizens Capital, and Citizens Capital and the Partners shall have no rights by virtue of this Agreement 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 Citizens Capital, shall not be deemed wrongful or improper. No Partner or Affiliate thereof shall be obligated to present any particular investment opportunity to Citizens Capital even if such opportunity is of a character that, if presented to Citizens Capital, could be taken by Citizens Capital, and any Partner or Affiliate thereof 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 opportunity. Section 9.7 LIMITS ON GENERAL PARTNER'S POWERS. (a) Anything in this Agreement to the contrary notwithstanding, the General Partner (or, upon appointment pursuant to Section 6.2(h), the Special Representative) shall not cause or permit Citizens Capital to: (i) acquire any assets other than as expressly provided herein; (ii) do any act which would make it impractical or impossible to carry on the ordinary business of Citizens Capital; (iii) possess Partnership property for other than a Partnership purpose; (iv) admit a Person as a Partner, except as expressly provided in this Agreement; (v) make any loans to the General Partner or its Affiliates, other than loans represented by the Convertible Debentures; (vi) perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction; (vii) engage in any activity that is not consistent with the purposes of Citizens Capital, as set forth in Section 2.3; (viii) without the written consent of 66-2/3% in Liquidation Preference of the Partnership Preferred Securities have an order for relief entered with respect to Citizens Capital or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of Citizens Capital's property, or make any assignment for the benefit of creditors of Citizens Capital; or (ix) borrow money or become liable for the borrowings of any third party or to engage in any financial or others trade or business. (b) So long as the Convertible Debentures are held by Citizens Capital, the General Partner shall not: (i) direct the time, method and place of conducting any proceeding for any remedy available to the Special Representative, or exercising any trust or power conferred on the Special Representative with respect to the Convertible Debentures, (ii) waive any past default which is waivable under the Convertible Debentures, (iii) exercise any right to rescind or annul a declaration that the principal of all the Convertible Debentures shall be due and payable, (iv) consent to any amendment, modification or termination of the Convertible Debentures or of the Indenture without, in each case, obtaining the prior approval of the Holders of not less than 66-2/3% in Liquidation Preference of the Partnership Preferred Securities; provided, however, that where a consent under the Convertible Debentures would require the consent of each holder of Convertible Debentures affected thereby, no such consent shall be given by the General Partner without the prior consent of each Holder of Partnership Preferred Securities. (c) The General Partner shall not revoke any action previously authorized or approved by the Special Representative or by a vote of Holders without the approval of the Holders of not less than 66-2/3% in Liquidation Preference of the Partnership Preferred Securities. The General Partner shall notify all Holders of any notice of default received from the Indenture Trustee with respect to the Convertible Debentures. Section 9.8 TAX MATTERS PARTNER. (a) For purposes of Code Section 6231(a)(7), the "Tax Matters Partner" shall be the General Partner as long as it remains the general partner of Citizens Capital. The Tax Matters Partner shall keep the Limited Partners fully informed of any inquiry, examination or proceeding. (b) The General Partner shall not make an election in accordance with Section 754 of the Code. (c) The General Partner and the Partnership Preferred Security Holders acknowledge that they intend, for U.S. federal income tax purposes, that Citizens Capital shall be treated as a partnership and that the General Partner and the Partnership Preferred Security Holders shall be treated as Partners of such Partnership for such purposes. (d) The General Partner shall retain, at the expense of Citizens Capital and at its sole discretion, a nationally recognized firm of certified public accountants which shall prepare all federal, state, local or other tax returns (including information returns) of Citizens Capital, as required by law, and the Schedule K- 1's or any successor or similar forms or schedules required by law. Section 9.9 CONSOLIDATION, MERGER OR SALE OF ASSETS. (a) Citizens may not merge or consolidate with or into another entity or permit another entity to merge or consolidate with or into, or be replaced by, or sell, transfer or lease all or substantially all of its assets to another entity (each such event, a "Transaction") unless (i) at the time of such Transaction, no Event of Default (as defined in the Fiscal Agency Agreement) shall have occurred and be continuing, or would occur as a result of such Transaction, (ii) the survivor of such merger or consolidation or the entity to which Citizens' assets are sold, transferred or leased is an entity organized under the laws of the United States or any state thereof, such entity becomes a party to this Agreement and becomes the General Partner, assumes all of Citizens' obligations under this Agreement, and has a net worth equal to at least 10% of the total capital contributions made by the Partners to Citizens Capital, and (iii) prior to such Transaction, Citizens obtains an opinion of nationally recognized independent counsel experienced in such matters to the effect that Citizens Capital will continue to be taxable as a partnership for federal income tax purposes after such Transaction and (iv) in the case of any sale, transfer or lease of all or substantially all of Citizens' assets that includes Citizens' Interest in Citizens Capital, Citizens has obtained the consent of the Holders of not less than 66- 2/3% in Liquidation Preference of the Partnership Preferred Securities to the sale, transfer or lease of its Interest in Citizens Capital. (b) In addition, Citizens shall not cause or allow Citizens Capital to enter into a Transaction, except as described below and as permitted or required under Section 11.3 of this Agreement. Citizens Capital may, for purposes of changing its state of domicile in order to avoid 1940 Act consequences adverse to Citizens, itself or the Holders, merge or without the consent of the Holders, merge or consolidate with or into, or be replaced by, a limited partnership or trust organized as such under the laws of any state of the United States of America; provided, that (i) such successor entity either (x) expressly assumes all of the obligations of Citizens Capital under the Partnership Preferred Securities or (y) substitutes for the Partnership Preferred Securities other securities having substantially the same terms as the Partnership Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, with respect to participation in the profits or assets of the successor entity, at least as high as the Partnership Preferred Securities rank, with respect to participation in the profits or assets of Citizens Capital, (ii) Citizens expressly acknowledges such successor entity as the holder of the Convertible Debentures, (iii) only if the Trust is liquidated and the Partnership Preferred Securities have been listed on a national securities exchange or other organization, such Transaction does not cause the Partnership Preferred Securities (or the Successor Securities) to be delisted by any national securities exchange or other organization on which the Partnership Preferred Securities are then listed, (iv) only if the Trust is liquidated and Partnership Preferred Securities are distributed to holders of Trust Securities, such Transaction does not cause the Partnership Preferred Securities (or the Successor Securities) to be downgraded by any nationally recognized statistical rating organization, as that term is defined by the Securities and Exchange Commission for purposes of Rule 436(g)(2) under the Securities Act, (v) such Transaction does not adversely affect the powers, preferences and other special rights of Holders of Partnership Preferred Securities (including Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (vi) prior to such Transaction the Company has received an opinion of nationally recognized independent counsel to Citizens Capital experienced in such matters to the effect that (x) such successor entity will be treated as a partnership for federal income tax purposes, (y) following such Transaction, Citizens and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company, and (z) such Transaction will not adversely affect the limited liability of the Holders. ARTICLE X TRANSFERS OF INTERESTS BY PARTNERS Section 10.1 TRANSFER OF INTERESTS. (a) Partnership Preferred Securities shall be freely transferable by a Holder. (b) Except as provided in the next sentence, the General Partner may not assign or transfer its Interest in Citizens Capital in whole or in part unless, prior to such assignment or transfer, the General Partner has obtained the consent of the Holders of not less than 66-2/3% in Liquidation Preference of the Partnership Preferred Securities. The General Partner may assign or transfer its interest in Citizens Capital without such consent only to an entity that is the survivor of a merger or consolidation of the General Partner in a transaction that meets the requirements of Section 9.9(a) and only if prior to such assignment or transfer the Company has received an opinion of nationally recognized independent tax counsel to Citizens Capital experienced in such matters to the effect that after such assignment or transfer Citizens Capital will continue to be treated as a partnership for U.S. federal income tax purposes. "Permitted Successor" shall mean an entity that is an assignee or transferee of the Interest of the General Partner as permitted by this Section 10.1(b). (c) Except as provided above, no Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Agreement. Any transfer or purported transfer of any Interest not made in accordance with this Agreement shall be null and void. Section 10.2 TRANSFER OF LP CERTIFICATES. The General Partner shall provide for the registration of LP Certificates and of transfers of LP Certificates. Upon surrender for registration of transfer of any LP Certificate, the General Partner shall cause one or more new LP Certificates to be issued in the name of the designated transferee or transferees. Every LP Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the General Partner duly executed by the Partnership Preferred Security Holder or his or her attorney duly authorized in writing. Each LP Certificate surrendered for registration of transfer shall be cancelled by the General Partner. A transferee of an LP Certificate shall be admitted to Citizens Capital as a Limited Partner and shall be entitled to the rights and subject to the obligations of a Partnership Preferred Security Holder hereunder upon the receipt by a transferee of an LP Certificate. Section 10.3 PERSONS DEEMED PARTNERSHIP PREFERRED SECURITY HOLDERS. Citizens Capital may treat the Person in whose name any LP Certificate shall be registered on the books and records of Citizens Capital as the sole holder of such LP Certificate and of the Partnership Preferred Securities represented by such LP Certificate for purposes of receiving Distributions and for all other purposes whatsoever (including without limitation, tax returns and information reports) and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such LP Certificate or in the Partnership Preferred Securities represented by such LP Certificate on the part of any other Person, whether or not Citizens Capital shall have actual or other notice thereof. Section 10.4 BOOK ENTRY PROVISIONS. (a) General. The provisions of this Section 10.4 shall apply only in the event that the Partnership Preferred Securities are distributed to the holders of Trust Securities. The LP Certificates, on original issuance, will be issued in the form of a global LP Certificate or LP Certificates representing the Book- Entry Interests, to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Partnership. Such LP Certificate or LP Certificates shall initially be registered on the books and records of the Partnership in the name of Cede & Co., the nominee of DTC, and no Partnership Preferred Security Owner will receive a definitive LP Certificate representing such Partnership Preferred Security Owner's interests in such LP Certificate, except as provided in Section 10.6. Unless and until definitive, fully registered LP Certificates (the "Definitive LP Certificates") have been issued to the Partnership Preferred Security Owners pursuant to Section 10.6: (i) The provisions of this Section shall be in full force and effect; (ii) The Partnership, the General Partner and any Special Representative shall be entitled to deal with the Clearing Agency for all purposes of this Agreement (including the payment of Distributions, Redemption Price and liquidation proceeds on the LP Certificates and receiving approvals, votes or consents hereunder) as the Partnership Preferred Security Holder and the sole holder of the LP Certificates and shall have no obligation to the Partnership Preferred Security Owner; and (iii) None of the Partnership, the General Partner, any Special Representative or any agent of the General Partner, the Partnership or any Special Representative shall have any liability with respect to or responsibility for the records of the Clearing Agency. (b) NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Partnership Preferred Security Holders is required under this Agreement, unless and until Definitive LP Certificates shall have been issued to the Partnership Preferred Security Owners pursuant to Section 10.6, the General Partner and any Special Representative shall give all such notices and communications specified herein to be given to the Partnership Preferred Security Holders to the Clearing Agency, and shall have no obligations to the Partnership Preferred Security Owners. (c) DEFINITIVE LP CERTIFICATES. If (i) the Clearing Agency elects to discontinue its services as securities depository, (ii) the Partnership elects to terminate the book-entry system through the Clearing Agency, or (iii) there is an Event of Default under the Convertible Debentures, then Definitive LP Certificates shall be prepared by the Partnership. Upon surrender of the global LP Certificate or LP Certificates representing the Book-Entry Interests by the Clearing Agency, accompanied by registration instructions, the General Partner shall cause Definitive LP Certificates to be delivered to Partnership Preferred Security Owners in accordance with the instructions of the Clearing Agency. Neither the General Partner nor the Partnership shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Any Person receiving a Definitive LP Certificate in accordance with this Article X shall be admitted to the Partnership as a Limited Partner upon receipt of such Definitive LP Certificate and shall be registered on the books and records of the Partnership as a Partnership Preferred Security Holder. The Definitive LP Certificates shall be printed, lithographed or engraved or may be produced in any other manner as may be required by any national securities exchange on which the Partnership Preferred Securities may be listed and is reasonably acceptable to the General Partner, as evidenced by its execution thereof. Section 10.5 REGISTRAR, PAYING AGENT AND CONVERSION AGENT. Citizens Capital shall maintain in the Borough of Manhattan, City of New York, State of New York (i) an office or agency where Partnership Preferred Securities may be presented for registration of transfer or for exchange ("Registrar"), (ii) an office or agency where Partnership Preferred Securities may be presented for payment ("Paying Agent") and an office or agency where Partnership Preferred Securities may be presented for conversion ("Conversion Agent"). The Registrar shall keep a register of the Partnership Preferred Securities and of their transfer and exchange. Citizens Capital may appoint the Registrar, the Paying Agent and the Conversion Agent and may appoint one or more co- registrars, one or more additional paying agents and one or more additional conversion agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. Citizens Capital may change any Paying Agent, Registrar, co-registrar or Conversion Agent without prior notice to any Holder. If Citizens Capital fails to appoint or maintain another entity as Registrar, Paying Agent or Conversion Agent, the General Partner shall act as such. Citizens Capital or any of its Affiliates may act as Paying Agent, Registrar, or Conversion Agent. Citizens Capital initially appoints Chemical Bank as Registrar, Paying Agent and Conversion Agent for the Partnership Preferred Securities. ARTICLE XI WITHDRAWAL, DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS Section 11.1 WITHDRAWAL OF PARTNERS. The General Partner shall not at any time retire or withdraw from Citizens Capital except as otherwise permitted hereunder. If the General Partner retires or withdraws in contravention of this Section 11.1, it shall indemnify, defend and hold harmless Citizens Capital and the other Partners from and against any losses, expenses, judgments, fines, settlements or damages suffered or incurred by Citizens Capital or such other Partners arising out of or resulting from such retirement or withdrawal. Section 11.2 DISSOLUTION OF CITIZENS CAPITAL. (a) Citizens Capital shall not be dissolved by the admission of Partners in accordance with the terms of this Agreement. Except as provided in Section 11.2(b)(ii), the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Partner, or the occurrence of any other event which terminates the Interest of a Partner in Citizens Capital, shall not cause Citizens Capital to be dissolved and its affairs wound up so long as Citizens Capital at all times has at least two Partners. Upon the occurrence of any such event, the business of Citizens Capital shall be continued without dissolution. (b) Citizens Capital shall be dissolved and terminated and its affairs shall be wound up upon the earliest to occur of any of the following events: (i) the expiration of the term of Citizens Capital, as provided in Section 2.4 of this Agreement; (ii) upon the bankruptcy, insolvency, expulsion or dissolution of the General Partner; (iii) the entry of a decree of judicial dissolution under Section 17-802 of the Act; (iv) the written consent of all Partners; or (v) in accordance with the terms of the Partnership Preferred Securities. (c) Upon dissolution of Citizens Capital, the Liquidator shall promptly notify the Partners of such dissolution. Section 11.3 LIQUIDATION. (a) In the event of the dissolution of Citizens Capital for any reason, the General Partner (or, if Citizens Capital is dissolved pursuant to Section 11.2(b)(ii), then a liquidating agent appointed by Holders of not less than 66 2/3% in Liquidation Preference of the Partnership Preferred Securities (the General Partner or such Person so appointed is hereinafter referred to as the "Liquidator")) shall commence to wind up the affairs of Citizens Capital and to liquidate Citizens Capital's assets, including Citizens Capital's Eligible Investments and/or amounts deposited in the Eligible Investment Account; provided, however, that a reasonable time shall be allowed for the orderly liquidation of the assets of Citizens Capital and the satisfaction of liabilities to creditors so as to enable the Partners to minimize the normal losses attendant upon liquidation. The Partners shall continue to share all income, losses and distributions during the period of liquidation in accordance with Articles IV and V. Subject to the provisions of this Article XI, the Liquidator shall have full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Partnership property pursuant to such liquidation, giving due regard to the activity and condition of the relevant market and general financial and economic conditions. (b) The Liquidator shall have all of the rights and powers with respect to the assets and liabilities of Citizens Capital in connection with the liquidation and termination of Citizens Capital that the General Partner would have with respect to the assets and liabilities of Citizens Capital during the term of Citizens Capital, and the Liquidator is hereby expressly authorized and empowered to execute any and all documents necessary or desirable to effectuate the liquidation and termination of Citizens Capital and the transfer of any assets. (c) Notwithstanding the foregoing, a Liquidator that is not a General Partner shall not be deemed a Partner in this Partnership and shall not have any of the economic interests in Citizens Capital of a Partner; and such Liquidator may be compensated for its services to Citizens Capital at normal customary and competitive rates for its services to Citizens Capital as reasonably determined by all the Limited Partners. Section 11.4 DISTRIBUTION IN LIQUIDATION. Subject to Section 9.3, the proceeds of liquidation shall be applied in the following order of priority (and without regard to the provisions of Section 17-804 of the Act): (i) to creditors of Citizens Capital, including Partnership Preferred Security Holders who are creditors, to the extent otherwise permitted by law, in satisfaction of the liabilities of Citizens Capital (whether by payment or the making of reasonable provisions for payment thereof), other than liabilities for distributions (including Distributions) to Partners; and (ii) following any allocations required under Section 4.1(c) of the Agreement, to the Partners in proportion to the Partner's positive Capital Account balances. Section 11.5 RIGHTS OF LIMITED PARTNERS. Each Limited Partner shall look solely to the assets of Citizens Capital for all distributions with respect to Citizens Capital and such Partner's capital contribution (including returns thereof), and such Partner's share of profits or losses thereof, and shall have no recourse therefor (upon dissolution or otherwise) against the General Partner, except under the Partnership Guarantee Agreement. Except as provided in Section 6.3 and 6.4 of this Agreement, no Partner shall have any right to demand or receive property other than cash upon dissolution and termination of Citizens Capital. Section 11.6 TERMINATION. Citizens Capital shall terminate when all of the assets of Citizens Capital shall have been disposed of and the assets shall have been distributed as provided in Section 11.4. The Liquidator shall then execute and cause to be filed a certificate of cancellation of Citizens Capital. ARTICLE XII AMENDMENTS AND MEETINGS Section 12.1 AMENDMENTS. Except as provided by Section 6.2(i), this Agreement may be amended by a written instrument executed by the General Partner without the consent of any Limited Partner; provided, however, that no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to cause Citizens Capital to be treated as anything other than a partnership for purposes of United States income taxation or require Citizens Capital to register under the 1940 Act. Notwithstanding any provision to the contrary, in the event of (i) a liquidation of the Trust for any reason or (ii) any other distribution which effectively causes Partnership Preferred Securities to be distributed to holders of Trust Securities, the General Partner may amend this Agreement without the consent of the Limited Partners to provide for (A) orderly dissemination, purchase, sale, exchange and replacement of such Partnership Preferred Securities, (B) all other matters to the extent required by or desirable under then applicable law and (C) such other matters reasonably incidental or related thereto; provided, however, that no such amendment may materially adversely effect the rights, preferences and value of any class of such Partnership Securities without the consent of a majority in interest of the Partners so effected. Section 12.2 AMENDMENT OF CERTIFICATE. In the event this Agreement shall be amended pursuant to Section 12.1, the General Partner shall amend the Certificate to reflect such change if it deems such amendment of the Certificate to be necessary or appropriate. Section 12.3 MEETINGS OF PARTNERS. (a) Meetings of the Limited Partners who are Holders may be called at any time by the General Partner to consider and act on any matter on which Limited Partners are entitled to act under the terms of this Agreement or the Act. The General Partner shall call a meeting of Holders if directed to do so by Holders of no less than 10% in Liquidation Preference as permitted by this Agreement. Such direction shall be given by delivering to the General Partner a request in writing stating that the signing Limited Partners desire to call a meeting and indicating the general or specific purpose for which the meeting is to be called. (b) Notice of any such meeting shall be given to all Partners not less than seven Business Days nor more than 60 days prior to the date of such meeting. Each such notice shall set forth the date, time and place of the meeting, a description of any matter on which Holders are entitled to vote and instructions for the delivery of proxies of written consents. (c) Any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if a consent in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum Interests that would be necessary to authorize or take such action at a meeting in which all Limited Partners 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 Limited Partners entitled to vote who have not consented in writing. The General Partner may provide that any written ballot submitted to the Limited Partners for the purpose of taking any action without a meeting shall be refunded to Citizens Capital within a specified time. (d) Each Partner may authorize any Person to act for it by proxy on all matters as to which a Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Partner or its attorney-in-fact. 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 Partner executing it. (e) Each meeting of Partners shall be conducted by the General Partner or by such other Person that the General Partner may designate. (f) The General Partner may establish all other reasonable procedures relating to meetings of Partners or the giving of written consents, in addition to those expressly provided, including notice of time, place or purpose of any meeting at which any matter is to be voted on by any Partners, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII MISCELLANEOUS Section 13.1 NOTICES. All notices provided for in this Agreement shall be in writing, and shall be delivered or mailed by first class or registered or certified mail or, with respect to Citizens Capital and General Partner, telecopied, as follows: (a) if given to Citizens Capital, in care of the General Partner at Citizens Capital's mailing address set forth below: Citizens Utilities Capital L.P. c/o Citizens Utilities Company High Ridge Park P.O. Box 3801 Stamford, Connecticut 06905 Attention: ________________ Telecopy: ________________ (b) if given to the General Partner, at its mailing address set forth below: Citizens Utilities Company High Ridge Park P.O. Box 3801 Stamford, Connecticut 06905 Attention: ______________ Telecopy: ______________ (c) if given to any other Partner at the address set forth on the books and records of Citizens Capital. Section 13.2 POWER OF ATTORNEY. Each Holder does hereby constitute and appoint the General Partner, and if applicable, any Special Representative appointed pursuant to Section 6.2(g) of this Agreement, as its true and lawful representative and attorney-in-fact, in its name, place and stead to make, execute, sign, deliver and file (a) any amendment of the Certificate required because of an amendment of this Agreement or in order to effect any change in Citizens Capital, (b) this Agreement, (c) any amendments to this Agreement and (d) all such other instruments, documents and certificates which from time to time may be required by the laws of the United States of America, the State of Delaware or any other jurisdiction, or any political subdivision or agency thereof, to effectuate, implement and continue the valid and subsisting existence of Citizens Capital or to dissolve Citizens Capital for any other purpose consistent with this agreement and the transactions contemplated hereby. The power of attorney granted hereby is coupled with an interest and shall (a) survive and not be affected by the subsequent death, incapacity, disability, dissolution, termination, or bankruptcy of the Holder granting the same or the transfer of all or any portion of such Holder's Interest and (b) extend to such Holder's successors, assigns and legal representatives. Section 13.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties. It supersedes any prior agreement or understandings among them, and it may not be modified or amended in any manner other than as set forth herein. Section 13.4 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Section 13.5 EFFECT. Except as herein otherwise specifically provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and assigns. Section 13.6 PRONOUNS AND NUMBER. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter shall include the masculine, feminine and neuter. Section 13.7 CAPTIONS. Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provisions hereof. Section 13.8 PARTIAL ENFORCEABILITY. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement, 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 13.9 COUNTERPARTS. This Agreement may contain more than one counterpart of the signature page and this Agreement may be executed by the affixing of the signature of each of the Partners to one 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. Section 13.10 REMEDIES. The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above stated. GENERAL PARTNER: CITIZENS UTILITIES COMPANY a Delaware corporation By: Name: Title: INITIAL LIMITED PARTNER: a _________ corporation By: Name: Title: ANNEX A FORM OF PARTNERSHIP PREFERRED SECURITY [FORM OF FACE OF SECURITY] Number of Partnership Certificate Number Preferred Securities [CUSIP NO. ] Certificate Evidencing Partnership Preferred Securities of Citizens Utilities Capital L.P. ___% Convertible Partnership Preferred Securities (liquidation preference $50 per Partnership Preferred Security) Citizens Utilities Capital L.P., a limited partnership formed under the laws of the State of Delaware (the "Partnership"), hereby certifies that (the "Holder") is the registered owner of preferred securities of Citizens Capital representing limited partnership interests in Citizens Capital, which are designated the __% Convertible Partnership Preferred Securities (liquidation preference $50 per Preferred Security) (the "Partnership Preferred Securities"). The Partnership Preferred Securities are fully paid and are nonassessable interests in Citizens Capital, as to which the Partners in Citizens Capital who hold the Partnership Preferred Securities (the "Partnership Preferred Security Holders"), in their capacities as Partners in Citizens Capital, will have no liability solely by reason of being Partnership Preferred Security Holders (subject to the obligation of a Partnership Preferred Security Holder to repay any funds wrongfully distributed to it), and are freely transferable on the books and records of Citizens Capital, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The powers, preferences and special rights and limitations of the Partnership Preferred Securities are set forth in, and this certificate and the Partnership Preferred Securities are set forth in, and this certificate and the Partnership Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Limited Partnership Agreement of Citizens Capital dated as of _________ ___, 1995, as the same may be amended from time to time in accordance with its terms (the "Limited Partnership Agreement"), authorizing the issuance of the Partnership Preferred Securities and determining the powers, preferences and other special rights and limitations, regarding Distributions, voting, return of capital and otherwise, and other matters relating to the Partnership Preferred Securities. Capitalized terms used herein but not defined herein shall have the meaning given them in the Limited Partnership Agreement. The Holder is entitled to the benefits of the Partnership Preferred Securities Guarantee Agreement dated as of ____________, 1995 (the "Partnership Guarantee Agreement") executed by Citizens Utilities Company (the "Company") to the extent provided therein. Citizens Capital will furnish a copy of the Limited Partnership Agreement and the Partnership Guarantee Agreement to the Holder without charge upon written request to Citizens Capital at its principal place of business or registered office. IN WITNESS WHEREOF, Citizens Capital has executed this certificate this _____ day of ___________ 1995. CITIZENS UTILITIES CAPITAL L.P. By: CITIZENS UTILITIES COMPANY its General Partner By: Name: Title: [FORM OF REVERSE OF SECURITY] The Holder, by accepting this certificate, is deemed to have agreed (i) to be bound by the provisions of the Limited Partnership Agreement and (ii) that the Convertible Debentures acquired by Citizens Capital with the proceeds from the issuance of the Partnership Preferred Securities are subordinated and junior in right of payment to all Senior Indebtedness of Citizens as and to the extent provided in the Convertible Debentures and (iii) that the Partnership Guarantee Agreement ranks (x) subordinate and junior in right of payment to all Senior Indebtedness of Citizens, and (y) PARI PASSU with the most senior preferred or preference stock now or hereafter issued by Citizens and with any guarantee now or hereafter entered into by Citizens in respect of any preferred or preference stock of any Affiliate of Citizens, and (z) senior to Common Stock and any other classes or series of capital stock of Citizens or any of its Affiliates which by its express terms ranks junior in the payment of distributions and amounts on liquidation, dissolution, and winding-up to the Partnership Preferred Securities, in each case, as and to the extent provided in the Partnership Guarantee Agreement. Upon receipt of this certificate, the Holder is admitted to the Partnership as a Limited Partner, is bound by the Limited Partnership Agreement and is entitled to the benefits thereunder. Distributions payable on each Partnership Preferred Security will be fixed at a rate per annum of % (the "Coupon Rate") of the stated liquidation preference of $50 per Partnership Preferred Security, such rate being the rate of interest payable on the Convertible Debentures to be held by Citizens Capital. Distributions in arrears for more than one quarter will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes payment in the form of cash or shares of common stock of the Company ("Common Stock"). A Distribution is payable only to the extent that payments are made in respect of the Convertible Debentures held by Citizens Capital and to the extent Citizens Capital has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Partnership Preferred Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears, on __________ ___, ________ ___, __________ ___ and __________ ___ of each year, commencing on __________ ___, 1996, to Holders of record on the relevant Regular Record Dates (as such term is defined in the Indenture), which payment dates shall correspond to the interest payment dates on the Convertible Debentures. The Debenture Issuer has the right under the Indenture to defer payments of interest from time to time on the Convertible Debentures for a period not exceeding 20 consecutive quarters (each an "Extension Period") and, as a consequence of such deferral, Distributions will also be deferred. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate compounded quarterly during any such Extension Period. Prior to the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements. The Partnership Preferred Securities shall be redeemable as provided in the Limited Partnership Agreement. The Partnership Preferred Securities shall be convertible into shares of Common Stock, through (i) the exchange of Partnership Preferred Securities for a portion of the Convertible Debentures and (ii) the immediate conversion of such Convertible Debentures into Common Stock, in the manner and according to the terms set forth in the Limited Partnership Agreement. NOTICE OF CONVERSION To: [Name of Bank], As Conversion Agent Citizens Utilities Capital L.P. The undersigned owner of these Partnership Preferred Securities hereby irrevocably exercises the option to convert these Partnership Preferred Securities, or the portion below designated, into shares of Common Stock, Series A, par value $.25 per share, of CITIZENS UTILITIES COMPANY ("Common Stock") in accordance with the terms of the Amended and Restated Agreement of Limited Partnership (the "Limited Partnership Agreement"), dated as of _________ ___, 1995, by and among Citizens Utilities Company, as the general partner, ____________, as initial limited partner, and such other Persons (as defined therein) who become Limited Partners (as defined therein) as provided in the Limited Partnership Agreement. Pursuant to the aforementioned exercise of the option to convert these Partnership Preferred Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Limited Partnership Agreement) to (i) exchange such Partnership Preferred Securities for a portion of the Convertible Debentures (as that term is defined in the Limited Partnership Agreement) held by the Limited Partnership (as such term is defined in the Limited Partnership Agreement) (at the rate of exchange specified in the Limited Partnership Agreement) and (ii) immediately convert such Convertible Debentures on behalf of the undersigned, into Common Stock (at the conversion rate specified in the Limited Partnership Agreement). The undersigned does also hereby direct the Conversion Agent that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. This Notice of Conversion and any action taken hereunder shall be governed by the terms of the Limited Partnership Agreement. Date: ____________, ____ in whole __ in part Number of Partnership Preferred Securities to be converted: ___________________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Common Stock are to be issued, along with the address or addresses of such person or persons Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ANNEX B NOTICE OF DISTRIBUTION ELECTION TO: _________________, As Election Agent Citizens Utilities Capital L.P. The undersigned owner of ____% Convertible Partnership Preferred Securities (liquidation preference $50 per preferred security) (the "Partnership Preferred Securities"), issued pursuant to the Amended and Restated Agreement of Limited Partnership (the "Limited Partnership Agreement"), dated as of ___________ ___, 1995, by and among Citizens Utilities Company, as the general partner, ____________, as initial limited partner, and such other Persons (as defined therein) who become Limited Partners (as defined therein) as provided in the Limited Partnership Agreement, hereby irrevocably elects to receive, in the form prescribed below, Distributions (as such term is defined in the Limited Partnership Agreement) due and payable to the undersigned on the four Distribution Payment Dates (as such term is defined in the Limited Partnership Agreement) occurring after the Election Period during which this Notice of Distribution Election is being submitted. The Undersigned, as Holder of [NUMBER OF PARTNERSHIP PREFERRED SECURITIES HELD] Partnership Preferred Securities, elects to receive payment of Distributions due and payable on the next four Distribution Payment Dates in the form: Choose one: ( ) Cash ( ) An Equivalent Value of shares Common Stock Series A, par value $.25 per share, of Citizens Utilities Company ("Common Stock") [(A) ( ) Cash for [NO. OF PARTNERSHIP PREFERRED SECURITIES TO RECEIVE DISTRIBUTIONS IN CASH]; (B) ( ) Shares of Common Stock Series A, par value $.25 per share, of Citizens Utilities Company ("Common Stock") [NO. OF PARTNERSHIP PREFERRED SECURITIES TO RECEIVE DISTRIBUTIONS IN COMMON STOCK].](1) ____________________ 1 Only holders of Partnership Preferred Securities who hold on behalf of more than one beneficial owner of Partnership Preferred Securities may choose more than one form in which to receive Distributions. Furthermore, such holder of multiple beneficial owners' interests in Partnership Preferred Securities may elect only one form of Distribution for each such beneficial owner. The undersigned does also hereby direct the addressee that any and all Distributions in the form of Common Stock made pursuant to this Notice of Distribution Election be delivered to and issued in the name of the undersigned, unless a different name/different names has/have been indicated in the assignment below. If such shares are to be issued in the name/names of a person/persons other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. This Notice of Distribution Election and any action taken hereunder shall be governed by the terms of the Limited Partnership Agreement. Date: ____________, ____ (Applicable only if box (B) has been checked.) If a name or names other than the undersigned, please indicate in the spaces below the name or names in which shares of Common Stock are to be issued, along with the address or addresses of such person or persons Signature Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ANNEX C STATEMENT OF COMMON DEFINITIONS TABLE OF CONTENTS Page ARTICLE I DEFINED TERMS Section 1.1 DEFINITIONS . . . . . . . . . . . . . . . . . 4 Section 1.2 HEADINGS . . . . . . . . . . . . . . . . . . . 14 ARTICLE II CONTINUATION OF CITIZENS CAPITAL; ADMISSION OF PARTNERSHIP PREFERRED SECURITIES HOLDERS; WITHDRAWAL OF INITIAL LIMITED PARTNER Section 2.1 CONTINUATION OF CITIZENS CAPITAL . . . . . . . 14 Section 2.2 NAME . . . . . . . . . . . . . . . . . . . . . 14 Section 2.3 BUSINESS OF CITIZENS CAPITAL . . . . . . . . . 14 Section 2.4 TERM . . . . . . . . . . . . . . . . . . . . . 15 Section 2.5 REGISTERED AGENT AND OFFICE . . . . . . . . . 15 Section 2.6 PRINCIPAL PLACE OF BUSINESS . . . . . . . . . 15 Section 2.7 NAME AND BUSINESS ADDRESS OF GENERAL PARTNER . . . . . . . . . . . . . . . 16 Section 2.8 QUALIFICATION TO DO BUSINESS . . . . . . . . . 16 Section 2.9 ADMISSION OF HOLDERS OF PARTNERSHIP PREFERRED SECURITIES; WITHDRAWAL OF INITIAL LIMITED PARTNER . . . . . . . . . . 16 ARTICLE III CAPITAL CONTRIBUTIONS; REPRESENTATION OF PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS Section 3.1 CAPITAL CONTRIBUTIONS . . . . . . . . . . . . 17 Section 3.2 PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST REPRESENTED BY L.P. CERTIFICATE . . . . . . . . . . . . . 17 Section 3.3 CAPITAL ACCOUNTS . . . . . . . . . . . . . . . 18 Section 3.4 INTEREST ON CAPITAL CONTRIBUTIONS . . . . . . 18 Section 3.5 WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . 18 Section 3.6 INVESTMENT OF CAPITAL CONTRIBUTIONS . . . . . 18 ARTICLE IV ALLOCATIONS Section 4.1 PROFITS AND LOSSES . . . . . . . . . . . . . . 19 Section 4.2 SPECIAL ALLOCATIONS . . . . . . . . . . . . . 21 Section 4.3 OTHER ALLOCATION PROVISIONS . . . . . . . . . 22 Section 4.4 ALLOCATIONS FOR INCOME TAX PURPOSES . . . . . 24 Section 4.5 WITHHOLDING . . . . . . . . . . . . . . . . 24 ARTICLE V DISTRIBUTIONS Section 5.1 DISTRIBUTIONS . . . . . . . . . . . . . . . . 25 Section 5.2 LIMITATIONS ON DISTRIBUTIONS . . . . . . . . . 25 ARTICLE VI ISSUANCE OF PARTNERSHIP PREFERRED SECURITIES Section 6.1 GENERAL PROVISIONS REGARDING PARTNERSHIP PREFERRED SECURITIES . . . . . . . 25 Section 6.2 PARTNERSHIP PREFERRED SECURITIES . . . . . . . 27 Section 6.3 CONVERSION RIGHTS OF PARTNERSHIP PREFERRED SECURITIES . . . . . . . . . . . . . 34 Section 6.4 DISTRIBUTION ELECTION . . . . . . . . . . . . 40 ARTICLE VII BOOKS OF ACCOUNT, RECORDS AND REPORTS Section 7.1 BOOKS AND RECORDS . . . . . . . . . . . . . . 44 Section 7.2 ACCOUNTING METHOD . . . . . . . . . . . . . . 44 Section 7.3 ANNUAL AUDIT . . . . . . . . . . . . . . . . . 45 ARTICLE VIII POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS Section 8.1 LIMITATIONS . . . . . . . . . . . . . . . . . 45 Section 8.2 LIABILITY . . . . . . . . . . . . . . . . . 45 Section 8.3 PRIORITY . . . . . . . . . . . . . . . . . . 46 ARTICLE IX POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER Section 9.1 AUTHORITY . . . . . . . . . . . . . . . . . . 46 Section 9.2 POWER AND DUTIES OF GENERAL PARTNER . . . . . 46 Section 9.3 OBLIGATIONS AND EXPENSES PAYABLE BY GENERAL PARTNER . . . . . . . . . . . . . . 48 Section 9.4 LIABILITY . . . . . . . . . . . . . . . . . . 49 Section 9.5 INVESTMENT COMPANY OR TAX ACTIONS . . . . . . 49 Section 9.6 OUTSIDE BUSINESSES . . . . . . . . . . . . . . 50 Section 9.7 LIMITS ON GENERAL PARTNER'S POWERS . . . . . . 50 Section 9.8 TAX MATTERS PARTNER . . . . . . . . . . . . . 52 Section 9.9 CONSOLIDATION, MERGER OR SALE OF ASSETS . . . 53 ARTICLE X TRANSFERS OF INTERESTS BY PARTNERS Section 10.1 TRANSFER OF INTERESTS . . . . . . . . . . . . 54 Section 10.2 TRANSFER OF LP CERTIFICATES . . . . . . . . . 55 Section 10.3 PERSONS DEEMED PARTNERSHIP PREFERRED SECURITY HOLDERS . . . . . . . . . . . . . . . 56 Section 10.4 BOOK ENTRY PROVISIONS . . . . . . . . . . . . 56 Section 10.5 REGISTRAR, PAYING AGENT AND CONVERSION AGENT . . . . . . . . . . . . . . . 58 ARTICLE XI WITHDRAWAL, DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS Section 11.1 WITHDRAWAL OF PARTNERS . . . . . . . . . . . . 58 Section 11.2 DISSOLUTION OF CITIZENS CAPITAL . . . . . . . 59 Section 11.3 LIQUIDATION . . . . . . . . . . . . . . . . . 59 Section 11.4 DISTRIBUTION IN LIQUIDATION . . . . . . . . . 60 Section 11.5 RIGHTS OF LIMITED PARTNERS . . . . . . . . . . 61 Section 11.6 TERMINATION . . . . . . . . . . . . . . . . . 61 ARTICLE XII AMENDMENTS AND MEETINGS Section 12.1 AMENDMENTS . . . . . . . . . . . . . . . . . . 61 Section 12.2 AMENDMENT OF CERTIFICATE . . . . . . . . . . . 62 Section 12.3 MEETINGS OF PARTNERS . . . . . . . . . . . . . 62 ARTICLE XIII MISCELLANEOUS Section 13.1 NOTICES . . . . . . . . . . . . . . . . . . . 63 Section 13.2 POWER OF ATTORNEY . . . . . . . . . . . . . . 64 Section 13.3 ENTIRE AGREEMENT . . . . . . . . . . . . . . . 64 Section 13.4 GOVERNING LAW . . . . . . . . . . . . . . . . 65 Section 13.5 EFFECT . . . . . . . . . . . . . . . . . . . . 65 Section 13.6 PRONOUNS AND NUMBER . . . . . . . . . . . . . 65 Section 13.7 CAPTIONS . . . . . . . . . . . . . . . . . . . 65 Section 13.8 PARTIAL ENFORCEABILITY . . . . . . . . . . . . 65 Section 13.9 COUNTERPARTS . . . . . . . . . . . . . . . . . 65 Section 13.10 REMEDIES . . . . . . . . . . . . . . . . . . . 65 EX-4 9 DRAFT: October 13, 1995 ______________________________________ CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT CITIZENS UTILITIES COMPANY Dated as of __________, 1995 ______________________________________ CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREEMENT This CONVERTIBLE PREFERRED SECURITIES GUARANTEE AGREE- MENT ("Guarantee Agreement"), dated as of _________, 1995, is executed and delivered by Citizens Utilities Company, a Delaware corporation (the "Guarantor"), and Chemical Bank, a New York banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Convertible Preferred Securities (as defined herein) of Citizens Utilities Trust, a Delaware statutory business trust (the "Trust"). WHEREAS, pursuant to the Declaration (as defined herein), the Trust is issuing on the date hereof up to $175,000,000 aggregate stated liquidation amount of Convertible Preferred Securities (plus up to an additional $26,250,000 aggregate stated liquidation amount of Convertible Preferred Securities, solely to cover over-allotments, if any), designated the _____% Citizens Utilities Convertible Preferred Securities (the "Convertible Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the Convertible Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee Agreement, to pay to the Holders of the Convertible Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Convertible Common Securities Guarantee Agreement") in substantially identical terms to this Guarantee Agreement for the benefit of the holders of the Convertible Common Securities (as defined herein) except that if an event of default under the Indenture (as defined herein), has occurred and is continuing, the rights of holders of the Convertible Common Securities to receive guarantee payments under the Convertible Common Securities Guarantee Agreement are subordinated to the rights of Holders of Convertible Preferred Securities to receive Guarantee Payments under this Guarantee Agreement. NOW, THEREFORE, in consideration of the purchase by each Holder of Convertible Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) Capitalized terms used in this Guarantee Agreement have the respective meanings assigned to them in this Section 1.1, or, to the extent not inconsistent with this Guarantee Agreement, in the Statement of Common Definitions, Annex A hereto; (b) unless otherwise defined herein, all capitalized items used herein shall have the meanings ascribed to them in the Declaration; (c) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (d) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (e) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, or any successor rule thereunder. "Business Day" is defined in the Statement of Common Definitions. "Citizens Capital" is defined in the Statement of Common Definitions. "Common Stock Series A" is defined in the Statement of Common Definitions. "Conversion Agent" is defined in the Statement of Common Definitions. "Convertible Common Securities" is defined in the Statement of Common Definitions. "Convertible Common Securities Guarantee Agreement" shall have the meaning set forth in the Recitals to this Guarantee Agreement. "Convertible Debentures" is defined in the Statement of Common Definitions. "Convertible Preferred Securities" shall have the meaning set forth in the Recitals to this Guarantee Agreement. "Covered Person" means any Holder or beneficial owner of Convertible Preferred Securities. "Declaration" is defined in the Statement of Common Definitions. "Designated Senior Holder" is defined in the Indenture. "Distributions" shall have the meaning as set forth in the Declaration. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement. "First Supplemental Indenture" is defined in the Statement of Common Definitions. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Convertible Preferred Securities, to the extent not paid or made by the Trust: (i) any accrued or deferred and unpaid Distributions that are required to be paid on such Convertible Preferred Securities to the extent the Trust shall have cash and/or Common Stock available therefor, (ii) the redemption price, including all accrued or deferred and unpaid Distributions to the date of redemption (the "Redemption Price"), to the extent the Trust has cash and/or Common Stock available therefor, with respect to any Convertible Preferred Securities called for redemption by the Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust other than in connection with the distribution of Partnership Preferred Securities or Convertible Debentures to the Holders in exchange for Convertible Preferred Securities as provided in the Declaration or the redemption of all the Convertible Preferred Securities, the lesser of (a) the aggregate of the liquidation amount, payable in cash, and all accrued or deferred and unpaid Distributions, payable in either cash or Common Stock, on the Convertible Preferred Securities to the date of payment (a "Liquidation Distribution"), to the extent the Trust shall have cash and/or Common Stock available therefor, and (b) the amount of assets of the Trust available for distribution to Holders in liquidation of the Trust. If an event of default under the Indenture has occurred and is continuing, the rights of holders of the Convertible Common Securities to receive guarantee payments under the Convertible Common Securities Guarantee Agreement are subordinated to the rights of Holders of Convertible Preferred Securities to receive Guarantee Payments under this Guarantee Agreement. "Guarantee Subordinated Payment" has the meaning specified in Section 7.2. "Guarantee Trustee" means Chemical Bank until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee. "Guarantor" shall have the meaning set forth in the Preamble to this Guarantee Agreement. "Holder" shall mean any holder, as registered on the books and records of the Trust, of any Convertible Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Convertible Preferred Securities have given many request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indebtedness" is defined in the Indenture. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of the Guarantee Trustee. "Indenture" is defined in the Statement of Common Definitions. "Junior Subordinated Payment" has the meaning specified in Section 7.2. "Limited Partnership Agreement" is defined in the Statement of Common Definitions. "Liquidation Distribution" shall have the meaning set forth in this Section 1.1. "List of Holders" shall have the meaning set forth in Section 2.2. "Majority in aggregate liquidation amount of the Convertible Preferred Securities" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of Convertible Preferred Securities, voting separately as a class, of more than 50% of the liquidation amount of all Convertible Preferred Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition 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. "Other Subordinated Indebtedness" is defined in the Indenture. "Paying Agent" means any Person authorized by the Guarantor to pay the amounts due under the Guarantee on behalf of the Guarantor. "Payment Blockage Period" has the meaning specified in Section 7.3. "Person" is defined in the Statement of Common Definitions. "Preferred Partnership Securities" is defined in the Statement of Common Definitions. "Proceeding" shall have the meaning set forth in Section 7.2. "Redemption Price" shall have the meaning set forth in this Section 1.1. "Responsible Officer" means, with respect to the Guarantee Trustee, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Corporate Trust Department of the Guarantee 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. "Senior Indebtedness" and all capitalized terms used therein is defined in the Indenture. "Senior Nonmonetary Default" has the meaning specified in Section 7.3. "Senior Payment Default" has the meaning specified in Section 7.3. "Subsidiary" is defined in the Statement of Common Definitions. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust" shall have the meaning set forth in the Preamble to this Guarantee Agreement. "Trust Indenture Act" means the Trust Indenture Act of 1939. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions; and (b) if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities. (a) The Guarantor shall provide the Guarantee Trustee with a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Convertible Preferred Securities ("List of Holders") as of such date, (i) within 1 day after January 1 and June 30 of each year and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Guarantee Trustee; provided that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. (c) Every Holder, by receiving and holding the same, agrees with the Guarantor and the Guarantee Trustee that neither the Guarantor nor the Guarantee Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 2.3 Reports by the Guarantee Trustee. Within 60 days after May 15 of each year, the Guarantee Trustee shall provide to the Holders of the Convertible Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. The Holders of a Majority in aggregate liquidation amount of Convertible Preferred Securities may, by vote, on behalf of the Holders of all of the Convertible Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Convertible Preferred Securities, notices of all Events of Default known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided that the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Convertible Preferred Securities. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice, of such Event of Default. SECTION 2.8 Conflicting Interests. The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders of the Convertible Preferred Securities, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder of Convertible Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of the Convertible Preferred Securities. (c) The Guarantee 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 Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise there- of, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee agreement against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee 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 Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee 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 aggregate liquidation amount of the Convertible Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee 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, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. (e) If: (1) default occurs in the payment of the principal of any Convertible Preferred Security when and as the same shall be due and payable and such failure shall continue for 15 days; or (2) default occurs in the payment of any distribution on any Convertible Preferred Security when such distribution becomes due and payable and such failure continues for a period of 60 days; the Guarantee Trustee shall be authorized to recover judgment, in its own name and as trustee of an express trust, against the Guarantor for the whole amount of principal and distributions owing and unpaid. (f) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Guarantor or any other obligor upon the Convertible Preferred Securities or the property of the Guarantor or of such other obligor or their creditors, the Guarantee Trustee shall be authorized to file and prove a claim for the whole amount of principal and distributions owing and unpaid in respect of the Convertible Preferred Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Guarantee Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Guarantee Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding. SECTION 3.2 Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by a written direction or an Officers' Certificate. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or reregistration thereof). (v) The Guarantee Trustee may consult with counsel, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Convertible Preferred Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Guarantee Agree- ment the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in aggregate liquidation amount of the Convertible Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee 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 Guarantee 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 Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1 Guarantee Trustee; Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustees. Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.2(b) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent account- ing) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Trust), as and when due, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Trust to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Convertible Preferred Securities to be performed or observed by the Trust; (b) the extension of time for the payment by the Trust of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Convertible Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Convertible Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the deferral of any interest payment on the Convertible Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Convertible Preferred Securities, or any action on the part of the Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) any invalidity of, or defect or deficiency in the Convertible Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders. (a) The Holders of a Majority in ag- gregate liquidation amount of the Convertible Preferred Securities have the right (i) to direct the time, method and place of conducting of any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement and (ii) on behalf of the Holders of all Convertible Preferred Securities to consent to the waiver of any past default and its consequences. (b) If the Guarantee Trustee fails to enforce this Guarantee Agreement, any Holder of Convertible Preferred Securities may, after a period of 30 days has elapsed from such Holder's written request to the Guarantee Trustee to enforce this Guarantee Agreement, institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under this Guarantee Agreement, without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other Person. SECTION 5.5 Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Convertible Preferred Securities against the Trust in respect of any amounts paid to such Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Convertible Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agree- ment notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI COVENANTS SECTION 6.1 Limitation of Transactions. So long as any Convertible Preferred Securities remain outstanding, if (i) there shall have occurred an Event of Default hereunder or an event of default under the Declaration or (ii) if the Guarantor exercises its right to defer interest payments on the Convertible Debentures, then (a) the Guarantor will not declare or pay any dividend or distribution (other than in shares of its capital stock) on any of the Guarantor's capital stock, (b) neither the Guarantor nor any of its Subsidiaries will redeem, purchase, acquire for value or make a liquidation payment to any holder of, or with respect to, any of its capital stock or Other Subordinated Indebtedness (other than (x) as an issuance of capital stock upon conversion of a convertible security or in payment of interest, premium or principal or in payment in redemption, purchase or other acquisition or liquidation of capital stock or Other Subordinated Indebtedness, (y) as a result of reclassification of such capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock, or (z) in connection with the right of Guarantor to purchase or reacquire shares of Common Stock Series A under the provisions of the First Supplemental Indenture, the Declaration or the Limited Partnership Agreement), (c) the Guarantor will not make any payment of principal, premium or interest (unless payable in shares of capital stock) on Other Subordinated Indebtedness, and (d) neither Guarantor nor any of its Subsidiaries will make any guarantee of payments which would be prohibited or limited by the foregoing (other than payments under this Guarantee Agreement, payments of dividends by a Subsidiary, or guarantees of dividends or payments payable to Guarantor). ARTICLE VII SUBORDINATION SECTION 7.1 Subordination. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank subordinate and subject in right of payment to the prior payment in full in cash of Senior Indebtedness of the Guarantor. Article VII shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. SECTION 7.2 Payment Over of Proceeds Upon Dissolution, etc. Upon any payment or distribution of assets of the Guarantor to creditors upon any liquidation, dissolu- tion, winding-up, reorganization, assignment for the benefit of creditors, marshalling of assets or liabilities or any bankruptcy, insolvency or similar proceedings of the Guarantor (each such event, if any, herein sometimes referred to as a "Proceeding"): (i) the holders of Senior Indebtedness shall be entitled to receive payment in full in cash of all amounts due on or to become due on or in respect of all Senior Indebtedness, before the Holders are entitled to receive any payment (including any payment to Holders made in respect of any other Indebtedness of the Guarantor subordinated to the payment of the Guarantee, such payment or distribution being hereinafter referred to as a "Junior Subordinated Payment"), on account of the Guarantee or on account of any purchase, redemption or other acquisition of the Guarantee by the Guarantor, any Subsidiary of the Guarantor, the Guarantee Trustee or any Paying Agent (all such payments, distributions, purchases, redemptions and acquisitions, whether or not in connection with a Proceeding, herein referred to, individually and collectively, as a "Guarantee Subordinated Payment"); and (ii) any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Guarantee Trustee would be entitled but for the provisions of this Article (including, without limitation, any Junior Subordinated Payment) shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment to the holders of such Senior Indebtedness. In the event that, notwithstanding the foregoing provisions of this Section, the Guarantee Trustee or a Holder shall have received in connection with any Proceeding any Guarantee Subordinated Payment before all Senior Indebtedness is paid in full or payment thereof provided for in cash, then and in such event such Guarantee Subordinated Payment shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Guarantor for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full in cash after giving effect to any concurrent payment to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include a payment or distribution of stock or securities of the Guarantor provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law or of any other corporation provided for by such plan of reorganization or readjustment which stock or securities are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent, or to a greater extent than, the Guarantee is so subordinated as provided in this Article. The consolidation of the Guarantor with, or the merger of the Guarantor into, another Person or the liquidation or dissolution of the Guarantor following the conveyance or transfer of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article Eight of the Indenture shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Guarantor is merged or the Person which acquires by conveyance or transfer such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article Eight of the Indenture. SECTION 7.3 No Payment When Senior Indebtedness In Senior Payment Default or Senior Indebtedness Accelerated. In the event that (a) any Senior Payment Default (as defined below) shall have occurred and such Senior Indebtedness shall have become, by reason thereof, due and payable prior to the stated maturity thereof, then no Guarantee Subordinated Payment shall be made (except that, so long as Citizens Capital shall be the holder of all of the Outstanding Convertible Debentures, payment may be made in shares of capital stock), unless and until such Senior Payment Default shall have been cured or waived in writing or shall have ceased to exist or all amounts then due and payable in respect of such Senior Indebtedness (including amounts that have become and remain due by acceleration) shall have been paid in full in cash. "Senior Payment Default" means any default (which default has continued beyond any applicable grace and/or cure period (if any), in the payment of principal of (or premium, if any) or interest on any Senior Indebtedness when due, whether at the stated maturity of any such payment or by declaration of acceleration, call for redemption, mandatory payment or prepayment or otherwise. In the event that any Senior Nonmonetary Default (as defined below) shall have occurred and be continuing, then, upon the receipt by the Guarantor and the Guarantee Trustee of written notice of such Senior Nonmonetary Default from the Designated Senior Holder of such certain Senior Indebtedness, no Guarantee Subordinated Payment (except that, so long as Citizens Capital shall be the holder of all of the Outstanding Convertible Deben- tures, payment may be made in shares of capital stock) shall be made, during the period (the "Payment Blockage Period") commencing on the date of such receipt of such written notice and ending (subject to any blockage of payments that may then or thereafter be in effect as the result of any Senior Payment Default) on the earlier of (i) the date on which the Senior Indebtedness to which such Senior Nonmonetary Default relates is discharged or such Senior Nonmonetary Default shall have been cured or waived in writing or shall have ceased to exist and any acceleration of Senior Indebtedness to which such Senior Nonmonetary Default relates shall have been rescinded or annulled or (ii) the 179th day after the date of such receipt of such written notice. No more than one Payment Blockage Period may be com- menced with respect to the Guarantee during any period of 360 consecutive days and there shall be a period of at least 181 consecutive days in each period of 360 consecutive days when no Payment Blockage Period is in effect. Following the commencement of any Payment Blockage Period, the holders of the Senior Indebtedness will be precluded from commencing a subsequent Payment Blockage Period until the conditions set forth in the preceding sentence are satisfied. For all purposes of this paragraph, no Senior Nonmonetary Default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by holders of Senior Indebtedness or their representatives unless such Senior Nonmonetary Default shall have been cured for a period of not less than 90 consecutive days. "Senior Nonmonetary Default" means any default (other than a Senior Payment Default) or any event which, after notice or lapse of time (or both), would become an event of default, under the terms of any instrument or agreement pursuant to which any Senior Indebtedness is outstanding, permitting (after notice or lapse of time or both) one or more holders of such Senior Indebtedness (or a trustee or agent on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise become due and payable. In the event that, notwithstanding the foregoing, the Guarantor shall make any Guarantee Subordinated Payment to the Guarantee Trustee or any Holder prohibited by the foregoing provisions of this Section, then and in such event such Guarantee Subordinated Payment shall be paid over and delivered forthwith to the Designated Senior Holders under the Senior Indebtedness or, if such Senior Indebtedness has been repaid in full, to the Guarantor. The provisions of this Section shall not apply to any Guarantee Subordinated Payment with respect to which Section 7.2 hereof would be applicable. SECTION 7.4 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Guarantee Agreement shall prevent the Guarantor, at any time except during the pendency of any Proceeding referred to in Section 7.2 hereof or under the conditions described in Section 7.3 hereof, from making Guarantee Subordinated Payments. SECTION 7.5 Subrogation To Rights Of Holders Of Senior Indebtedness. Subject to the payment in full in cash of all Senior Indebtedness, the Holders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of and interest on the Guarantee shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders or the Guarantee Trustee would be entitled except for the provisions of this Article, and no payments pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders or the Guarantee Trustee, shall, as among the Guarantor, its creditors other than holders of Senior Indebtedness and the Holders, be deemed to be a payment or distribution by the Guarantor to or on account of the Senior Indebtedness. SECTION 7.6 Provisions Solely To Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Guarantee Agreement is intended to or shall (a) impair, as among the Guarantor, its creditors (other than holders of Senior Indebtedness) and the Holders, the obligation of the Guarantor, which is absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Guarantor), to pay to the Holders the Guarantee Subordinated Payments as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Guarantor of the Holders and creditors of the Guarantor, other than the holders of Senior Indebtedness; or (c) prevent the Guarantee Trustee or a Holder from exercising all remedies otherwise permitted by applicable law upon default under this Guarantee Agreement, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Guarantee Trustee or such Holder or, under the conditions specified in Section 7.3, to prevent any payment prohibited by such Section or enforce their rights pursuant to the penultimate paragraph in Section 7.3. SECTION 7.7 Guarantee Trustee To Effectuate Subordination. Each Holder of the Guarantee by his acceptance thereof authorizes and directs the Guarantee Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Guarantee Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Guarantor whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the Indebtedness of the Guarantor owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Guarantee Trustee does not file a proper claim at least 30 days before the expiration of the time to file such claim, then the holders of the Senior Indebtedness and their agents, trustees or other representatives are authorized to do so (but shall in no event be liable for any failure to do so) for and on behalf of the Holders. SECTION 7.8 No Waiver Of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness 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 Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Guarantor with the terms, provisions and covenants of this Guarantee Agreement, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Guarantee Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders to the holders of the Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) permit the Guarantor to borrow, repay and then reborrow any or all of the Senior Indebtedness; (iii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iv) release any Person liable in any manner for the collection of Senior Indebtedness; (v) exercise or refrain from exercising any rights against the Guarantor and any other Person; and (vi) apply any sums received by them to Senior Indebtedness. SECTION 7.9 Notice To Guarantee Trustee. The Guarantor shall give prompt written notice to the Guarantee Trustee of any fact known to the Guarantor which would prohibit the making of any payment to or by the Guarantee Trustee in respect of the Guarantee. Notwithstanding the provision of this Article or any other provision of this Guarantee Agreement, the Guarantee Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Guaran- tee Trustee in respect of the Guarantee, unless and until a Responsible Officer of the Guarantee Trustee shall have received written notice thereof from the Guarantor, any holder of Senior Indebtedness, any Designated Senior Holder or from any trustee, fiduciary or agent therefore; and, prior to the receipt of any such written notice, the Guarantee Trustee, subject to the provisions of Section 3.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Guarantee Trustee shall not have received the notice provided for in this Section at least three 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 any amounts due under the Guarantee), then, anything herein contained to the contrary notwithstanding, but without limiting the rights and remedies of the holders of Senior Indebtedness or any trustee, fiduciary or agent therefor, the Guarantee Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Any notice required or permitted to be given to the Guarantee Trustee by a holder of Senior Indebtedness or by any Designated Senior Holder shall be in writing and shall be sufficient for every purpose hereunder if in writing and either (i) sent via facsimile to the Guarantee Trustee, the receipt of which shall be confirmed via telephone, or (ii) mailed, first class postage prepaid, or sent by overnight carrier, to the Guarantee Trustee addressed to it at the address of its principal office specified herein or at any other address furnished in writing to such holder of Senior Indebtedness by the Guarantee Trustee. Subject to the provisions of Section 3.1, the Guarantee Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness or Designated Senior Holder (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness or Designated Senior Holder (or a trustee, fiduciary or agent therefor). In the event that the Guarantee Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness or Designated Senior Holder to participate in any payment or distribution pursuant to this Article, the Guarantee Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Guarantee Trustee as to the amount of 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, and if such evidence is not fur- nished, the Guarantee Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Notwithstanding anything else contained herein, no notice, request or other communication to or with the Guarantee Trustee shall be deemed given unless received by a Responsible Officer at the Guarantee Trustee's principal corporate trust office. SECTION 7.10 Reliance On Judicial Order Or Certificate Of Liquidating Agent. Upon any payment or distribution of assets of the Guarantor referred to in this Article, the Guarantee Trustee, subject to the provisions of Section 3.1, and the Holders shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Guarantee Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other Indebtedness of the Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article, provided that the foregoing shall apply only if such court has been apprised of the provisions of this Article. SECTION 7.11 Guarantee Trustee Not Fiduciary For Holders Of Senior Indebtedness. The Guarantee Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders or to the Guarantor or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. SECTION 7.12 Rights of Guarantee Trustee As Holder Of Senior Indebtedness; Preservation Of Guarantee Trustee's Rights. The Guarantee Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Guarantee Agreement shall deprive the Guarantee Trustee of any of its rights as a holder of Senior Indebtedness. Nothing in this Article shall apply to claims of, or payments to, the Guarantee Trustee under or pursuant to this Guarantee Agreement or Section 6.7 of the Indenture. SECTION 7.13 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Guarantee Trustee shall have been appointed by the Guarantor and be then acting hereunder, the term "Guarantee Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Guarantee Trustee; provided, however, that Section 7.11 hereof shall not apply to the Guarantor or any Affiliate of the Guarantor if it or such Affiliate acts as Paying Agent. ARTICLE VIII TERMINATION SECTION 8.1 Termination. This Guarantee Agreement shall terminate upon (i) full payment of the Redemption Price of all Convertible Preferred Securities, (ii) the distribution of the Partnership Preferred Securities or the Convertible Debentures to the Holders in exchange for all of such Holders' Convertible Preferred Securities, (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust or (iv) distribution of Common Stock to Holders in respect of the conversion of all of such Holders' Convertible Preferred Securities into Common Stock. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Convertible Preferred Securities must restore payment of any sums paid under the Convertible Preferred Securities or under this Guarantee Agreement. ARTICLE IX INDEMNIFICATION SECTION 9.1 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor 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 in accordance with this Guarantee Agreement and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement 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 Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, 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 Distribu- tions to Holders of Convertible Preferred Securities might properly be paid. SECTION 9.2 Indemnification. (a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person in accordance with this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 9.2(a). ARTICLE X CONVERSION OF CONVERTIBLE PREFERRED SECURITIES SECTION 10.1 Issuance of Common Stock Series A. The Guarantor hereby agrees that, upon the request of the Conversion Agent, on behalf of one or more holders of Convertible Preferred Securities to convert Convertible Debentures into Common Stock Series A pursuant to the request of such holders to effect such conversion in accordance with the terms of the Declaration, the Guarantor shall deliver to the Conversion Agent certificates representing the full number of shares of Common Stock Series A issuance upon conversion of such Convertible Debentures in accordance with the terms of the Indenture and such Convertible Debentures. The Guarantor has reserved and will keep available for issuance, solely for the purpose of affecting the conversion of the Convertible Debentures, the full number of shares of Common Stock Series A deliverable by the Conversion Agent to the holders upon the conversion of all outstanding Convertible Preferred Securities not thereto fore converted by the holders. SECTION 10.2 Validity of Common Stock Series A. All shares of Common Stock Series A delivered by the Guarantor upon such conversion will be duly and validly issued and fully paid and nonassessable. SECTION 10.3 Termination of Obligation to Issue Common Stock Series A. The Guarantor's obligations under this Article X to issue Common Stock Series A shall terminate upon the termination of the right of holders of Convertible Preferred Securities to request the Conversion Agent to effect such conversion as set forth in the Declaration and, with respect to a particular holder, upon such conversion. ARTICLE XI MISCELLANEOUS SECTION 11.1 Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Convertible Preferred Securities then outstanding. SECTION 11.2 Amendments. Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of at least 66-2/3% in 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 the outstanding Convertible P- referred Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Securities apply to the giving of such approval. SECTION 11.3 Notices. All notices provided for in this Guarantee Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Convertible Preferred Securities): Chemical Bank 450 West 33rd Street New York, New York 10001 Attention: _________________ Fax No.: (212) __________ (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Convertible Preferred Securities): Citizens Utilities Company High Ridge Park, Bldg. No. 3 Stamford, Connecticut 06905 Attention: _________________ Fax No.: (203) __________ copy to: Boulanger, Hicks & Churchill 135 East 57th Street New York, New York 10022 Attention: Jonathan H. Churchill Fax No.: (212) 753-6971 (c) If given to any Holder of Convertible Preferred Securities, 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 11.4 Benefit. This Guarantee Agreement is solely for the benefit of the Holders of the Convertible Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Convertible Preferred Securities. SECTION 11.5 Governing Law. This Guarantee Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. CITIZENS UTILITIES COMPANY By: Name: Title: CHEMICAL BANK, as Guarantee Trustee By: Name: Title: CITIZENS UTILITIES COMPANY Reconciliation and tie between Trust Indenture Act of 1939 and Guarantee, dated as of __________, 1995. Trust Indenture Act Section Guarantee Section 310(a)(1). . . . . . . . . . . . . . . . . . . . . .4.1(a) (a)(2). . . . . . . . . . . . . . . . . . . . . .4.1(a) (a)(3). . . . . . . . . . . . . . . . . .Not Applicable (a)(4). . . . . . . . . . . . . . . . . .Not Applicable (a)(5). . . . . . . . . . . . . . . . . . . . . .4.1(a) (b) . . . . . . . . . . . . . . . . . . .4.1(c), 4.2(d) 311(a) . . . . . . . . . . . . . . . . . . . . . .2.2(b) (b) . . . . . . . . . . . . . . . . . . . . . .2.2(b) 312(a) . . . . . . . . . . . . . . . . . . . . . . .2.2(a) (b) . . . . . . . . . . . . . . . . . . . . . . .2.2(b) (c) . . . . . . . . . . . . . . . . . . . . . . .2.2(c) 313(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (b) . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (c) . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (d) . . . . . . . . . . . . . . . . . . . . . . . . 2.3 314(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.4 (b) . . . . . . . . . . . . . . . . . . .Not Applicable (c)(1). . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(2). . . . . . . . . . . . . . . . . . . . .2.4, 2.5 (c)(3). . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . . . . . . 1.1 315(a) . . . . . . . . . . . . . . . . 3.1(c), 3.1(d)(i) (b) . . . . . . . . . . . . . . . . . . . . . . . 2.7 (c) . . . . . . . . . . . . . . . . . . . . . .3.1(c) (d) . . . . . . . . . . . . . . . . . . . . . .3.1(d) (d)(1). . . . . . . . . . . . . . . . . . . . 3.1(d)(i) (d)(2). . . . . . . . . . . . . . . . . . . .3.1(d)(ii) (d)(3). . . . . . . . . . . . . . . . . . . 3.1(d)(iii) (e) . . . . . . . . . . . . . . . . . . . . . .None 316(a) . . . . . . . . . . . . . . . . . . . . . . . 5.4 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . 5.4 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 5.4 (a)(2). . . . . . . . . . . . . . . . . . . . . . .None (b) . . . . . . . . . . . . . . . . . . . . . .5.1, 5.3 (c) . . . . . . . . . . . . . . . . . . . . . . . .None 317(a)(1). . . . . . . . . . . . . . . . . . . . . .3.1(e) (a)(2). . . . . . . . . . . . . . . . . . . . . .3.1(f) (b) . . . . . . . . . . . . . . . . . . .Not applicable 318(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.1 NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Guarantee. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation . . . . . . . . . 1 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application . . . . . . . . 6 SECTION 2.2 Lists of Holders of Securities . . . . . . . . . 6 SECTION 2.3 Reports by the Guarantee Trustee . . . . . . . . 6 SECTION 2.4 Periodic Reports to Guarantee Trustee. . . . . . 7 SECTION 2.5 Evidence of Compliance with Conditions Precedent 7 SECTION 2.6 Events of Default; Waiver. . . . . . . . . . . . 7 SECTION 2.7 Event of Default; Notice . . . . . . . . . . . . 7 SECTION 2.8 Conflicting Interests. . . . . . . . . . . . . . 7 ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Guarantee Trustee . . . 8 SECTION 3.2 Certain Rights of Guarantee Trustee. . . . . . 10 SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee 12 ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1 Guarantee Trustee; Eligibility . . . . . . . . 12 SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustees . . . . . . . . . . . . . 13 ARTICLE V GUARANTEE SECTION 5.1 Guarantee. . . . . . . . . . . . . . . . . . . 13 SECTION 5.2 Waiver of Notice and Demand. . . . . . . . . . 14 SECTION 5.3 Obligations Not Affected . . . . . . . . . . . 14 SECTION 5.4 Rights of Holders. . . . . . . . . . . . . . . 15 SECTION 5.5 Guarantee of Payment . . . . . . . . . . . . . 15 SECTION 5.6 Subrogation. . . . . . . . . . . . . . . . . . 15 SECTION 5.7 Independent Obligations. . . . . . . . . . . . 15 ARTICLE VI COVENANTS SECTION 6.1 Limitation of Transactions . . . . . . . . . . 16 ARTICLE VII SUBORDINATION SECTION 7.1 Subordination. . . . . . . . . . . . . . . . . 16 SECTION 7.2 Payment Over of Proceeds Upon Dissolution, etc. 16 SECTION 7.3 No Payment When Senior Indebtedness In Senior Payment Default or Senior Indebtedness Accelerated . . . . . . . . . . . . . . . . 18 SECTION 7.4 Payment Permitted If No Default. . . . . . . . 19 SECTION 7.5 Subrogation To Rights Of Holders Of Senior Indebtedness. . . . . . . . . . . . . 19 SECTION 7.6 Provisions Solely To Define Relative Rights. . 19 SECTION 7.7 Guarantee Trustee To Effectuate Subordination. 20 SECTION 7.8 No Waiver Of Subordination Provisions. . . . . 20 SECTION 7.9 Notice To Guarantee Trustee. . . . . . . . . . 21 SECTION 7.10 Reliance On Judicial Order Or Certificate Of Liquidating Agent. . . . . . . . . . . . . . 22 SECTION 7.11 Guarantee Trustee Not Fiduciary For Holders Of Senior Indebtedness . . . . . . . . . . . . . 22 SECTION 7.12 Rights of Guarantee Trustee As Holder Of Senior Indebtedness; Preservation Of Guarantee Trustee's Rights . . . . . . . . . . . . . . 22 SECTION 7.13 Article Applicable to Paying Agents. . . . . . 22 ARTICLE VIII TERMINATION SECTION 8.1 Termination. . . . . . . . . . . . . . . . . . 23 ARTICLE IX INDEMNIFICATION SECTION 9.1 Exculpation. . . . . . . . . . . . . . . . . . 23 SECTION 9.2 Indemnification. . . . . . . . . . . . . . . . 24 ARTICLE X CONVERSION OF CONVERTIBLE PREFERRED SECURITIES SECTION 10.1 Issuance of Common Stock Series A. . . . . . . 24 SECTION 10.2 Validity of Common Stock Series A. . . . . . . 24 SECTION 10.3 Termination of Obligation to Issue Common Stock Series A . . . . . . . . . . . . . . . . . . 24 ARTICLE XI MISCELLANEOUS SECTION 11.1 Successors and Assigns . . . . . . . . . . . . 25 SECTION 11.2 Amendments . . . . . . . . . . . . . . . . . . 25 SECTION 11.3 Notices. . . . . . . . . . . . . . . . . . . . 25 SECTION 11.4 Benefit. . . . . . . . . . . . . . . . . . . . 26 SECTION 11.5 Governing Law. . . . . . . . . . . . . . . . . 26 EX-4 10 DRAFT: October 13, 1995 ______________________________________ PARTNERSHIP PREFERRED SECURITIES GUARANTEE AGREEMENT CITIZENS UTILITIES COMPANY Dated as of __________, 1995 ______________________________________ PARTNERSHIP PREFERRED SECURITIES GUARANTEE AGREEMENT This PARTNERSHIP PREFERRED SECURITIES GUARANTEE AGREE- MENT ("Guarantee Agreement"), dated as of _________, 1995, is executed and delivered by Citizens Utilities Company, a Delaware corporation (the "Guarantor"), and Chemical Bank, a New York banking corporation, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Partnership Preferred Securities (as defined herein) of Citizens Utilities Capital L.P., a Delaware limited partnership ("Citizens Capital"). WHEREAS, pursuant to the Limited Partnership Agreement (as defined herein), Citizens Capital is issuing on the date hereof up to $180,413,000 aggregate stated liquidation amount of Partnership Preferred Securities (plus up to an additional $27,062,000 aggregate stated liquidation amount of Partnership Preferred Securities, solely to cover overallotments, if any), designated the _____% Partnership Preferred Securities (the "Partnership Preferred Securities"); and WHEREAS, as incentive for the Holders to purchase the Partnership Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee Agreement, to pay to the Holders of the Partnership Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the purchase by each Holder of Partnership Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) Capitalized terms used in this Guarantee Agreement have the respective meanings assigned to them in this Section 1.1, or, to the extent not inconsistent with this Guarantee Agreement, in the Statement of Common Definitions, Annex A hereto; (b) unless otherwise defined herein, all capitalized items used herein shall have the meanings ascribed to them in the Limited Partnership Agreement; (c) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (d) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (e) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, or any successor rule thereunder. "Business Day" is defined in the Statement of Common Definitions. "Citizens Capital" shall have the meaning set forth in the Preamble to this Guarantee Agreement. "Common Stock Series A" is defined in the Statement of Common Definitions. "Conversion Agent" is defined in the Statement of Common Definitions. "Convertible Debentures" is defined in the Statement of Common Definitions. "Covered Person" means any Holder or beneficial owner of Partnership Preferred Securities. "Declaration" is defined in the Statement of Common Definitions. "Designated Senior Holder" is defined in the Indenture. "Distributions" shall have the meaning as set forth in the Limited Partnership Agreement. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement. "First Supplemental Indenture" is defined in the Statement of Common Definitions. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Partnership Preferred Securities, to the extent not paid or made by Citizens Capital: (i) any accrued or deferred and unpaid Distributions that are required to be paid on such Partnership Preferred Securities to the extent Citizens Capital shall have cash and/or Common Stock legally available therefor, (ii) the redemption price, including all accrued or deferred and unpaid Distributions to the date of redemption (the "Redemption Price"), to the extent Citizens Capital has cash and/or Common Stock legally available therefor, with respect to any Partnership Preferred Securities called for redemption by Citizens Capital, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of Citizens Capital other than in connection with the distribution of Convertible Debentures to the Holders in exchange for Partnership Preferred Securities as provided in the Limited Partnership Agreement or the redemption of all the Partnership Preferred Securities, the lesser of (a) the aggregate of the liquidation amount, payable in cash, and all accrued or deferred and unpaid Distributions, payable in either cash or Common Stock, on the Partnership Preferred Securities to the date of payment (a "Liquidation Distribution"), to the extent Citizens Capital shall have cash and/or Common Stock legally available therefor, and (b) the amount of assets of Citizens Capital available for distribution to Holders in liquidation of Citizens Capital. "Guarantee Subordinated Payment" has the meaning specified in Section 7.2. "Guarantee Trustee" means Chemical Bank until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. "Guarantor" shall have the meaning set forth in the Preamble to this Guarantee Agreement. "Holder" shall mean any holder, as registered on the books and records of Citizens Capital, of any Partnership Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Partnership Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indebtedness" is defined in the Indenture. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of the Guarantee Trustee. "Indenture" is defined in the Statement of Common Definitions. "Junior Subordinated Payment" has the meaning specified in Section 7.2. "Limited Partnership Agreement" is defined in the Statement of Common Definitions. "Liquidation Distribution" shall have the meaning set forth in this Section 1.1. "List of Holders" shall have the meaning set forth in Section 2.2. "Majority in aggregate liquidation amount of the Partnership Preferred Securities" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of Partnership Preferred Securities, voting separately as a class, of more than 50% of the liquidation amount of all Partnership Preferred Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition 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. "Other Subordinated Indebtedness" is defined in the Indenture. "Paying Agent" means any Person authorized by the Guarantor to pay the amounts due under the Guarantee on behalf of the Guarantor. "Payment Blockage Period" has the meaning specified in Section 7.3. "Person" is defined in the Statement of Common Definitions. "Partnership Preferred Securities" shall have the meaning set forth in the Recitals to this Guarantee Agreement. "Proceeding" shall have the meaning set forth in Section 7.2. "Redemption Price" shall have the meaning set forth in this Section 1.1. "Responsible Officer" means, with respect to the Guarantee Trustee, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Corporate Trust Department of the Guarantee 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. "Senior Indebtedness" and all capitalized terms used therein is defined in the Statement of Common Definitions. "Senior Nonmonetary Default" has the meaning specified in Section 7.3. "Senior Payment Default" has the meaning specified in Section 7.3. "Subsidiary" is defined in the Statement of Common Definitions. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions; and (b) if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities. (a) The Guarantor shall provide the Guarantee Trustee with a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Partnership Preferred Securities ("List of Holders") as of such date, (i) within 1 day after January 1 and June 30 of each year and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Guarantee Trustee; provided that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. (c) Every Holder, by receiving and holding the same, agrees with the Guarantor and the Guarantee Trustee that neither the Guarantor nor the Guarantee Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 2.3 Reports by the Guarantee Trustee. Within 60 days after May 15 of each year, the Guarantee Trustee shall provide to the Holders of the Partnership Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. The Holders of a Majority in aggregate liquidation amount of Partnership Preferred Securities may, by vote, on behalf of the Holders of all of the Partnership Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Partnership Preferred Securities, notices of all Events of Default known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided that the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Partnership Preferred Securities. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Limited Partnership Agreement shall have obtained written notice, of such Event of Default. SECTION 2.8 Conflicting Interests. The Limited Partnership Agreement shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders of the Partnership Preferred Securities, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder of Partnership Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of the Partnership Preferred Securities. (c) The Guarantee 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 Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee 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 Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee 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 aggregate liquidation amount of the Partnership Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee 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, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. (e) If: (1) default occurs in the payment of the principal of any Partnership Preferred Security when and as the same shall be due and payable and such failure shall continue for 15 days; or (2) default occurs in the payment of any distribution on any Partnership Preferred Security when such distribution becomes due and payable and such failure continues for a period of 60 days; the Guarantee Trustee shall be authorized to recover judgment, in its own name and as trustee of an express trust, against the Guarantor for the whole amount of principal and distributions owing and unpaid. (f) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Guarantor or any other obligor upon the Partnership Preferred Securities or the property of the Guarantor or of such other obligor or their creditors, the Guarantee Trustee shall be authorized to file and prove a claim for the whole amount of principal and distributions owing and unpaid in respect of the Partnership Preferred Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Guarantee Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Guarantee Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding. SECTION 3.2 Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by a written direction or an Officers' Certificate. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or reregistration thereof). (v) The Guarantee Trustee may consult with counsel, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Partnership Preferred Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in aggregate liquidation amount of the Partnership Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (iii) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee 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 Guarantee 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 Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1 Guarantee Trustee; Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustees. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.2(b) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by Citizens Capital), as and when due, regardless of any defense, right of set-off or counterclaim that Citizens Capital may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing Citizens Capital to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against Citizens Capital or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by Citizens Capital of any express or implied agreement, covenant, term or condition relating to the Partnership Preferred Securities to be performed or observed by Citizens Capital; (b) the extension of time for the payment by Citizens Capital of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Partnership Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Partnership Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the deferral of any interest payment on the Convertible Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Partnership Preferred Securities, or any action on the part of Citizens Capital granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, Citizens Capital or any of the assets of Citizens Capital; (e) any invalidity of, or defect or deficiency in the Partnership Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders. (a) The Holders of a Majority in aggregate liquidation amount of the Partnership Preferred Securities have the right (i) to direct the time, method and place of conducting of any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement and (ii) on behalf of the Holders of all Partnership Preferred Securities to consent to the waiver of any past default and its consequences. (b) If the Guarantee Trustee fails to enforce this Guarantee Agreement, any Holder of Partnership Preferred Securities may, after a period of 30 days has elapsed from such Holder's written request to the Guarantee Trustee to enforce this Guarantee Agreement, institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee's rights under this Guarantee Agreement, without first instituting a legal proceeding against Citizens Capital, the Guarantee Trustee or any other Person. SECTION 5.5 Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Partnership Preferred Securities against Citizens Capital in respect of any amounts paid to such Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of Citizens Capital with respect to the Partnership Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agree- ment notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI COVENANTS SECTION 6.1 Limitation of Transactions. So long as any Partnership Preferred Securities remain outstanding, if (i) there shall have occurred an Event of Default hereunder or an event of default under the Limited Partnership Agreement or (ii) if the Guarantor exercises its right to defer interest payments on the Convertible Debentures, then (a) the Guarantor will not declare or pay any dividend or distribution (other than in shares of its capital stock) on any of the Guarantor's capital stock, (b) neither the Guarantor nor any of its Subsidiaries will redeem, purchase, acquire for value or make a liquidation payment to any holder of, or with respect to, any of its capital stock or Other Subordinated Indebtedness (other than (x) as an issuance of capital stock upon conversion of a convertible security or in payment of interest, premium or principal or in payment in redemption, purchase or other acquisition or liquidation of capital stock or Other Subordinated Indebtedness, (y) as a result of reclassification of such capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock, or (z) in connection with the right of Guarantor to purchase or reacquire shares of Common Stock Series A under the provisions of the First Supplemental Indenture, the Declaration or the Limited Partnership Agreement), (c) the Guarantor will not make any payment of principal, premium or interest (unless payable in shares of capital stock) on Other Subordinated Indebtedness, and (d) neither Guarantor nor any of its Subsidiaries will make any guarantee of payments which would be prohibited or limited by the foregoing (other than payments under this Guarantee Agreement, payments of dividends by a Subsidiary, or guarantees of dividends or payments payable to Guarantor). ARTICLE VII SUBORDINATION SECTION 7.1 Subordination. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank subordinate and subject in right of payment to the prior payment in full in cash of Senior Indebtedness of the Guarantor. Article VII shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. SECTION 7.2 Payment Over of Proceeds Upon Dissolution, etc. Upon any payment or distribution of assets of the Guarantor to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshalling of assets or liabilities or any bankruptcy, insolvency or similar proceedings of the Guarantor (each such event, if any, herein sometimes referred to as a "Proceeding"): (i) the holders of Senior Indebtedness shall be entitled to receive payment in full in cash of all amounts due on or to become due on or in respect of all Senior Indebtedness, before the Holders are entitled to receive any payment (including any payment to Holders made in respect of any other Indebtedness of the Guarantor subordinated to the payment of the Guarantee, such payment or distribution being hereinafter referred to as a "Junior Subordinated Payment"), on account of the Guarantee or on account of any purchase, redemption or other acquisition of the Guarantee by the Guarantor, any Subsidiary of the Guarantor, the Guarantee Trustee or any Paying Agent (all such payments, distributions, purchases, redemptions and acquisitions, whether or not in connection with a Proceeding, herein referred to, individually and collectively, as a "Guarantee Subordinated Payment"); and (ii) any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Guarantee Trustee would be entitled but for the provisions of this Article (including, without limitation, any Junior Subordinated Payment) shall be paid by the liquidating trustee or agent or other Person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment to the holders of such Senior Indebtedness. In the event that, notwithstanding the foregoing provisions of this Section, the Guarantee Trustee or a Holder shall have received in connection with any Proceeding any Guarantee Subordinated Payment before all Senior Indebtedness is paid in full or payment thereof provided for in cash, then and in such event such Guarantee Subordinated Payment shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Guarantor for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full in cash after giving effect to any concurrent payment to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include a payment or distribution of stock or securities of the Guarantor provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law or of any other corporation provided for by such plan of reorganization or readjustment which stock or securities are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent, or to a greater extent than, the Guarantee is so subordinated as provided in this Article. The consolidation of the Guarantor with, or the merger of the Guarantor into, another Person or the liquidation or dissolution of the Guarantor following the conveyance or transfer of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article Eight of the Indenture shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Guarantor is merged or the Person which acquires by conveyance or transfer such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article Eight of the Indenture. SECTION 7.3 No Payment When Senior Indebtedness In Senior Payment Default or Senior Indebtedness Accelerated. In the event that (a) any Senior Payment Default (as defined below) shall have occurred and such Senior Indebtedness shall have become, by reason thereof, due and payable prior to the stated maturity thereof, then no Guarantee Subordinated Payment shall be made (except that, so long as Citizens Capital shall be the holder of all of the Outstanding Convertible Debentures, payment may be made in shares of capital stock), unless and until such Senior Payment Default shall have been cured or waived in writing or shall have ceased to exist or all amounts then due and payable in respect of such Senior Indebtedness (including amounts that have become and remain due by acceleration) shall have been paid in full in cash. "Senior Payment Default" means any default (which default has continued beyond any applicable grace and/or cure period (if any), in the payment of principal of (or premium, if any) or interest on any Senior Indebtedness when due, whether at the stated maturity of any such payment or by declaration of acceleration, call for redemption, mandatory payment or prepayment or otherwise. In the event that any Senior Nonmonetary Default (as defined below) shall have occurred and be continuing, then, upon the receipt by the Guarantor and the Guarantee Trustee of written notice of such Senior Nonmonetary Default from the Designated Senior Holder of such certain Senior Indebtedness, no Guarantee Subordinated Payment (except that, so long as Citizens Capital shall be the holder of all of the Outstanding Convertible Debentures, payment may be made in shares of capital stock) shall be made, during the period (the "Payment Blockage Period") commencing on the date of such receipt of such written notice and ending (subject to any blockage of payments that may then or thereafter be in effect as the result of any Senior Payment Default) on the earlier of (i) the date on which the Senior Indebtedness to which such Senior Nonmonetary Default relates is discharged or such Senior Nonmonetary Default shall have been cured or waived in writing or shall have ceased to exist and any acceleration of Senior Indebtedness to which such Senior Nonmonetary Default relates shall have been rescinded or annulled or (ii) the 179th day after the date of such receipt of such written notice. No more than one Payment Blockage Period may be commenced with respect to the Guarantee during any period of 360 consecutive days and there shall be a period of at least 181 consecutive days in each period of 360 consecutive days when no Payment Blockage Period is in effect. Following the commencement of any Payment Blockage Period, the holders of the Senior Indebtedness will be precluded from commencing a subsequent Payment Blockage Period until the conditions set forth in the preceding sentence are satisfied. For all purposes of this paragraph, no Senior Nonmonetary Default that existed or was continuing on the date of commencement of any Payment Blockage Period with respect to the Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by holders of Senior Indebtedness or their representatives unless such Senior Nonmonetary Default shall have been cured for a period of not less than 90 consecutive days. "Senior Nonmonetary Default" means any default (other than a Senior Payment Default) or any event which, after notice or lapse of time (or both), would become an event of default, under the terms of any instrument or agreement pursuant to which any Senior Indebtedness is outstanding, permitting (after notice or lapse of time or both) one or more holders of such Senior Indebtedness (or a trustee or agent on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise become due and payable. In the event that, notwithstanding the foregoing, the Guarantor shall make any Guarantee Subordinated Payment to the Guarantee Trustee or any Holder prohibited by the foregoing provisions of this Section, then and in such event such Guarantee Subordinated Payment shall be paid over and delivered forthwith to the Designated Senior Holders under the Senior Indebtedness or, if such Senior Indebtedness has been repaid in full, to the Guarantor. The provisions of this Section shall not apply to any Guarantee Subordinated Payment with respect to which Section 7.2 hereof would be applicable. SECTION 7.4 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Guarantee Agreement shall prevent the Guarantor, at any time except during the pendency of any Proceeding referred to in Section 7.2 hereof or under the conditions described in Section 7.3 hereof, from making Guarantee Subordinated Payments. SECTION 7.5 Subrogation To Rights Of Holders Of Senior Indebtedness. Subject to the payment in full in cash of all Senior Indebtedness, the Holders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of and interest on the Guarantee shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders or the Guarantee Trustee would be entitled except for the provisions of this Article, and no payments pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders or the Guarantee Trustee, shall, as among the Guarantor, its creditors other than holders of Senior Indebtedness and the Holders, be deemed to be a payment or distribution by the Guarantor to or on account of the Senior Indebtedness. SECTION 7.6 Provisions Solely To Define Relative Rights.The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Guarantee Agreement is intended to or shall (a) impair, as among the Guarantor, its creditors (other than holders of Senior Indebtedness) and the Holders, the obligation of the Guarantor, which is absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Guarantor), to pay to the Holders the Guarantee Subordinated Payments as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Guarantor of the Holders and creditors of the Guarantor, other than the holders of Senior Indebtedness; or (c) prevent the Guarantee Trustee or a Holder from exercising all remedies otherwise permitted by applicable law upon default under this Guarantee Agreement, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Guarantee Trustee or such Holder or, under the conditions specified in Section 7.3, to prevent any payment prohibited by such Section or enforce their rights pursuant to the penultimate paragraph in Section 7.3. SECTION 7.7 Guarantee Trustee To Effectuate Subordination. Each Holder of the Guarantee by his acceptance thereof authorizes and directs the Guarantee Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Guarantee Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Guarantor whether in bankruptcy, insolvency, receivership proceedings, or otherwise, the timely filing of a claim for the unpaid balance of the Indebtedness of the Guarantor owing to such Holder in the form required in such proceedings and the causing of such claim to be approved. If the Guarantee Trustee does not file a proper claim at least 30 days before the expiration of the time to file such claim, then the holders of the Senior Indebtedness and their agents, trustees or other representatives are authorized to do so (but shall in no event be liable for any failure to do so) for and on behalf of the Holders. SECTION 7.8 No Waiver Of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness 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 Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Guarantor with the terms, provisions and covenants of this Guarantee Agreement, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Guarantee Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders to the holders of the Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) permit the Guarantor to borrow, repay and then reborrow any or all of the Senior Indebtedness; (iii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iv) release any Person liable in any manner for the collection of Senior Indebtedness; (v) exercise or refrain from exercising any rights against the Guarantor and any other Person; and (vi) apply any sums received by them to Senior Indebtedness. SECTION 7.9 Notice To Guarantee Trustee. The Guarantor shall give prompt written notice to the Guarantee Trustee of any fact known to the Guarantor which would prohibit the making of any payment to or by the Guarantee Trustee in respect of the Guarantee. Notwithstanding the provision of this Article or any other provision of this Guarantee Agreement, the Guarantee Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Guarantee Trustee in respect of the Guarantee, unless and until a Responsible Officer of the Guarantee Trustee shall have received written notice thereof from the Guarantor, any holder of Senior Indebtedness, any Designated Senior Holder or from any trustee, fiduciary or agent therefore; and, prior to the receipt of any such written notice, the Guarantee Trustee, subject to the provisions of Section 3.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Guarantee Trustee shall not have received the notice provided for in this Section at least three 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 any amounts due under the Guarantee), then, anything herein contained to the contrary notwithstanding, but without limiting the rights and remedies of the holders of Senior Indebtedness or any trustee, fiduciary or agent therefor, the Guarantee Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Any notice required or permitted to be given to the Guarantee Trustee by a holder of Senior Indebtedness or by any Designated Senior Holder shall be in writing and shall be sufficient for every purpose hereunder if in writing and either (i) sent via facsimile to the Guarantee Trustee, the receipt of which shall be confirmed via telephone, or (ii) mailed, first class postage prepaid, or sent by overnight carrier, to the Guarantee Trustee addressed to it at the address of its principal office specified herein or at any other address furnished in writing to such holder of Senior Indebtedness by the Guarantee Trustee. Subject to the provisions of Section 3.1, the Guarantee Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness or Designated Senior Holder (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness or Designated Senior Holder (or a trustee, fiduciary or agent therefor). In the event that the Guarantee Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness or Designated Senior Holder to participate in any payment or distribution pursuant to this Article, the Guarantee Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Guarantee Trustee as to the amount of 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, and if such evidence is not furnished, the Guarantee Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Notwithstanding anything else contained herein, no notice, request or other communication to or with the Guarantee Trustee shall be deemed given unless received by a Responsible Officer at the Guarantee Trustee's principal corporate trust office. SECTION 7.10 Reliance On Judicial Order Or Certificate Of Liquidating Agent. Upon any payment or distribution of assets of the Guarantor referred to in this Article, the Guarantee Trustee, subject to the provisions of Section 3.1, and the Holders shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Guarantee Trustee or to the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other Indebtedness of the Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article, provided that the foregoing shall apply only if such court has been apprised of the provisions of this Article. SECTION 7.11 Guarantee Trustee Not Fiduciary For Holders Of Senior Indebtedness. The Guarantee Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders or to the Guarantor or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. SECTION 7.12 Rights of Guarantee Trustee As Holder Of Senior Indebtedness;Preservation Of Guarantee Trustee's Rights. The Guarantee Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Guarantee Agreement shall deprive the Guarantee Trustee of any of its rights as a holder of Senior Indebtedness. Nothing in this Article shall apply to claims of, or payments to, the Guarantee Trustee under or pursuant to this Guarantee Agreement or Section 6.7 of the Indenture. SECTION 7.13 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Guarantee Trustee shall have been appointed by the Guarantor and be then acting hereunder, the term "Guarantee Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Guarantee Trustee; provided, however, that Section 7.11 hereof shall not apply to the Guarantor or any Affiliate of the Guarantor if it or such Affiliate acts as Paying Agent. ARTICLE VIII TERMINATION SECTION 8.1 Termination. This Guarantee Agreement shall terminate upon (i) full payment of the Redemption Price of all Partnership Preferred Securities, (ii) the distribution of the Convertible Debentures to the Holders in exchange for all of such Holders' Partnership Preferred Securities, (iii) full payment of the amounts payable in accordance with the Limited Partnership Agreement upon liquidation of Citizens Capital or (iv) distribution of Common Stock to Holders in respect of the conversion of all of such Holders' Partnership Preferred Securities into Common Stock. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Partnership Preferred Securities must restore payment of any sums paid under the Partnership Preferred Securities or under this Guarantee Agreement. ARTICLE IX INDEMNIFICATION SECTION 9.1 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor 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 in accordance with this Guarantee Agree- ment and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement 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 Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, 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 Distribu- tions to Holders of Partnership Preferred Securities might properly be paid. SECTION 9.2 Indemnification. (a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person in accordance with this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemni- fied in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 9.2(a). ARTICLE X CONVERSION OF PARTNERSHIP PREFERRED SECURITIES SECTION 10.1 Issuance of Common Stock Series A. the Guarantor hereby agrees that, upon the request of the Conversion Agent, on behalf of one or more holders of Partnership Preferred Securities to convert Convertible Debentures into Common Stock Series A pursuant to the request of such holders to effect such conversion in accordance with the terms of the Limited Partnership Agreement, the Guarantor shall deliver to the Conversion Agent certificates representing the full number of shares of Common Stock Series A issuance upon conversion of such Convertible Debentures in accordance with the terms of the Indenture and such Convertible Debentures. The Guarantor has reserved and will keep available for issuance, solely for the purpose of affecting the conversion of the Convertible Debentures, the full number of shares of Common Stock Series A deliverable by the Conversion Agent to the holders upon the conversion of all outstanding Partnership Preferred Securities not theretofore converted by the holders. SECTION 10.2 Validity of Common Stock Series A. All shares of Common Stock Series A delivered by the Guarantor upon such conversion will be duly and validly issued and fully paid and nonassessable. SECTION 10.3 Termination of Obligation to Issue Common Stock Series A. The Guarantor' obligations under this Article IX to issue Common Stock Series A shall terminate upon the termination of the right of holders of Partnership Preferred Securities to request the Conversion Agent to effect such conversion as set forth in the Limited Partnership Agreement and, with respect to a particular holder, upon such conversion. ARTICLE MISCELLANEOUS SECTION 11.1 Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Partnership Preferred Securities then outstanding. SECTION 11.2 Amendments. Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of at least 66-2/3% in 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 the outstanding Partnership Preferred Securities. The provisions of Section 12.3 of the Limited Partnership Agreement with respect to meetings of Partners apply to the giving of such approval. SECTION 11.3 Notices. All notices provided for in this Guarantee Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Partnership Preferred Securities): Chemical Bank 450 West 33rd Street New York, New York 10001 Attention: _________________ Fax No.: (212) __________ (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Partnership Preferred Securities): Citizens Utilities Company High Ridge Park, Bldg. No. 3 Stamford, Connecticut 06905 Attention: _________________ Fax No.: (203) __________ copy to: Boulanger, Hicks & Churchill 135 East 57th Street New York, New York 10022 Attention: Jonathan H. Churchill Fax No.: (212) 753-6971 (c) If given to any Holder of Partnership Preferred Securities, at the address set forth on the books and records of Citizens Capital. 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 11.4 Benefit. This Guarantee Agreement is solely for the benefit of the Holders of the Partnership Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Partnership Preferred Securities. SECTION 11.5 Governing Law. This Guarantee Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. CITIZENS UTILITIES COMPANY By: Name: Title: CHEMICAL BANK, as Guarantee Trustee By: Name: Title: CITIZENS UTILITIES COMPANY Reconciliation and tie between Trust Indenture Act of 1939 and Guarantee, dated as of __________, 1995. Trust Indenture Act Section Guarantee Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . 4.1(a) (a)(2) . . . . . . . . . . . . . . . . . . . . . 4.1(a) (a)(3) . . . . . . . . . . . . . . . . . Not Applicable (a)(4) . . . . . . . . . . . . . . . . . Not Applicable (a)(5) . . . . . . . . . . . . . . . . . . . . . 4.1(a) (b). . . . . . . . . . . . . . . . . . . 4.1(c), 4.2(d) 311(a) . . . . . . . . . . . . . . . . . . . . . 2.2(b) (b) . . . . . . . . . . . . . . . . . . . . . 2.2(b) 312(a). . . . . . . . . . . . . . . . . . . . . . . 2.2(a) (b). . . . . . . . . . . . . . . . . . . . . . . 2.2(b) (c). . . . . . . . . . . . . . . . . . . . . . . 2.2(c) 313(a). . . . . . . . . . . . . . . . . . . . . . . . .2.3 (b). . . . . . . . . . . . . . . . . . . . . . . . .2.3 (c) . . . . . . . . . . . . . . . . . . . . . . . .2.3 (d). . . . . . . . . . . . . . . . . . . . . . . . .2.3 314(a). . . . . . . . . . . . . . . . . . . . . . . . .2.4 (b). . . . . . . . . . . . . . . . . . . Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . . . 2.4, 2.5 (c)(2) . . . . . . . . . . . . . . . . . . . . 2.4, 2.5 (c)(3) . . . . . . . . . . . . . . . . .Not Applicable (d) . . . . . . . . . . . . . . . . .Not Applicable (e) . . . . . . . . . . . . . . . . . . . . . . .1.1 315(a) . . . . . . . . . . . . . . . .3.1(c), 3.1(d)(i) (b) . . . . . . . . . . . . . . . . . . . . . . .2.7 (c) . . . . . . . . . . . . . . . . . . . . . 3.1(c) (d) . . . . . . . . . . . . . . . . . . . . . 3.1(d) (d)(1) . . . . . . . . . . . . . . . . . . . .3.1(d)(i) (d)(2) . . . . . . . . . . . . . . . . . . . 3.1(d)(ii) (d)(3) . . . . . . . . . . . . . . . . . . .3.1(d)(iii) (e) . . . . . . . . . . . . . . . . . . . . . . None 316(a) . . . . . . . . . . . . . . . . . . . . . . .5.4 (a)(1)(A). . . . . . . . . . . . . . . . . . . . . .5.4 (a)(1)(B). . . . . . . . . . . . . . . . . . . . . .5.4 (a)(2) . . . . . . . . . . . . . . . . . . . . . . None (b) .. . . . . . . . . . . . . . . . . . . . . 5.1, 5.3 (c). . . . . . . . . . . . . . . . . . . . . . . . None 317(a)(1) . . . . . . . . . . . . . . . . . . . . . 3.1(e) (a)(2) . . . . . . . . . . . . . . . . . . . . . 3.1(f) (b) . .. . . . . . . . . . . . . . . . . Not applicable 318(a) . .. . . . . . . . . . . . . . . . . . . . . . .2.1 NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Guarantee. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation. . . . . . . . . 1 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. . . . . . . . 5 SECTION 2.2 Lists of Holders of Securities. . . . . . . . . 5 SECTION 2.3 Reports by the Guarantee Trustee. . . . . . . . 6 SECTION 2.4 Periodic Reports to Guarantee Trustee . . . . . 6 SECTION 2.5 Evidence of Compliance with Conditions Precedent 6 SECTION 2.6 Events of Default; Waiver . . . . . . . . . . . 6 SECTION 2.7 Event of Default; Notice. . . . . . . . . . . . 7 SECTION 2.8 Conflicting Interests . . . . . . . . . . . . . 7 ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Guarantee Trustee. . . 7 SECTION 3.2 Certain Rights of Guarantee Trustee . . . . . . 9 SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee 11 ARTICLE IV GUARANTEE TRUSTEE SECTION 4.1 Guarantee Trustee; Eligibility. . . . . . . . 12 SECTION 4.2 Appointment, Removal and Resignation of Guarantee Trustees. . . . . . . . . . . . . 12 ARTICLE V GUARANTEE SECTION 5.1 Guarantee . . . . . . . . . . . . . . . . . . 13 SECTION 5.2 Waiver of Notice and Demand . . . . . . . . . 13 SECTION 5.3 Obligations Not Affected. . . . . . . . . . . 13 SECTION 5.4 Rights of Holders . . . . . . . . . . . . . . 14 SECTION 5.5 Guarantee of Payment. . . . . . . . . . . . . 14 SECTION 5.6 Subrogation . . . . . . . . . . . . . . . . . 15 SECTION 5.7 Independent Obligations . . . . . . . . . . . 15 ARTICLE VI COVENANTS SECTION 6.1 Limitation of Transactions. . . . . . . . . . 15 ARTICLE VII SUBORDINATION SECTION 7.1 Subordination . . . . . . . . . . . . . . . . 16 SECTION 7.2 Payment Over of Proceeds Upon Dissolution, etc. 16 SECTION 7.3 No Payment When Senior Indebtedness In Senior Payment Default or Senior Indebtedness Accelerated. 17 SECTION 7.4 Payment Permitted If No Default . . . . . . . 19 SECTION 7.5 Subrogation To Rights Of Holders Of Senior Indebtedness. . . . . . . . . . . . . . . . 19 SECTION 7.6 Provisions Solely To Define Relative Rights . 19 SECTION 7.7 Guarantee Trustee To Effectuate Subordination 19 SECTION 7.8 No Waiver Of Subordination Provisions . . . . 20 SECTION 7.9 Notice To Guarantee Trustee . . . . . . . . . 20 SECTION 7.10 Reliance On Judicial Order Or Certificate Of Liquidating Agent. . . . . . . . . . . . 21 SECTION 7.11 Guarantee Trustee Not Fiduciary For Holders Of Senior Indebtedness . . . . . . . . . . . . 22 SECTION 7.12 Rights of Guarantee Trustee As Holder Of Senior Indebtedness; Preservation Of Guarantee Trustee's Rights. . . . . . . . . . . . . . 22 SECTION 7.13 Article Applicable to Paying Agents . . . . . 22 ARTICLE VIII TERMINATION SECTION 8.1 Termination. . . . . . . . . . . . . . . 22 ARTICLE IX INDEMNIFICATION SECTION 9.1 Exculpation . . . . . . . . . . . . . . . . . 23 SECTION 9.2 Indemnification . . . . . . . . . . . . . . . 23 ARTICLE X CONVERSION OF PARTNERSHIP PREFERRED SECURITIES SECTION 10.1 Issuance of Common Stock Series A . . . . . . 24 SECTION 10.2 Validity of Common Stock Series A . . . . . . 24 SECTION 10.3 Termination of Obligation to Issue Common Stock Series A. . . . . . . . . . . . . . . . . . 24 ARTICLE XI MISCELLANEOUS SECTION 11.1 Successors and Assigns. . . . . . . . . . . . 24 SECTION 11.2 Amendments. . . . . . . . . . . . . . . . . . 24 SECTION 11.3 Notices . . . . . . . . . . . . . . . . . . . 25 SECTION 11.4 Benefit . . . . . . . . . . . . . . . . . . . 25 SECTION 11.5 Governing Law . . . . . . . . . . . . . . . . 26 EX-8 11 October [ ], 1995 Citizens Utilities Company Citizens Utilities Capital, L.P. Citizens Utilities Trust High Ridge Park, Bldg. No. 3 P.O. Box 3801 Stamford, Connecticut 06905 Re: Registration No. 33-[ ] Registration Statement on Form S-3 Ladies and Gentlemen: We have acted as special counsel for Citizens Utilities Company, a Delaware corporation (the "Company"), Citizens Utilities Capital, L.P., a Delaware limited partnership (the "Partnership") and Citizens Utilities Trust, a Delaware business trust (the "Trust") in connection with the above captioned registration statement on Form S-3 filed with the Securities and Exchange Commission (the "Commission") on October [ ], 1995, and Amendment No.1 thereto, filed with the Commission on October [ ], 1995 for the purpose of registering (i) up to $201,250,000 of [ ]% Citizens Utilities Convertible Preferred Securities (liquidation preference $50 per preferred security) of the Trust (the "Preferred Securities"), representing undivided beneficial interests in the assets of the Trust, (ii) up to $201,250,000 of Partnership Preferred Securities of the Partnership (the "Partnership Securities"), (iii) up to $201,250,000 aggregate principal amount of [ ]% Convertible Subordinated Debentures Due 2035 (the "Subordinated Debt Securities") issued by the Company to the Partnership in connection with the sale of the Preferred Securities and (iv) shares of Common Stock Series A of the Company ("Common Stock") issuable upon conversion of the Subordinated Debt Securities. We hereby confirm that, although the discussion set forth in the above captioned registration statement under the heading "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" does not purport to discuss all possible United States federal income tax consequences of the purchase, ownership, disposition and conversion of Preferred Securities, in our opinion such discussion constitutes, in all material respects, a fair and accurate summary of the United States federal income tax consequences of the purchase, ownership, disposition and conversion of Preferred Securities, based upon current law. It is possible that contrary positions may be taken by the Internal Revenue Service and that a court may agree with such contrary positions. This opinion is furnished to you solely for your benefit in connection with the filing of the Registration Statement and, except as set forth in the next sentence, is not to be used, circulated, quoted or otherwise referred to for any other purpose or relied upon by any other person for any purpose without our prior written consent. We also consent to the use of our name under the heading "Legal Matters" in the form of Prospectus included as an exhibit to the Registration Statement. We hereby consent to the filing of this opinion with the Commission as Exhibit 8 to the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder. This opinion is expressed as of the date hereof unless otherwise expressly stated and we disclaim any undertaking to advise you of any subsequent changes of the facts stated or assumed herein or any subsequent changes in applicable law. Very Truly Yours, EX-23 12 EXHIBIT 23.1 The Board of Directors Citizens Utilities Company: We consent to the use of our report incorporated by reference herein and to the reference to our firm under the heading "Experts" in the registration statement. /s/ KPMG Peat Marwick LLP ------------------------- New York, New York October 19, 1995 EXHIBIT 23.2 ARTHER ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports and to all refernces to our Firm included in or made a part of this Form S-3 registration statement for Citizens Utilities Company and Citizens Utilities Trust. /s/ Arthur Andersen LLP ----------------------- Dallas, Texas October 19, 1995 EX-25 13 ___________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 _________________________ FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ___________________________________________ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ________________________________________ CHEMICAL BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) _____________________________________________ CITIZENS UTILITIES COMPANY (Exact name of obligor as specified in its charter) Delaware 06-0619596 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) High Ridge Park, Bldg.3 P.O. Box 3801 Stamford, Connecticut 06905 (Address of principal executive offices) (Zip Code) ___________________________________________ % Convertible Subordinated Debentures Convertible Preferred Securities Guarantee Partnership Preferred Securities Guarantee (Title of the indenture securities) ____________________________________________________ GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Page 2 Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 33-84460, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, Chemical Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 13th day of October, 1995. CHEMICAL BANK By \s\ Thomas J. Foley ___________________ Thomas J. Foley Vice President Page 3 Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF Chemical Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1995, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Millions Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .........................................$ 5,573 Interest-bearing balances ....................................2,681 Securities: .......................................... Held to maturity securities.....................................6,027 Available for sale securities..................................18,304 Federal Funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds sold ...........................................1,516 Securities purchased under agreements to resell ................287 Loans and lease financing receivables: Loans and leases, net of unearned income $73,829 Less: Allowance for loan and lease losses 1,885 Less: Allocated transfer risk reserve ... 104 ------ Loans and leases, net of unearned income, allowance, and reserve ......................................71,840 Trading Assets ................................................25,315 Premises and fixed assets (including capitalized leases).......................................................1,395 Other real estate owned ...........................................69 Investments in unconsolidated subsidiaries and associated companies............................................158 Customer's liability to this bank on acceptances outstanding ..................................................1,120 Intangible assets ................................................484 Other assets ...................................................7,254 ----- TOTAL ASSETS ................................................$142,023 ======== Page 4 LIABILITIES Deposits In domestic offices ....................................$46,128 Noninterest-bearing ........................$16,282 Interest-bearing ............................29,846 ------ In foreign offices, Edge and Agreement subsidiaries, and IBF's ...............................................30,833 Noninterest-bearing ........................$ 199 Interest-bearing ........................... 30,634 ------ Federal funds purchased and securities sold under agree- ments to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's Federal funds purchased ................................16,779 Securities sold under agreements to repurchase ............810 Demand notes issued to the U.S. Treasury ..................1,001 Trading liabilities ......................................20,888 Other Borrowed money: With original maturity of one year or less ..............6,505 With original maturity of more than one year ..............602 Mortgage indebtedness and obligations under capitalized leases .....................................................18 Bank's liability on acceptances executed and outstanding...1,126 Subordinated notes and debentures .........................3,411 Other liabilities .........................................6,287 TOTAL LIABILITIES .......................................134,388 ------- EQUITY CAPITAL Common stock ................................................620 Surplus ...................................................4,524 Undivided profits and capital reserves ....................2,724 Net unrealized holding gains (Losses) on available-for-sale securities ...........................(241) Cumulative foreign currency translation adjustments ...........8 TOTAL EQUITY CAPITAL ......................................7,635 ______ TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK AND EQUITY CAPITAL .............................$142,023 ======== I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true and correct. WALTER V. SHIPLEY ) EDWARD D. MILLER )DIRECTORS WILLIAM B. HARRISON ) Page 5 EX-25 14 ___________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 _________________________ FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ___________________________________________ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ________________________________________ CHEMICAL BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) _____________________________________________ CITIZENS UTILITIES TRUST (Exact name of obligor as specified in its charter) Delaware Pending (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) High Ridge Park, Bldg.3 P.O. Box 3801 Stamford, Connecticut 06905 (Address of principal executive offices) (Zip Code) ___________________________________________ Preferred Securities (Title of the indenture securities) ____________________________________________________ GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Page 2 Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 33-84460, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, Chemical Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 13th day of October, 1995. CHEMICAL BANK By \s\ Thomas J. Foley ___________________ Thomas J. Foley Vice President Page 3 Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF Chemical Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1995, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Millions Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin .........................................$ 5,573 Interest-bearing balances ....................................2,681 Securities: .......................................... Held to maturity securities.....................................6,027 Available for sale securities..................................18,304 Federal Funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds sold ...........................................1,516 Securities purchased under agreements to resell ................287 Loans and lease financing receivables: Loans and leases, net of unearned income $73,829 Less: Allowance for loan and lease losses 1,885 Less: Allocated transfer risk reserve ... 104 ------ Loans and leases, net of unearned income, allowance, and reserve ......................................71,840 Trading Assets ................................................25,315 Premises and fixed assets (including capitalized leases).......................................................1,395 Other real estate owned ...........................................69 Investments in unconsolidated subsidiaries and associated companies............................................158 Customer's liability to this bank on acceptances outstanding ..................................................1,120 Intangible assets ................................................484 Other assets ...................................................7,254 ----- TOTAL ASSETS ................................................$142,023 ======== Page 4 LIABILITIES Deposits In domestic offices ....................................$46,128 Noninterest-bearing ......................$16,282 Interest-bearing ..........................29,846 ------ In foreign offices, Edge and Agreement subsidiaries, and IBF's ...............................................30,833 Noninterest-bearing ......................$ 199 Interest-bearing ......................... 30,634 ------ Federal funds purchased and securities sold under agree- ments to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's Federal funds purchased ................................16,779 Securities sold under agreements to repurchase ............810 Demand notes issued to the U.S. Treasury ..................1,001 Trading liabilities ......................................20,888 Other Borrowed money: With original maturity of one year or less ..............6,505 With original maturity of more than one year ..............602 Mortgage indebtedness and obligations under capitalized leases .....................................................18 Bank's liability on acceptances executed and outstanding...1,126 Subordinated notes and debentures .........................3,411 Other liabilities .........................................6,287 TOTAL LIABILITIES .......................................134,388 ------- EQUITY CAPITAL Common stock ................................................620 Surplus ...................................................4,524 Undivided profits and capital reserves ....................2,724 Net unrealized holding gains (Losses) on available-for-sale securities ...........................(241) Cumulative foreign currency translation adjustments ...........8 TOTAL EQUITY CAPITAL ......................................7,635 ______ TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK AND EQUITY CAPITAL .............................$142,023 ======== I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the in- structions issued by the appropriate Federal regulatory authority and is true and correct. WALTER V. SHIPLEY ) EDWARD D. MILLER )DIRECTORS WILLIAM B. HARRISON ) Page 5 -----END PRIVACY-ENHANCED MESSAGE-----