-----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, UBL0kvn0sBniwQcjVWX1LoklIznX8kz3XOivonZDEt1EwfHgFx7liq8lyX9HUQ9E qfO8U34tPqYRemHTe8ECHw== 0000950110-96-001077.txt : 19960919 0000950110-96-001077.hdr.sgml : 19960919 ACCESSION NUMBER: 0000950110-96-001077 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19960918 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC CITY ELECTRIC CO CENTRAL INDEX KEY: 0000008192 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 210398280 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-06625 FILM NUMBER: 96631937 BUSINESS ADDRESS: STREET 1: 6801 BLACK HORSE PIKE CITY: PLEASANTVILLE STATE: NJ ZIP: 08232 BUSINESS PHONE: 6096454100 MAIL ADDRESS: STREET 1: PO BOX 1264 CITY: PLEASANTVILLE STATE: NJ ZIP: 08232 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 As filed with the Securities and Exchange Commission on September 18, 1996 File No. 333-06625 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ATLANTIC CITY ELECTRIC NEW JERSEY COMPANY DELAWARE ATLANTIC CAPITAL I (STATE OR OTHER 21-0398280 (EXACT NAME OF REGISTRANT JURISDICTION 22-6701238 AS SPECIFIED OF INCORPORATION (I.R.S. EMPLOYER IN ITS CHARTER) OR ORGANIZATION) IDENTIFICATION NUMBER) 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 (609) 645-4100 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) James E. Franklin II, Esq. Senior Vice President, Secretary and General Counsel Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 (609) 645-4100 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Vincent Pagano, Jr. J.H. Byington, Jr. Simpson Thacher & Bartlett Winthrop, Stimson, Putnam & Roberts 425 Lexington Avenue One Battery Park Plaza New York, New York 10017 New York, New York 10004 (212) 455-2000 (212) 858-1000 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, 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. |_| 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 and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| 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. |_| The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant 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 this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1996 2,800,000 PREFERRED SECURITIES ATLANTIC CAPITAL I % Cumulative Quarterly Income Preferred Securities (QUIPS(SM))* (Liquidation Preference $25 per Preferred Security) Guaranteed to the extent the Issuer has funds as set forth herein by Atlantic City Electric Company ---------------------- The % Cumulative Quarterly Income Preferred Securities (the "QUIPS"), offered hereby represent undivided beneficial interests in the assets of Atlantic Capital I, a trust formed under the laws of the State of Delaware (the "Issuer"). Atlantic City Electric Company, a New Jersey corporation (the "Company"), will be the owner of all of the beneficial interests represented by common securities of the Issuer ("Common Securities"). The Bank of New York is the Property Trustee of the Issuer. The Issuer exists for the sole purpose of issuing the QUIPS and the Common Securities and investing the proceeds (Continued on next page) ---------------------- SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE QUIPS. ---------------------- 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 OFFERING PRICE COMMISSION(1) ISSUER (2)(3) -------------- ------------- ------------- Per QUIPS.............. $ 25.00 (2) $ 25.00 Total.................. $ 70,000,000 (2) $70,000,000 - ---------- (1) The Issuer and the Company have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting". (2) In view of the fact that the proceeds of the sale of the QUIPS will be used to purchase the QUIDS, the Underwriting Agreement provides that the Company will pay to the Underwriters, as compensation ("Underwriters' Compensation") for their arranging the investment therein of such proceeds, $ per QUIPS (or $ in the aggregate). See "Underwriting". (3) Expenses of the offering, which are payable by the Company, are estimated to be $375,000. ---------------------- The QUIPS 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 the QUIPS will be ready for delivery in book-entry form only through the facilities of The Depository Trust Company in New York, New York, on or about , 1996, against payment therefor in immediately available funds. * QUIPS and QUIDS are servicemarks of Goldman, Sachs & Co. GOLDMAN, SACHS & CO. DEAN WITTER REYNOLDS INC. A.G. EDWARDS & SONS, INC. LEHMAN BROTHERS PRUDENTIAL SECURITIES INCORPORATED WHEAT FIRST BUTCHER SINGER ---------------------- The date of this Prospectus is , 1996. ---------------------- (Continued from previous page) thereof in _____% Junior Subordinated Deferrable Interest Debentures (the "QUIDS"SM), to be issued by the Company. The QUIDS will mature on _____, 2026, which date may be extended to a date not later than _____, 2045 if certain conditions are met. The QUIPS will have a preference under certain circumstances with respect to cash distributions and amounts payable on liquidation, redemption or otherwise over the Common Securities. See "Description of QUIPS--Subordination of Common Securities". Holders of the QUIPS will be entitled to receive preferential cumulative cash distributions accruing from the date of original issuance and payable quarterly in arrears on the last day of March, June, September and December of each year, commencing December 31, 1996, at the annual rate of _____% of the Liquidation Amount of $25 per QUIPS ("Distributions"). The Company has the right to defer payment of interest on the QUIDS at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each deferral period (each, an "Extension Period"), during which Extension Periods the Company shall have the right to make full or partial payments of interest on any Interest Payment Date, provided that no Extension Period may extend beyond the Stated Maturity (as defined herein) of the QUIDS. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date (as defined herein), the Company may elect to begin a new Extension Period subject to the requirements set forth herein. If interest payments on the QUIDS are so deferred, distributions on the QUIPS will also be deferred and the Company may not, and may not permit any subsidiary of the Company to, subject to certain exceptions set forth herein, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, the Company's common stock, preferred stock or preference stock (collectively, "Capital Stock") or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank pari passu with or junior to the QUIDS. During an Extension Period, interest on the QUIDS will continue to accrue (and the amount of Distributions to which holders of the QUIPS are entitled will accumulate at the rate of % per annum, compounded quarterly). See "Description of QUIDS--Option to Extend Interest Payment Period" and "Certain Federal Income Tax Consequences--Original Issue Discount". The Company has, through the Guarantee, the Trust Agreement, the QUIDS, the Indenture and the Expense Agreement (each, as defined herein), taken together, fully, irrevocably and unconditionally guaranteed all of the Issuer's obligations under the QUIPS. The Company guarantees the payment of Distributions and payments on liquidation or redemption of the QUIPS, but only in each case to the extent of funds held by the Issuer, as described herein (the "Guarantee"). See "Description of Guarantee" herein. If the Company does not make interest payments on the QUIDS held by the Issuer, the Issuer will have insufficient funds to pay Distributions on the QUIPS. The Guarantee does not cover payment of Distributions when the Issuer does not have sufficient funds to pay such Distributions. In such event, a holder of QUIPS may institute a legal proceeding directly against the Company to enforce payment of such Distributions to such holder. The obligations of the Company under the Guarantee and the QUIDS are subordinate and junior in right of payment to all Senior Debt (as defined in "Description of QUIDS--Subordination" herein) of the Company. The QUIPS are subject to mandatory redemption, in whole or in part, upon repayment of the QUIDS at maturity or their earlier redemption in an amount equal to the amount of related QUIDS maturing or being redeemed at a redemption price equal to the aggregate Liquidation Amount of such QUIPS plus accumulated and unpaid Distributions thereon to the date of redemption. The QUIDS are redeemable prior to maturity at the option of the Company (i) on or after , 2001, in whole at any time or in part from time to time, at a redemption price equal to the accrued and unpaid interest on the QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof or (ii) at any time, in whole (but not in part), upon the occurrence and continuation of a Special Event (as defined herein), at a redemption price equal to the accrued and unpaid interest on the QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof, in each case subject to the further conditions described under "Description of QUIDS--Redemption". At any time, the Company will have the right to terminate the Issuer and cause the QUIDS to be distributed to the holders of the QUIPS in liquidation of the Issuer. If the Company elects to liquidate the Issuer and thereby causes the QUIDS to be distributed to holders of the QUIPS in liquidation of the Issuer, the Company shall have the right to shorten or extend the maturity of the QUIDS, provided that it can extend the maturity only if certain conditions are met. See "Description of QUIPS--Redemption--Special Event Redemption or Distribution of QUIDS". The QUIDS are subordinate and junior in right of payment to all Senior Debt (as defined herein) of the Company. As of June 30, 1996, the Company had approximately $802,000,000 aggregate principal amount of Senior Debt outstanding. 2 The terms of the QUIDS place no limitation on the amount of Senior Debt that may be incurred by the Company. See "Description of QUIDS--Subordination". In the event of the termination of the Issuer, after satisfaction of the creditors of the Issuer as provided by applicable law, the holders of the QUIPS will be entitled to receive a Liquidation Amount of $25 per QUIPS plus accumulated and unpaid Distributions thereon to the date of payment, which may be in the form of a distribution of such amount in QUIDS, subject to certain exceptions. See "Description of QUIPS--Liquidation Distribution Upon Termination". The QUIPS have been approved for listing on the New York Stock Exchange, subject to notice of issuance. If the QUIDS are distributed to the holders of QUIPS upon the liquidation of the Issuer, the Company will use its best efforts to list the QUIDS on the New York Stock Exchange or such other stock exchanges, if any, on which the QUIPS are then listed. The QUIPS will be represented by global certificates registered in the name of The Depository Trust Company ("DTC") or its nominee. Beneficial interests in the QUIPS will be shown on, and transfers thereof will be effected only through, records maintained by participants in DTC. Except as described herein, QUIPS in certificated form will not be issued in exchange for the global certificates. See "Description of QUIPS--Book-Entry Issuance". As used herein, (i) the "Indenture" means the Junior Subordinated Indenture, as amended and supplemented from time to time, between the Company and The Bank of New York, as trustee (the "Debenture Trustee"), and (ii) the "Trust Agreement" means the Amended and Restated Trust Agreement among the Company, as Depositor, The Bank of New York, as Property Trustee (the "Property Trustee") and The Bank of New York (Delaware), as Delaware Trustee (the "Delaware Trustee"), the Administrative Trustees named therein (collectively, with the Property Trustee and Delaware Trustee, the "Issuer Trustees") and the Holders as defined therein. 3 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE QUIPS AT A LEVEL ABOVE THAT 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. ---------------------- AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company with the Commission pursuant to the informational requirements of the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices of the Commission: Chicago Regional Office, Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661; and New York Regional Office, 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission also maintains a Web site (http://www.sec.gov) that contains reports, proxy statements and other information regarding the Company. The Company and the Issuer have filed with the Commission a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities offered hereby. This Prospectus omits, in accordance with the rules and regulations of the Commission, certain of the information contained in the Registration Statement. Reference is hereby made to the Registration Statement and the exhibits and the financial statements, notes and schedules filed as a part thereof or incorporated by reference therein for further information with respect to the Company, the Issuer and the securities offered hereby. Statements contained herein concerning the provisions of any document are not necessarily complete and, in each instance, where a copy of such document has been filed as an exhibit to the Registration Statement or otherwise has been filed with the Commission, reference is made to the copy so filed. Each such statement is qualified in its entirety by such reference. No separate financial statements of the Issuer have been included herein. The Company and the Issuer do not consider that such financial statements would be material to holders of the QUIPS because the Issuer is a newly formed special purpose entity, has no operating history or independent operations and is not engaged in and does not propose to engage in any activity other than holding as trust assets the QUIDS of the Company and issuing the QUIPS and Common Securities. See "The Issuer", "Description of QUIPS", "Description of Guarantee" and "Description of QUIDS". INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996 and the Company's Current Report on Form 8-K dated May 29, 1996, June 26, 1996, July 25, 1996 and August 13, 1996 previously filed by the Company with the Commission, are incorporated by reference in this Prospectus and shall be deemed to be a part hereof. Each document filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of any offering of securities made by this Prospectus shall be deemed to be incorporated herein by reference and to be a part hereof from the date of filing such document. Any statement contained herein, or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement or this Prospectus. The Company will provide without charge to any person to whom a copy of this Prospectus is delivered, upon written or oral request of such person, a copy of any and all of the documents that have been or may be incorporated by reference herein (other than exhibits to such documents which are not specifically incorporated by reference into such documents). Such 4 requests should be directed to Robert K. Marshall, Manager, Finance & Treasury Operations, Atlantic City Electric Company, 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234-4130 (telephone: (609) 645-4655). RECENT DEVELOPMENTS On August 9, 1996, Atlantic Energy, Inc. ("Energy"), the parent of the Company, and Delmarva Power & Light Company ("DP&L") entered into a merger agreement pursuant to which Energy will merge into a yet-to-be-named new company that will become the parent company of the Company and DP&L. The merger is expected to be a tax-free, stock-for-stock transaction accounted for as a purchase. Under the terms of the merger agreement, DP&L shareholders will receive one share of the new company's common stock for each share of DP&L common stock. Energy shareholders will receive 0.75 shares of the new company's common stock and 0.125 shares of the new company's Class A common stock for each share of Energy common stock. All of the debt and preferred stock obligations of the Company will continue to be outstanding obligations of the Company. In order for the merger to be effective, approvals are needed by the shareholders of both Energy and DP&L and a number of federal and state regulators. Securing the necessary approvals may take from 12 to 18 months. There can be no assurance when and if such approvals will be obtained. RISK FACTORS Prospective purchasers of the QUIPS should carefully review the information contained elsewhere in this Prospectus and should particularly consider the following matters. Ranking of Subordinated Obligations Under the Guarantee and the QUIDS The obligations of the Company under the Guarantee issued by the Company for the benefit of the holders of QUIPS are unsecured and rank subordinate and junior in right of payment to all general liabilities of the Company. The obligations of the Company under the QUIDS are subordinate and junior in right of payment to all Senior Debt. At June 30, 1996, the Senior Debt of the Company aggregated approximately $802,000,000. Neither the Indenture, the Guarantee nor the Trust Agreement places any limitation on the amount of secured or unsecured debt, including Senior Debt, that may be incurred by the Company. See "Description of Guarantee--Status of the Guarantee" and "Description of QUIDS--Subordination". The ability of the Issuer to pay amounts due on the QUIPS is solely dependent upon the Company making payments on the QUIDS as and when required. Option to Extend Interest Payment Period; Tax Consequences The Company has the right under the Indenture to defer the payment of interest on the QUIDS at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity (as defined below) of the QUIDS. As a consequence of any such deferral, quarterly Distributions on the QUIPS by the Issuer will be deferred (and the amount of Distributions to which holders of the QUIPS are entitled will accumulate additional Distributions thereon at the rate of % per annum, compounded quarterly from the relevant payment date for such Distributions) during any such Extension Period. During any such Extension Period, the Company may not, and may not permit any subsidiary of the Company to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's Capital Stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the QUIDS or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu or junior in interest to the QUIDS (other than (a) dividends or distributions in Common Stock of the Company and (b) payments under the Guarantee). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that no Extension Period may exceed 20 consecutive quarters or extend beyond the Stated Maturity (as defined below) of the QUIDS. Upon the termination of any Extension Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extension Period subject to the above requirements. See "Description of QUIPS--Distributions" and "Description of QUIDS--Option to Extend Interest Payment Period". 5 Should the Company defer payment of interest on the QUIDS, a holder of QUIPS will continue to accrue income (in the form of original issue discount) in respect of its pro rata share of the QUIDS held by the Issuer for United States federal income tax purposes. As a result, a holder of QUIPS will include such income in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash related to such income from the Issuer if the holder disposes of the QUIPS prior to the record date for the payment of Distributions. See "Certain Federal Income Tax Consequences--Original Issue Discount" and "--Sale or Redemption of QUIPS". The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the QUIDS. However, should the Company elect to exercise such right in the future, the market price of the QUIPS is likely to be affected. A holder that disposes of its QUIPS during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its QUIPS. In addition, as a result of the existence of the Company's right to defer interest payments, the market price of the QUIPS (which represent preferred undivided beneficial interests in the QUIDS) may be more volatile than the market prices of other securities on which original issue discount accrues that are not subject to such deferrals. Special Event Redemption Upon the occurrence and continuation of a Special Event (as defined below), the Company has the right to redeem the QUIDS in whole (but not in part) at the redemption price within 90 days following the occurrence of such Special Event and thereby cause a mandatory redemption of the QUIPS and Common Securities. A "Special Event" means a Tax Event or an Investment Company Event. A "Tax Event" means the receipt by the Issuer of an opinion of counsel, rendered by a law firm having a national tax and securities practice, to the effect that, as a result of any amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is adopted or such pronouncement or decision is announced on or after the date of issuance of the QUIPS under the Trust Agreement, there is more than an insubstantial risk that (i) the Issuer is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the QUIDS, (ii) interest payable by the Company on such QUIDS is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes, or (iii) the Issuer is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means the receipt by the Issuer of an opinion of counsel, rendered by a law firm having a recognized national tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a 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"), the Issuer is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the QUIPS. On March 19, 1996, President Clinton announced a 1997 balanced budget proposal (the Revenue Reconciliation Bill of 1996, the "Bill"). The Bill would, among other things, deny interest deductions on a debt instrument issued on or after December 7, 1995 if the instrument had a maximum weighted average maturity of more than 40 years. The Bill would also generally deny interest deductions for interest on an instrument, issued by a corporation, that has a maximum term of more than 20 years and that is not shown as indebtedness on the separate balance sheet of the issuer or, where the instrument is issued to a related party (other than a corporation), where the holder or some other related party issues a related instrument that is not shown as indebtedness on the issuer's consolidated balance sheet. For purposes of determining the weighted average maturity or the term of an instrument, any right to extend would be treated as exercised. The above-described provisions of the Bill were proposed to be effective generally for instruments issued on or after December 7, 1995. If either provision were to apply to the QUIDS, the Company would be unable to deduct interest on the QUIDS. However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees issued a joint statement to the effect that it was their intention that the effective date of the President's legislative proposals, if adopted, will be no earlier than the date of appropriate Congressional action. The Company believes that, under current law, it will be able to deduct interest on the QUIDS. There can be no assurance, however, that current or future legislative or administrative proposals or final legislation will not affect the ability of the Company to deduct interest on the QUIDS. Such a change would give rise to a Tax Event, which would permit the Company to cause a redemption of the QUIPS upon receiving an opinion of counsel, as described 6 more fully under "Description of QUIPS--Redemption--Special Event Redemption or Distribution of QUIDS". Such a tax law change would not alter the United States federal income tax consequences of the purchase, ownership and disposition of QUIPS. There can be no assurance as to the market prices for QUIPS or QUIDS that may be distributed in exchange for QUIPS if a liquidation of the Issuer occurs. Accordingly, the QUIPS that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the QUIDS that a holder of QUIPS may receive on liquidation of the Issuer, may trade at a discount to the price that the investor paid to purchase the QUIPS offered hereby. In addition, because the Company has the right to shorten or extend the maturity of the QUIDS upon the termination of the Issuer and the distribution of QUIDS to holders of QUIPS, there can be no assurance that the Company will not exercise its option to change the maturity of the QUIDS upon such an event. Because holders of QUIPS may receive QUIDS on termination of the Issuer prospective purchasers of QUIPS are also making an investment decision with regard to the QUIDS and should carefully review all the information regarding the QUIDS contained herein. See "Description of QUIPS--Redemption--Special Event Redemption or Distribution of QUIDS" and "Description of QUIDS--General". Rights Under the Guarantee The Guarantee will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Bank of New York will act as the indenture trustee under the Guarantee (the "Guarantee Trustee") for the purposes of compliance with the Trust Indenture Act and will hold the Guarantee for the benefit of the holders of the QUIPS. The Bank of New York will also act as Debenture Trustee for the QUIDS and as Property Trustee under the Trust Agreement and The Bank of New York (Delaware) will act as Delaware Trustee under the Trust Agreement. The Guarantee guarantees to the holders of the QUIPS the following payments, to the extent not paid by the Issuer: (i) any accumulated and unpaid Distributions required to be paid on the QUIPS, to the extent that the Issuer has funds on hand available therefor at such time, (ii) the redemption price including all accrued and unpaid Distributions to the date of redemption with respect to any QUIPS called for redemption, to the extent that the Issuer has funds on hand available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of the Issuer (unless the QUIDS are distributed to holders of the QUIPS), the lesser of (a) the aggregate of the liquidation preference and all accrued and unpaid Distributions to the date of payment to the extent that the Issuer has funds on hand available therefor at such time and (b) the amount of assets of the Issuer remaining available for distribution to holders of the QUIPS. The holders of not less than a majority in aggregate liquidation amount of the QUIPS 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 Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. Any holder of the QUIPS may institute a proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a proceeding against the Issuer, the Guarantee Trustee or any other person or entity. If the Company were to default on its obligation to pay amounts payable under the QUIDS, the Issuer would lack funds for the payment of Distributions or amounts payable on redemption of the QUIPS or otherwise, and, in such event, holders of the QUIPS would not be able to rely upon the Guarantee for payment of such amounts. Instead, in the event a Debenture Event of Default shall have occurred and be continuing and such event is attributable to the failure of the Company to pay interest on or principal of the QUIDS on the payment date on which such payment is due and payable, then a holder of QUIPS may directly institute a proceeding against the Company for enforcement of payment to such holder of the interest on or principal of such QUIDS having a principal amount equal to the aggregate liquidation preference of the QUIPS of such holder (a "Direct Action"). In connection with such Direct Action, the Company will be subrogated to the rights of such holder of QUIPS under the Trust Agreement to the extent of any payment made by the Company to such holder of QUIPS in such Direct Action. Except as set forth herein, holders of QUIPS will not be able to exercise directly any other remedy available to the holders of QUIDS or assert directly any other rights in respect of the QUIDS. See "Description of QUIPS--Enforcement of Certain Rights by Holders QUIPS", "Description of Guarantee" and "Description of QUIDS--Debenture Events of Default". The Trust Agreement provides that each holder of QUIPS by acceptance thereof agrees to the provisions of the Guarantee and the Indenture. Limited Voting Rights Holders of QUIPS will generally have limited voting rights relating only to the modification of the QUIPS and certain other matters described herein. Holders of QUIPS will not be entitled to vote to appoint, remove or replace the Property Trustee or the Delaware Trustee, which voting rights are vested exclusively in the holder of the Common Securities except upon the occurrence of certain events described herein. The Issuer Trustees (as defined below) and the Company may 7 amend the Trust Agreement without the consent of holders of QUIPS to ensure that the Issuer will be classified for United States federal income tax purposes as a grantor trust even if such action adversely affects the interests of such holders. See "Description of QUIPS--Voting Rights; Amendment of the Trust Agreement" and "--Removal of Issuer Trustees". Trading Characteristics of QUIPS The QUIPS have been approved for listing on the New York Stock Exchange, subject to notice of issuance. The QUIPS may trade at prices that do not fully reflect the value of accrued but unpaid interest with respect to the underlying QUIDS. A holder of QUIPS that disposes of its QUIPS between record dates for payments of Distributions (and consequently does not receive a Distribution from the Issuer for the period prior to such disposition) will nevertheless be required to include in income as ordinary income an amount equal to the accrued but unpaid interest on the QUIDS through the date of disposition and to add such amount to its adjusted tax basis in the QUIPS disposed of. Such holder will recognize a capital loss to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than its adjusted tax basis (which will include accrued but unpaid interest). 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 Consequences--Sale or Redemption of QUIPS". ATLANTIC CAPITAL I The Issuer is a statutory business trust formed under Delaware law pursuant to (i) the Amended and Restated Trust Agreement (the "Trust Agreement") executed by the Company, as Depositor, The Bank of New York, as Property Trustee and The Bank of New York (Delaware), as Delaware Trustee, and the Administrative Trustees named therein, and (ii) the filing of a certificate of trust with the Delaware Secretary of State on June 20, 1996. The Issuer's business and affairs are conducted by The Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and two individual Administrative Trustees who are employees or officers of or affiliated with the Company (collectively, the "Issuer Trustees"). The Issuer exists for the exclusive purposes of (i) issuing and selling the QUIPS and Common Securities, (ii) using the proceeds from the sale of QUIPS and Common Securities to acquire QUIDS issued by the Company and (iii) engaging in only those other activities necessary, convenient or incidental thereto. Accordingly, the QUIDS will be the sole assets of the Issuer, and payments under the QUIDS and the Expense Agreement will be the sole revenue of the Issuer. All of the Common Securities will be owned by the Company. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the QUIPS, except that upon the occurrence and continuance of an Event of Default (as defined herein) under the Trust Agreement resulting from a Debenture Event of Default (as defined herein) under the Indenture, the rights of the Company as holder of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise will be subordinated to the rights of the holders of the QUIPS. See "Description of QUIPS--Subordination of Common Securities". The Company will acquire Common Securities in an aggregate liquidation amount equal to 3% of the total capital of the Issuer. The Issuer has a term of 55 years, but may terminate earlier as provided in the Trust Agreement. The principal executive office of the Issuer is 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234-4130, Attention: Manager of Finance, and its telephone number is (609) 645-4655. The Trust Agreement will be substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Trust Agreement will be qualified as an indenture under the Trust Indenture Act. The Bank of New York, as Property Trustee, will act as sole indenture trustee under the Trust Agreement for purposes of compliance with the Trust Indenture Act. The Bank of New York will also act as trustee under the Guarantee and the Indenture (each as defined herein). See "Description of Guarantee" and "Description of QUIDS". The holder of the Common Securities, unless a Debenture Event of Default has occurred and is continuing, or the holders of a majority in liquidation preference of the QUIPS if any Debenture Event of Default has occurred and is continuing, will be entitled to appoint, remove or replace the Property Trustee and/or the Delaware Trustee. In no event will the holders of the QUIPS have the right to vote to appoint, remove or replace the Administrative Trustees; such voting rights are vested exclusively in the holder of the Common Securities. The duties and obligations of each Issuer Trustee are governed by the Trust Agreement. The Company will pay all fees and expenses related to the Issuer and the offering of the QUIPS and will pay, directly or indirectly, all ongoing costs, expenses and liabilities of the Issuer. 8 ATLANTIC CITY ELECTRIC COMPANY The Company was formed under the laws of New Jersey on April 28, 1924 by merger and consolidation of several utility companies. The Company is engaged in the generation, transmission, distribution, and sale of electric energy in the southern part of New Jersey. The Company, which has a wholly owned subsidiary, Deepwater Operating Company, is the principal subsidiary of Energy which is a public utility holding company as defined in the Public Utility Holding Company Act of 1935 and which has claimed exemption from substantially all of the provisions of such Act. The other direct subsidiary of Energy is Atlantic Energy Enterprises, Inc. Energy has recently entered into a merger agreement with DP&L. See "Recent Developments." The Company's principal office is located at 6801 Black Horse Pike, Egg Harbor Township, New Jersey, 08232-4130, telephone 609-645-4100. The Company is subject to regulation by the New Jersey Board of Public Utilities and the Federal Energy Regulatory Commission. At December 31, 1995, the Company had over 473,000 customers and employed 1,455 persons, of which 622 were affiliated with a national labor organization. With the exception of a municipal electric system providing electric service within the municipal boundaries of the City of Vineland, New Jersey, the Company supplies electric service to the southern one-third of the State of New Jersey. The Company has qualified to do business as a foreign corporation in the Commonwealth of Pennsylvania to enable it to participate in the ownership and operation of generation and transmission facilities located therein. As of June 30, 1996, the Company had approximately $802,000,000 aggregate principal amount of Senior Debt outstanding. Neither the Indenture, the Guarantee nor the Trust Agreement will place any limitation on the amount of secured or unsecured debt, including Senior Debt, that may be incurred by the Company. USE OF PROCEEDS All of the proceeds from the sale of QUIPS will be invested by the Issuer in QUIDS. The Company intends that the proceeds from the sale of such QUIDS will be applied to the redemption and/or purchase of shares of the Company's preferred stock and/or the repayment of short-term debt, including the redemption of $5,000,000 aggregate liquidation value of the Company's $8.25 No Par Preferred Stock and $10,000,000 aggregate liquidation value of the Company's 7.52% Cumulative Preferred Stock and the purchase pursuant to an outstanding tender offer of shares of the Company's $7.80 No Par Preferred Stock. ACCOUNTING TREATMENT For financial reporting purposes, the Issuer will be treated as a subsidiary of the Company and, accordingly, the accounts of the Issuer will be included in the consolidated financial statements of the Company. The QUIPS will be presented as a separate line item in the consolidated balance sheet of the Company and appropriate disclosures about the QUIPS, the Guarantee and the QUIDS will be included in the notes to the consolidated financial statements. SELECTED FINANCIAL INFORMATION The following information is qualified by the detailed information and financial statements included elsewhere in the Prospectus, including documents incorporated by reference.
Year Ended December 31, -------------------------------------------------------- Twelve Months Ended 1991 1992 1993 1994 1995 June 30, 1996 --------- --------- --------- --------- --------- ---------- Operating Revenues (000) ...................... $ 808,482 $ 816,931 $ 865,799 $ 913,226 $ 953,779 $1,000,374 Net Income (000) ............ $ 107,428 $ 107,446 $ 109,026 $ 93,174 $ 98,752 $ 100,642 Ratio of Earnings to Fixed Charges ..................... 3.41 3.55 3.37 3.05 3.16 3.18 Ratio of Earnings to Combined Fixed Charges and Preferred Dividend Requirements ...... 2.48 2.49 2.44 2.22 2.39 2.47
9 As of June 30, 1996 ----------------------------- Amount Percentage (in thousands) (%) -------------- ---------- Long Term Debt* ............................ 802,378 45.72% Cumulative Preferred Stock: Subject to Mandatory Redemption* .......... 125,000 7.12 Not Subject to Mandatory Redemption ....... 40,000 2.28 Common Equity .............................. 787,471 44.88 ---------- ----- Total Capitalization ..................... 1,754,849 100.00% ========== ======== - ---------- * Includes current portion DESCRIPTION OF QUIPS Pursuant to the terms of the Trust Agreement, the Administrative Trustees on behalf of the Issuer will issue the QUIPS and the Common Securities. The QUIPS will represent preferred undivided beneficial interests in the assets of the Issuer and the holders thereof will be entitled to a preference in certain circumstances with respect to Distributions and amounts payable on redemption or liquidation over the Common Securities, as well as other benefits as described in the Trust Agreement. This summary of certain provisions of the QUIPS and the Trust Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Trust Agreement, including the definitions therein of certain terms, and the Trust Indenture Act. Wherever particular defined terms of the Trust Agreement (as supplemented or amended from time to time) are referred to herein, the definitions of such defined terms are incorporated herein by reference. The form of the Trust Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. General The QUIPS will rank pari passu, and payments will be made thereon pro rata, with the Common Securities except as described under "--Subordination of Common Securities". Legal title to the QUIDS will be held by the Property Trustee in trust for the benefit of the holders of the QUIPS and the Common Securities. The Guarantee executed by the Company for the benefit of the holders of the QUIPS will be a guarantee on a subordinated basis with respect to the QUIPS but will not guarantee payment of Distributions or amounts payable on redemption or liquidation of the QUIPS when the Issuer does not have funds on hand available to make such payments. See "Description of Guarantee". Distributions The QUIPS represent undivided beneficial interests in the assets of the Issuer, and Distributions on each QUIPS will be payable at the annual rate of % of the stated Liquidation Amount of $25, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. Distributions will accumulate from _____, 1996, the date of original issuance. The first Distribution payment date for the QUIPS will be December 31, 1996. The amount of Distributions payable in the first payment period will be computed on the basis of days in a 360-day year. The amount of Distributions payable for any period thereafter will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which Distributions are payable on the QUIPS is not a Business Day, then payment of the Distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any additional Distributions 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 date such payment was originally payable (each date on which Distributions are payable in accordance with the foregoing, a "Distribution Date"). A "Business Day" shall mean 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 required by law or executive order to remain closed or a day on which the corporate trust office of the Property Trustee or the Debenture Trustee (as defined herein) is closed for business. 10 The revenue of the Issuer available for distribution to holders of its QUIPS will be limited to payments under the QUIDS in which the Issuer will invest the proceeds from the issuance and sale of the QUIPS and the Common Securities. See "Description of QUIDS". If the Company does not make interest payments on the QUIDS, the Property Trustee will not have funds available to pay Distributions on the QUIPS. The payment of Distributions (if and to the extent the Issuer has funds legally available for the payment of such Distributions) is guaranteed by the Company on a limited basis as set forth herein under "Description of Guarantee". Distributions on the QUIPS (other than distributions on a Redemption Date) will be payable to the holders thereof as they appear on the register of the Issuer on the relevant record dates, which, as long as the QUIPS remain in book-entry form, will be the close of business one Business Day prior to the relevant Distribution Date. Subject to any applicable laws and regulations and the provisions of the Trust Agreement, each such payment will be made as described under "--Book-Entry Issuance". In the event the QUIPS are not in book-entry form, the relevant record date for the QUIPS shall be 15 days prior to the relevant Distribution Date. So long as no Debenture Event of Default under the Indenture has occurred and is continuing, the Company has the right under the Indenture to defer the payment of interest on the QUIDS at any time or from time to time for a period not exceeding 20 consecutive quarters (each, an "Extension Period"), provided that no Extension Period may extend beyond the Stated Maturity (as defined below) of the QUIDS. As a consequence of any such extension, quarterly Distributions on the QUIPS will be deferred by the Issuer during any such Extension Period. Distributions to which holders of the QUIPS are entitled will accumulate additional Distributions thereon at the rate per annum of % thereof, compounded quarterly from the relevant payment date for such Distributions. The term "Distributions" as used herein shall include any such additional Distributions. During any such Extension Period, the Company may not, and may not permit any subsidiary of the Company to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's Capital Stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the QUIDS or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu or junior in interest to the QUIDS (other than (a) dividends or distributions in Common Stock of the Company and (b) payments under the Guarantee). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that no Extension Period may exceed 20 consecutive quarters or extend beyond the Stated Maturity (as defined below) of the QUIDS. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extension Period. See "Description of the QUIDS--Option to Extend Interest Payment Period" and "Certain Federal Income Tax Consequences--Original Issue Discount". The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period of the QUIDS. Redemption Mandatory Redemption. Upon the repayment or redemption, in whole or in part, of the QUIDS, whether at Stated Maturity (as defined below) or upon earlier redemption as provided in the Indenture, the proceeds from such repayment or redemption shall be applied by the Property Trustee to redeem a Like Amount (as defined below) of the QUIPS and Common Securities, upon not less than 30 nor more than 60 days notice prior to the date fixed for repayment or redemption, at a redemption price (the "Redemption Price"), with respect to the QUIPS, equal to the aggregate Liquidation Amount of such QUIPS plus accrued and unpaid Distributions thereon to the date of redemption (the "Redemption Date"). If less than all of the QUIDS are to be repaid or redeemed on a Redemption Date, then the proceeds from such repayment or redemption shall be allocated to the redemption pro rata of the QUIPS and the Common Securities. The Company will have the right to redeem the QUIDS (i) on or after , 2001, in whole at any time or in part from time to time, at a redemption price equal to the accrued and unpaid interest on the QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof or (ii) at any time, in whole (but not in part), upon the occurrence and continuation of a Special Event, at a redemption price equal to the accrued and unpaid interest on the QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof, in each case subject to the further conditions described under "Description of QUIDS--Redemption" and "Description of QUIDS--Optional Redemption". 11 Special Event Redemption or Distribution of QUIDS. If a Special Event shall occur and be continuing, the Company will have the right to redeem the QUIDS in whole (but not in part) and thereby cause a mandatory redemption of the QUIPS in whole (but not in part) at the Redemption Price within 90 days following the occurrence of such Special Event. At any time, the Company will have the right to terminate the Issuer and, after satisfaction of the liabilities of creditors of the Issuer as provided by applicable law, cause the QUIDS to be distributed to the holders of the QUIPS in liquidation of the Issuer. Under current United States federal income tax law and interpretations and assuming, as expected, the Issuer is treated as a grantor trust, a distribution of the QUIDS should not be a taxable event to holders of the QUIPS. Should there be a change in law, a change in legal interpretation, a Special Event or other circumstances, however, the distribution could be a taxable event to holders of the QUIPS. See "Certain Federal Income Tax Consequences--Distribution of QUIDS to Holders of QUIPS". If the Company does not elect either option described above, the QUIPS will remain outstanding until the repayment of the QUIDS, and in the event a Tax Event has occurred and is continuing, Additional Sums (as defined below) may be payable on the QUIDS. "Additional Sums" means the additional amounts as may be necessary in order that the amount of Distributions then due and payable by the Issuer on the outstanding QUIPS and Common Securities shall not be reduced as a result of any additional taxes, duties and other governmental charges to which the Issuer has become subject as a result of a Tax Event. If the Company elects to liquidate the Issuer and thereby causes the QUIDS to be distributed to holders of the QUIPS in liquidation of the Issuer, the Company shall have the right to shorten or extend the maturity of the QUIDS at the time of such election, provided that it can extend the maturity only if certain conditions are met at the time such election is made and at the time of such extension. See "Description of QUIDS--General". "Like Amount" means (i) with respect to a redemption of the QUIPS and the Common Securities, the QUIPS and the Common Securities having a Liquidation Amount (as defined below) equal to the principal amount of the QUIDS to be contemporaneously redeemed in accordance with the Indenture allocated 3% to the Common Securities and 97% to the QUIPS and the proceeds of which will be used to pay the Redemption Price of such QUIPS and to redeem such Common Securities, and (ii) with respect to a distribution of the QUIDS to holders of QUIPS and Common Securities in connection with a dissolution or liquidation of the Issuer, the QUIDS having a principal amount equal to the Liquidation Amount of the QUIPS or the Common Securities, as the case may be, of the holder to whom such QUIDS are distributed. "Liquidation Amount" means the stated amount of $25 per QUIPS or Common Security. After the liquidation date fixed for any distribution of QUIDS (i) the QUIPS will no longer be deemed to be outstanding, (ii) The Depository Trust Company ("DTC") or its nominee, as the record holder of such QUIPS, will receive a registered global certificate or certificates representing the QUIDS to be delivered upon such distribution and (iii) any certificates representing QUIPS not held by DTC or its nominee will be deemed to represent QUIDS having a principal amount equal to the stated liquidation preference of such QUIPS, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on such QUIPS until such certificates are presented to the Administrative Trustees or their agent for transfer or reissuance. There can be no assurance as to the market prices for the QUIPS or the QUIDS that may be distributed in exchange for QUIPS if a dissolution and liquidation of the Issuer were to occur. Accordingly, the QUIPS that an investor may purchase, or the QUIDS that the investor may receive on dissolution and liquidation of the Issuer, may trade at a discount to the price that the investor paid to purchase QUIPS offered hereby. Redemption Procedures QUIPS redeemed on each Redemption Date shall be redeemed at the Redemption Price with the applicable proceeds from the contemporaneous redemption or payment at Stated Maturity (as defined below) of the QUIDS. Redemptions of the QUIPS shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Issuer has funds on hand available for the payment of such Redemption Price. See also "--Subordination of Common Securities". If the Issuer gives a notice of redemption in respect of the QUIPS, then, by 12:00 noon, New York City time, on the Redemption Date, to the extent funds are available, the Property Trustee will deposit irrevocably with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price to the holders of the QUIPS. See "--Book-Entry Issuance". If the QUIPS are no longer in book-entry form, the Issuer, to the extent funds are available, will irrevocably deposit with the paying agent for the QUIPS funds sufficient to pay the applicable Redemption Price and will give the paying agent irrevocable instructions and authority to pay the Redemption Price to the holders thereof upon surrender of their certificates evidencing the QUIPS. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any QUIPS called for redemption shall be payable to the holders of such 12 QUIPS on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of the holders of such QUIPS so called for redemption will cease, except the right of the holders of such QUIPS to receive the Redemption Price, but without interest on such Redemption Price, and such QUIPS will cease to be outstanding. In the event that any date fixed for redemption of QUIPS 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 each case with the same force and effect as if made on the date such payment was originally payable. In the event that payment of the Redemption Price in respect of QUIPS called for redemption is improperly withheld or refused and not paid either by the Issuer or by the Company pursuant to the Guarantee as described under "Description of Guarantee", Distributions on such QUIPS will continue to accrue at the then applicable rate, from the Redemption Date originally established by the Issuer for the QUIPS to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. Subject to applicable law (including, without limitation, United States federal securities law), the Company or its subsidiaries may at any time and from time to time purchase outstanding QUIPS by tender, in the open market or by private agreement. If less than all of the QUIPS and Common Securities issued by the Issuer are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of such QUIPS and Common Securities to be redeemed shall be allocated pro rata among the QUIPS and the Common Securities. The particular QUIPS to be redeemed shall be selected on a pro rata basis not more than 60 days prior to the Redemption Date by the Property Trustee from the outstanding QUIPS not previously called for redemption, by such method as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or an integral multiple of $25 in excess thereof) of the liquidation preference of QUIPS of a denomination larger than $25. The Property Trustee shall promptly notify the trust registrar in writing of the QUIPS selected for redemption and, in the case of any QUIPS selected for partial redemption, the liquidation preference thereof to be redeemed. For all purposes of the Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of QUIPS shall relate, in the case of any QUIPS redeemed or to be redeemed only in part, to the portion of the aggregate liquidation preference of QUIPS which has been or is to be redeemed. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of QUIPS to be redeemed at its registered address. Unless the Issuer defaults in payment of the Redemption Price, on and after the Redemption Date Distributions cease to accrue on such QUIPS or portions thereof called for redemption. Subordination of Common Securities Payment of Distributions on, and the Redemption Price of, the QUIPS and the Common Securities, as applicable, shall be made pro rata based on the Liquidation Amount of such QUIPS and Common Securities; provided, however, that if on any Distribution Date or Redemption Date a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution on, or Redemption Price of, any of the Common Securities, and no other payment on account of the redemption, liquidation or other acquisition of such Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all of the outstanding QUIPS for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all of the outstanding QUIPS then called for redemption, shall have been made or provided for, and all funds available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or Redemption Price of, the QUIPS then due and payable. In the case of any Event of Default resulting from a Debenture Event of Default, the Company as holder of the Common Securities will be deemed to have waived any right to act with respect to any such Event of Default under the Trust Agreement until the effect of all such Events of Default with respect to the QUIPS have been cured, waived or otherwise eliminated. Until any such Events of Default under the Trust Agreement with respect to the QUIPS have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the holders of the QUIPS and not on behalf of the Company as holder of the Common Securities, and only the holders of the QUIPS will have the right to direct the Property Trustee to act on their behalf. 13 Liquidation Distribution Upon Termination Pursuant to the Trust Agreement, the Issuer shall automatically terminate upon expiration of its term and shall terminate on the first to occur of: (i) certain events of bankruptcy, dissolution or liquidation of the Company; (ii) the distribution of a Like Amount of the QUIDS to the holders of the QUIPS and Common Securities, if the Company, as Depositor, has given written direction to the Property Trustee to terminate the Issuer (which direction is optional and wholly within the discretion of the Company, as Depositor); (iii) the redemption of all of the QUIPS in connection with the redemption of all of the QUIDS and (iv) the entry by a court of competent jurisdiction of an order for the dissolution of the Issuer. If an early termination occurs as described in clause (i), (ii) or (iv) above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously as the Issuer Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Issuer as provided by applicable law, to the holders of the QUIPS and Common Securities a Like Amount of the QUIDS, unless such distribution is determined by the Property Trustee not to be practical, in which event such holders will be entitled to receive out of the assets of the Issuer available for distribution to holders, after satisfaction of liabilities to creditors of the Issuer as provided by applicable law, an amount equal to, in the case of holders of QUIPS, the aggregate of the liquidation preference plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If such Liquidation Distribution can be paid only in part because the Issuer has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Issuer on the QUIPS shall be paid on a pro rata basis. The holder(s) of the Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the QUIPS, except that if a Debenture Event of Default has occurred and is continuing, the QUIPS shall have a priority over the Common Securities. Events of Default; Notice Any one of the following events constitutes an "Event of Default" under the Trust Agreement (an "Event of Default") with respect to the QUIPS issued thereunder (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): (i) the occurrence of a Debenture Event of Default under the Indenture (see "Description of QUIDS--Debenture Events of Default"); or (ii) default in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (iii) default in the payment of any Redemption Price of any QUIPS or Common Security when it becomes due and payable; or (iv) default in the performance, or breach, in any material respect, of any covenant or warranty of the Issuer Trustees in the Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (ii) or (iii) above), and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the defaulting Issuer Trustee or Trustees by the holders of at least 25% in aggregate liquidation preference of the outstanding QUIPS, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" under the Trust Agreement; or (v) the occurrence of certain events of bankruptcy or insolvency with respect to the Issuer. Within five Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit notice of such Event of Default to the holders of the QUIPS, the Administrative Trustees and the Company, as Depositor, unless such Event of Default shall have been cured or waived. The Company, as Depositor, and the Administrative Trustees are required to file annually with the Property Trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the Trust Agreement. If a Debenture Event of Default has occurred and is continuing, the QUIPS shall have a preference over the Common Securities upon termination of the Issuer as described above. See "--Liquidation Distribution Upon Termination". The existence of an Event of Default does not entitle the holders of QUIPS to accelerate the maturity thereof. 14 Enforcement of Certain Rights by Holders of QUIPS If an Event of Default has occurred and is continuing, then the holders of QUIPS would rely on the enforcement by the Property Trustee of its rights as a holder of the QUIDS against the Company. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the QUIDS on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a holder of QUIPS may directly institute a proceeding against the Company for enforcement of payment to such holder of the principal of or interest on the QUIDS having a principal amount equal to the aggregate liquidation preference of the QUIPS of such holder (a "Direct Action"). In connection with such Direct Action, the Company will be subrogated to the rights of such holder of QUIPS under the Trust Agreement to the extent of any payment made by the Company to such holder of QUIPS in such Direct Action. Removal of Issuer Trustees Unless a Debenture Event of Default shall have occurred and be continuing, any Issuer Trustee may be removed at any time by the holder of the Common Securities. If a Debenture Event of Default has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed at such time by the holders of a majority in Liquidation Amount of the outstanding QUIPS. In no event will the holders of the QUIPS have the right to vote to appoint, remove or replace the Administrative Trustees, which voting rights are vested exclusively in the Company as the holder of the Common Securities. No resignation or removal of an Issuer Trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement. Co-Trustees and Separate Property Trustee Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Company, as the holder of the Common Securities, and the Administrative Trustees shall have power to appoint one or more persons either to act as a co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such person or persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the Trust Agreement. In case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Merger or Consolidation of Issuer Trustees Any corporation into which the Property Trustee, the Delaware Trustee or any Administrative Trustee that is not a natural person 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 Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee under the Trust Agreement, provided such corporation shall be otherwise qualified and eligible. Mergers, Consolidations, Amalgamations or Replacements of the Issuer The Issuer may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other Person, except as described below. The Issuer may, at the request of the Company, with the consent of the Administrative Trustees and without the consent of the holders of the QUIPS, merge with or into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any State; provided that (i) such successor entity either (a) expressly assumes all of the obligations of the Issuer with respect to the QUIPS or (b) substitutes for the QUIPS other securities having substantially the same terms as the QUIPS (the "Successor Securities") so long as the Successor Securities rank the same as the QUIPS rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Company expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the QUIDS, (iii) the Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the QUIPS are then listed, if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does 15 not cause the QUIPS (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the QUIPS (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose identical to that of the Issuer, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer, or lease, the Company has received an opinion from independent counsel to the Issuer experienced in such matters to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the QUIPS (including any Successor Securities) in any material respect and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Issuer nor such successor entity will be required to register as an investment company under the Investment Company Act, (viii) the Company or any permitted successor or assignee owns all of the Common Securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and (ix) such successor entity expressly assumes all of the obligations of the Issuer with respect to the Trustees. Notwithstanding the foregoing, the Issuer shall not, except with the consent of holders of 100% in aggregate liquidation preference of the QUIPS, consolidate, amalgamate, merge with or into, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Issuer or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. Voting Rights; Amendment of the Trust Agreement Except as provided below and under "Description of Guarantee--Amendments and Assignment" and as otherwise required by law and the Trust Agreement, the holders of the QUIPS will have no voting rights. The Trust Agreement may be amended from time to time by the Company and the Issuer Trustees, without the consent of the holders of the QUIPS (i) to cure any ambiguity, correct or supplement any provisions in the Trust Agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the Trust Agreement that shall not be inconsistent with the other provisions of the Trust Agreement, or (ii) to modify, eliminate or add to any provisions of the Trust Agreement to such extent as shall be necessary to ensure that the Issuer will be classified for United States federal income tax purposes as a grantor trust at all times that any QUIPS and Common Securities are outstanding or to ensure that the Issuer will not be required to register as an "investment company" under the Investment Company Act, provided, however, that such action shall not adversely affect in any material respect the interests of any holder of QUIPS or Common Securities, and any amendments of the Trust Agreement shall become effective when notice thereof is given to the holders of QUIPS and Common Securities. The Trust Agreement may be amended by the Issuer Trustees and the Company with (i) the consent of holders representing not less than a majority (based upon Liquidation Amounts) of the outstanding QUIPS and Common Securities and (ii) receipt by the Issuer Trustees of an opinion of counsel to the effect that such amendment or the exercise of any power granted to the Issuer Trustees in accordance with such amendment will not affect the Issuer's status as a grantor trust for United States federal income tax purposes or the Issuer's exemption from status of an "investment company" under the Investment Company Act, provided, further that without the consent of each holder of QUIPS and Common Securities affected thereby, the Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the QUIPS and Common Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the QUIPS and Common Securities as of a specified date or (ii) restrict the right of a holder of QUIPS or Common Securities to institute suit for the enforcement of any such payment on or after such date. So long as any QUIDS are held by the Property Trustee, the Issuer Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee or executing any trust or power conferred on the Property Trustee with respect to such QUIDS, (ii) waive any past default that is waiveable under Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the QUIDS shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or such QUIDS, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of a majority in aggregate liquidation preference of all outstanding QUIPS; provided, however, that where a consent under the Indenture would require the consent of each holder of QUIDS affected thereby, no such consent shall be given by the Property Trustee without the prior consent of each holder of QUIPS. The Issuer Trustees shall not revoke any action previously authorized or approved by a vote of the holders of the QUIPS except pursuant to a subsequent vote of the holders of the QUIPS. The Property 16 Trustee shall notify each holder of record of the QUIPS of any notice of default which it receives with respect to the QUIDS. In addition to obtaining the foregoing approvals of the holders of the QUIPS, prior to taking any of the foregoing actions, the Issuer Trustees shall receive an opinion of counsel experienced in such matters to the effect that the Issuer will not be classified as other than a grantor trust for United States federal income tax purposes on account of such action. Any required approval of holders of QUIPS may be given at a meeting of holders of QUIPS convened for such purpose or pursuant to written consent. The Property Trustee will cause a notice of any meeting at which holders of QUIPS are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be given to each holder of record of QUIPS in the manner set forth in the Trust Agreement. No vote or consent of the holders of QUIPS will be required for the Issuer to redeem and cancel its QUIPS in accordance with the Trust Agreement. Notwithstanding that holders of QUIPS are entitled to vote or consent under any of the circumstances described above, any of the QUIPS that are owned by the Company, the Issuer Trustees or any affiliate of the Company or any Issuer Trustees, shall, for purposes of such vote or consent, be treated as if they were not outstanding. Payment and Paying Agency Payments in respect of the QUIPS shall be made to DTC, which shall credit the relevant accounts at DTC on the applicable Distribution Dates or, if the QUIPS are not held by DTC, such payments shall be made by check mailed to the address of the holder entitled thereto as such address shall appear on the Register. The paying agent (the "Paying Agent") shall initially be the Property Trustee and any co-paying agent chosen by the Property Trustee and acceptable to the Administrative Trustees and the Company. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Property Trustee and the Company. In the event that the Property Trustee shall no longer be the Paying Agent, the Administrative Trustees shall appoint a successor (which shall be a bank or trust company acceptable to the Administrative Trustees and the Company) to act as Paying Agent. Book-Entry Issuance DTC will act as securities depositary for all of the QUIPS. The QUIPS will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global certificates will be issued for the QUIPS, representing in the aggregate the total number of QUIPS, and will be deposited with DTC. 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 New York Stock Exchange, Inc., 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 custodial relationships with Direct Participants, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of QUIPS within the DTC system must be made by or through Direct Participants, which will receive a credit for the QUIPS on DTC's records. The ownership interest of each actual purchaser of each QUIPS ("Beneficial Owner") is in turn to be recorded on the Direct and 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 QUIPS. Transfers of ownership interests in the QUIPS 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 QUIPS, except in the event that use of the book-entry system for the QUIPS of the Issuer is discontinued. 17 DTC has no knowledge of the actual Beneficial Owners of the QUIPS; DTC's records reflect only the identity of the Direct Participants to whose accounts such QUIPS 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. Redemption notices shall be sent to Cede & Co. as the registered holder of the QUIPS. If less than all of the QUIPS are being redeemed, DTC's current practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed. Although voting with respect to the QUIPS is limited to the holders of record of the QUIPS, in those instances in which a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to QUIPS. Under its usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the Property Trustee 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 such QUIPS are credited on the record date (identified in a listing attached to the Omnibus Proxy). 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 and the voting rights of Direct Participants, Indirect Participants and 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. Distribution payments on the QUIPS will be made by the Property Trustee 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 and will be the responsibility of such Participant and not of DTC, the Property Trustee, the Issuer or the Company, 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 Property Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depositary with respect to any of the QUIPS at any time by giving reasonable notice to the Property Trustee and the Company. In the event that a successor securities depositary is not obtained, definitive QUIPS certificates representing such QUIPS are required to be printed and delivered. The Company, at its option, may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depositary). After a Debenture Event of Default, the holders of a majority in liquidation preference of QUIPS may determine to discontinue the system of book-entry transfers through DTC. In any such event, definitive certificates for the QUIPS will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer or the Company believe to be accurate, but the Issuer and the Company assume no responsibility for the accuracy thereof. None of the Issuer Trustees, the Issuer or the Company has any responsibility for the performance by DTC or its Participants of their respective obligations as described herein or under the rules and procedures governing their respective operations. Registrar and Transfer Agent The Property Trustee will act as registrar and transfer agent for the QUIPS. Registration of transfers of QUIPS will be effected without charge by or on behalf of the Issuer, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The Issuer will not be required (i) to register or cause to be registered the transfer or exchange of the QUIPS during a period beginning at the opening of business 15 days before the day of the mailing of the relevant notice of redemption and ending at the close of business on the day of mailing of such notice of redemption or (ii) to register or cause to be registered the transfer or exchange of any QUIPS so selected for redemption, except in the case of any QUIPS being redeemed in part, any portion thereof not to be redeemed. 18 Information Concerning the Property Trustee The Company and its affiliates utilize various of the banking services offered by the Property Trustee. Such services include acting as a depositary and providing lines of credit. In addition, the Property Trustee acts as indenture trustee under the Mortgage and Deed of Trust dated January 13, 1937 under which the Company's First Mortgage Bonds are issued. The Property Trustee, other than during the occurrence and continuance of an Event of Default, undertakes to perform only such duties as are specifically set forth in the Trust Agreement and, after such Event of Default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Trust Agreement at the request of any holder of QUIPS unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. If no Event of Default has occurred and is continuing and the Property Trustee is required to decide between alternative causes of action, construe ambiguous provisions in the Trust Agreement or is unsure of the application of any provision of the Trust Agreement, and the matter is not one on which holders of QUIPS are entitled under the Trust Agreement to vote, then the Property Trustee may, but shall be under no duty to, take such action as is directed by the Company and, if not so directed, shall take such action as it deems advisable and in the best interests of the holders of the QUIPS and the Common Securities and will have no liability except for its own bad faith, negligence or willful misconduct. Miscellaneous The Administrative Trustees are authorized and directed to conduct the affairs of and to operate the Issuer in such a way that the Issuer will not be deemed to be an "investment company" required to be registered under the Investment Company Act or classified as an association taxable as other than a grantor trust for United States federal income tax purposes and so that the QUIDS will be treated as indebtedness of the Company for United States federal income tax purposes. In this connection, the Company and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Issuer or the Trust Agreement, that the Company and the Administrative Trustees determine in their discretion to be necessary or desirable for such purposes, as long as such action does not materially adversely affect the interests of the holders of the QUIPS. Holders of the QUIPS have no preemptive or similar rights. The Issuer may not borrow money nor issue debt nor mortgage or pledge any of its assets. DESCRIPTION OF QUIDS The QUIDS are to be issued under a Junior Subordinated Indenture (the "Indenture"), between the Company and The Bank of New York, as trustee (the "Debenture Trustee"). This summary of certain terms and provisions of the QUIDS and the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Indenture, the form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and to the Trust Indenture Act. Whenever particular defined terms of the Indenture are referred to herein, such defined terms are incorporated herein by reference. General Concurrently with the issuance of the QUIPS, the Issuer will invest the proceeds thereof and the consideration paid by the Company for the Common Securities in the QUIDS issued by the Company. The QUIDS will be in the principal amount equal to the aggregate stated Liquidation Amount of the QUIPS plus the Company's concurrent investment in the Common Securities. The QUIDS will bear interest at the annual rate of % of the principal amount thereof, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year (each, an "Interest Payment Date"), commencing December 31, 1996, to the person in whose name each QUIDS is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date (other than interest payable on a Redemption Date or the maturity date). In the event the QUIDS are not in book-entry form, the relevant record date for the QUIDS shall be the fifteenth day of the month in which occurs the relevant Interest Payment Date. It is anticipated that, until the liquidation, 19 if any, of the Issuer, each QUIDS will be held in the name of the Property Trustee in trust for the benefit of the holders of the QUIPS and the Common Securities. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the QUIDS is not a Business Day, then payment of the interest 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 the date such payment was originally payable. Accrued interest that is not paid on the applicable Interest Payment Date will bear additional interest on the amount thereof (to the extent permitted by law) at the rate per annum of % thereof, compounded quarterly. The term "interest" as used herein shall include quarterly interest payments, interest on quarterly interest payments not paid on the applicable Interest Payment Date and Additional Sums (as defined below), as applicable. The QUIDS will mature on _____, 2026, which date may be extended at any time at the election of the Company for one or more periods, but in no event to a date later than _____, 2045 (such date, as it may be so extended, the "Stated Maturity"), provided that at the time such election is made and at the time of extension (i) the Company is not in bankruptcy, otherwise insolvent or in liquidation, (ii) the Company is not in default in the payment of any interest or principal on the QUIDS, (iii) the Issuer is not in arrears on payments of Distributions on the QUIPS and no deferred Distributions are accumulated, (iv) the QUIDS are rated not less than BBB- by Standard & Poor's or Baa3 by Moody's Investors Service, Inc. or the equivalent by any other nationally recognized statistical rating organization and (v) the extended Stated Maturity is no later than the 49th anniversary of the initial issuance of the QUIPS; provided, however, that, if the Company exercises its right to liquidate the Issuer and distribute the QUIDS, effective upon such exercise the Stated Maturity of the QUIDS may be changed to any date elected by the Company that is (i) no earlier than the date five years after the initial issuance of the QUIPS and (ii) no later than the date 30 years (plus an extended term of up to an additional 19 years if the above-referenced conditions are satisfied) after the date of the initial issuance of the QUIPS. The QUIDS will be unsecured and will rank junior and be subordinate in right of payment to all Senior Debt (as defined below) of the Company. See "Description of QUIDS--Subordination". The Indenture does not limit the incurrence or issuance of other secured or unsecured debt of the Company, whether under the Indenture or any existing or other indenture that the Company may enter into in the future or otherwise. See "--Subordination". Option to Extend Interest Payment Period So long as no Event of Default under the Indenture has occurred and is continuing, the Company has the right under the Indenture to defer the payment of interest at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the QUIDS. At the end of such Extension Period, the Company must pay all interest then accrued and unpaid (together with interest thereon at the annual rate of ______%, compounded quarterly, to the extent permitted by applicable law). During an Extension Period, interest will continue to accrue and holders of QUIDS (or holders of QUIPS while the QUIPS are outstanding) will be required to accrue interest income for United States federal income tax purposes. See "Certain Federal Income Tax Consequences--Original Issue Discount". During any such Extension Period, the Company may not, and may not permit any subsidiary of the Company to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's Capital Stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the QUIDS or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu or junior in interest to the QUIDS (other than (a) dividends or distributions in common stock of the Company and (b) payments under the Guarantee). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that no Extension Period may exceed 20 consecutive quarters or extend beyond the Stated Maturity of the QUIDS. Upon the termination of any such Extension Period and the payment of all amounts then due on any Interest Payment Date, the Company may elect to begin a new Extension Period subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company must give the Property Trustee, the Administrative Trustees and the Debenture Trustee notice of its election of such Extension Period at least one Business Day prior to the earlier of (i) the date the Distributions on the QUIPS would have been payable except for the election to begin such Extension Period or (ii) the date the Administrative Trustees are 20 required to give notice to the Nasdaq National Market or other applicable self-regulatory organization or to holders of such QUIPS of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date. The Property Trustee shall give notice of the Company's election to begin a new Extension Period to the holders of the QUIPS. Certain Covenants of the Company The Company will covenant in the Indenture that if and so long as (i) the Issuer is the holder of all QUIDS, (ii) a Tax Event in respect of the Issuer has occurred and is continuing and (iii) the Company has not exercised its right to (x) redeem the QUIDS or (y) terminate the Issuer, the Company will pay to the Issuer Additional Sums (as defined herein) in respect of the QUIPS and the Common Securities, subject to the conditions described under "Description of QUIPS--Redemption--Special Event Redemption or Distribution of QUIDS". The Company will also covenant that it will not, and will not permit any subsidiary of the Company to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's Capital Stock or (ii) make any payment of principal, interest or premium, if any, on or repay or repurchase or redeem any debt securities of the Company that rank pari passu with or junior in interest to the QUIDS or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu or junior in interest to the QUIDS (other than (a) dividends or distributions in common stock of the Company and (b) payments under the Guarantee) if at such time (i) there shall have occurred any event of which the Company has actual knowledge that (a) with the giving of notice or the lapse of time, or both, would constitute an "Event of Default" under the Indenture with respect to QUIDS and (b) in respect of which the Company shall not have taken reasonable steps to cure, (ii) the Company shall be in default with respect to its payment of any obligations under the Guarantee or (iii) the Company shall have given notice of its election of an Extension Period as provided in the Indenture and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing. The Company will also covenant (i) to maintain directly or indirectly 100% ownership of the Common Securities of the Issuer, provided that certain successors which are permitted pursuant to the Indenture may succeed to the Company's ownership of the Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate the Issuer, except (a) in connection with a distribution of QUIDS to the holders of the QUIPS in liquidation of the Issuer or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause the Issuer to remain classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes. Redemption The QUIDS are redeemable prior to maturity at the option of the Company (i) on or after ______, 2001, in whole at any time or in part from time to time, at a redemption price equal to the accrued and unpaid interest on the QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof or (ii) at any time in whole (but not in part), within 90 days of the occurrence of a Special Event, at a redemption price equal to the accrued and unpaid interest on the QUIDS so redeemed to the date fixed for redemption, plus 100% of the principal amount thereof. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of QUIDS to be redeemed at its registered address. Unless the Company defaults in payment of the redemption price, on and after the redemption date interest ceases to accrue on such QUIDS or portions thereof called for redemption. Distributions of QUIDS Under certain circumstances involving the termination of the Issuer, QUIDS may be distributed to the holders of the QUIPS in liquidation of the Issuer after satisfaction of liabilities to creditors of the Issuer as provided by applicable law. If distributed to holders of QUIPS in liquidation, the QUIDS will initially be issued in the form of one or more global securities and DTC, or any successor depositary for the QUIPS, will act as depositary for the QUIDS. It is anticipated that the depositary arrangements for the QUIDS would be substantially identical to those in effect for the QUIPS. If the QUIDS are distributed to the holders of QUIPS upon the liquidation of the Issuer, the Company will use its best efforts to list the QUIDS on the New York Stock Exchange or such other stock exchanges, if any, on which the QUIPS are then listed. There can be no assurance as to the market price of any QUIDS that may be distributed to the holders of QUIPS. For a description of DTC and the terms of the depositary matters, see "Description of QUIPS--Book-Entry Issuance". 21 Global QUIDS The QUIDS may be issued in whole or in part in the form of a Global QUIDS that will be deposited with, or on behalf of, a depositary (the "Depositary"). Global QUIDS may be issued only in fully registered form and in either temporary or permanent form. Unless and until it is exchanged in whole or in part for the individual QUIDS represented thereby, a Global QUIDS may not be transferred except as a whole by the Depositary for such Global QUIDS to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by the Depositary or any nominee to a successor Depositary or any nominee of such successor. Upon the issuance of a Global QUIDS and the deposit of such Global QUIDS with or on behalf of the Depositary, the Depositary for such Global QUIDS or its nominee will credit on its book-entry registration and transfer system the respective principal amounts of the individual QUIDS represented by such Global QUIDS to the accounts of persons that have accounts with such Depositary ("Participants"). Such accounts shall be designated by the dealers, underwriters or agents with respect to such QUIDS or by the Company if such QUIDS are offered and sold directly by the Company. Ownership of beneficial interests in a Global QUIDS will be limited to Participants or persons that may hold interests through Participants. Ownership of beneficial interests in such Global QUIDS will be shown on, and the transfer of that ownership will be effected only through, records maintained by the applicable Depositary or its nominee (with respect to interests of Participants) and the records of Participants (with respect to interests of persons who hold through Participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global QUIDS. So long as the Depositary for a Global QUIDS, or its nominee, is the registered owner of such Global QUIDS, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the QUIDS represented by such Global QUIDS for all purposes under the Indenture governing such QUIDS. Except as provided below, owners of beneficial interests in a Global QUIDS will not be entitled to have any of the individual QUIDS of the series represented by such Global QUIDS registered in their names, will not receive or be entitled to receive physical delivery of any such QUIDS of such series in definitive form and will not be considered the owners or holders thereof under the Indenture. Payments of principal of and premium, if any, and interest on individual QUIDS represented by a Global QUIDS registered in the name of a Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner of the Global QUIDS representing such QUIDS. None of the Company, the Debenture Trustee, any Paying Agent or the Securities Registrar for such QUIDS will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Global QUIDS representing such QUIDS or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that the Depositary or its nominee, upon receipt of any payment of principal, premium, if any, or interest in respect of a permanent Global QUIDS representing any of such QUIDS, immediately will credit Participants' accounts with payments in amounts proportionate to their respective beneficial interest in the principal amount of such Global QUIDS representing such QUIDS as shown on the records of such Depositary or its nominee. The Company also expects that payments by Participants to owners of beneficial interests in such Global QUIDS held through such Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name". Such payments will be the responsibility of such Participants. If the Depositary is at any time unwilling, unable or ineligible to continue as depositary and a successor depositary is not appointed by the Company within 90 days, the Company will issue individual QUIDS in exchange for the Global QUIDS representing such QUIDS. In addition, the Company may at any time and in its sole discretion, determine not to have any QUIDS represented by one or more Global QUIDS and, in such event, will issue individual QUIDS in exchange for the Global QUIDS representing such QUIDS. Further, if the Company so specifies with respect to the QUIDS, an owner of a beneficial interest in a Global QUIDS representing QUIDS may, on terms acceptable to the Company, the Debenture Trustee and the Depositary for such Global QUIDS, receive individual QUIDS in exchange for such beneficial interests. In any such instance, an owner of a beneficial interest in a Global QUIDS will be entitled to physical delivery of individual QUIDS of the series represented by such Global QUIDS equal in principal amount to such beneficial interest and to have such QUIDS registered in its name. Individual QUIDS so issued will be issued in denominations, unless otherwise specified by the Company, of $25 and integral multiples thereof. 22 Payment and Paying Agents Payment of principal of and any interest on QUIDS will be made at the office of the Debenture Trustee in the City of New York or at the office of such Paying Agent or Paying Agents as the Company may designate from time to time, except that at the option of the Company payment of any interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or by wire transfer. Payment of any interest on QUIDS (other than interest payable on a Redemption Date or the maturity date) will be made to the Person in whose name such QUIDS is registered at the close of business on the Regular Record Date for such interest, except in the case of Defaulted Interest. The Company may at any time designate additional Paying Agents or rescind the designation of any Paying Agent; however the Company will at all times be required to maintain a Paying Agent in each Place of Payment. Any moneys deposited with the Debenture 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 QUIDS and remaining unclaimed for two years after such principal and premium, if any, or interest has become due and payable shall, at the request of the Company, be repaid to the Company and the holder of such QUIDS shall thereafter look, as a general unsecured creditor, only to the Company for payment thereof. Registration and Transfer of QUIDS A global security shall be exchangeable for QUIDS registered in the names of persons other than DTC or its nominee only if (i) DTC notifies the Company that it is unwilling or unable to continue as a depository for such global security and no successor depository shall have been appointed, or if at any time DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, (ii) the Company in its sole discretion determines that such global security shall be so exchangeable, or (iii) there shall have occurred and be continuing an Event of Default with respect to such global security. Any global security that is exchangeable pursuant to the preceding sentence shall be exchangeable for definitive certificates registered in such names as DTC shall direct. It is expected that such instructions will be based upon directions received by DTC from its Participants with respect to ownership of beneficial interests in such global security. In the event that QUIDS are issued in definitive form, such QUIDS will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on QUIDS represented by a global security will be made to DTC, as the Depositary for the QUIDS. In the event QUIDS are issued in definitive form, principal and interest will be payable, the transfer of the QUIDS will be registrable, and QUIDS will be exchangeable for QUIDS of other denominations of a like aggregate principal amount, at the corporate office of the Debenture Trustee in New York, New York or at the offices of any paying agent or transfer agent appointed by the Company, provided that payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto or by wire transfer. In addition, if the QUIDS are issued in certificated form, the record dates for payment of interest will be the 15th day of the last month of each calendar quarter. For a description of DTC and the terms of the depositary arrangements relating to payments, transfers, voting rights, redemptions and other notices and other matters, see "Description of QUIPS--Book-Entry Issuance". QUIDS may be presented for exchange as provided above, and may be presented for registration of transfer (with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed), at the office of the appropriate Securities Registrar or at the office of any transfer agent designated by the Company for such purpose with respect to the QUIDS, without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. The Company will appoint the Debenture Trustee as Securities Registrar under the Indenture. The Company may at any time rescind the designation of any transfer agent or approve a change in the location through which any transfer agent acts, provided that the Company maintains a transfer agent in each Place of Payment. The Company may at any time designate additional transfer agents with respect to the QUIDS. In the event of any redemption, neither the Company nor the Debenture Trustee shall be required to (i) issue, register the transfer of or exchange QUIDS during a period beginning at the opening of business 15 days before the day of the mailing of the relevant notice of redemption and ending at the close of business on the day of mailing of such notice of redemption or (ii) transfer or exchange any QUIDS so selected for redemption, except, in the case of any QUIDS being redeemed in part, any portion thereof not to be redeemed. 23 Modification of Indenture From time to time the Company and the Debenture Trustee may, without the consent of the holders of the QUIDS, amend, waive or supplement the Indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies (provided that any such action does not materially adversely affect the interest of the holders of QUIDS) and qualifying, or maintaining the qualification of, the Indenture under the Trust Indenture Act. The Indenture contains provisions permitting the Company and the Debenture Trustee, with the consent of the holders of not less than a majority in principal amount of outstanding QUIDS affected, to modify the Indenture in a manner affecting the rights of the holders of such QUIDS; provided that no such modification may, without the consent of the holder of each outstanding QUIDS so affected, (i) change the stated maturity of QUIDS, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon (except such change or extension as is contemplated hereby) or (ii) reduce the percentage of principal amount of QUIDS, the holders of which are required to consent to any such modification of the Indenture, provided that, so long as any QUIPS remain outstanding, no such modification may be made that adversely affects the holders of such QUIPS in any material respect, and no termination of the Indenture may occur, and no waiver of any Debenture Event of Default or compliance with any covenant under the Indenture may be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of the QUIPS unless and until the principal of the QUIDS and all accrued and unpaid interest thereon have been paid in full and certain other conditions are satisfied. Debenture Events of Default The Indenture provides that any one or more of the following described events with respect to the QUIDS that has occurred and is continuing constitutes a "Debenture Event of Default" with respect to the QUIDS: (i) failure for 30 days to pay any interest on the QUIDS, when due (subject to the deferral of any due date in the case of an Extension Period); or (ii) failure to pay any principal on the QUIDS when due whether at maturity, upon redemption by declaration or otherwise, provided, however, that a change or an extension of the maturity of the QUIDS in accordance with the terms of the Indenture shall not constitute a Debenture Event of Default; or (iii) failure to observe or perform in any material respect certain other covenants contained in the Indenture for 90 days after written notice to the Company from the Debenture Trustee or the holders of at least 25% in aggregate outstanding principal amount of outstanding QUIDS; or (iv) certain events in bankruptcy, insolvency or reorganization of the Company. The holders of a majority in aggregate outstanding principal amount of QUIDS have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate outstanding principal amount of QUIDS may declare the principal due and payable immediately upon a Debenture Event of Default, and, should the Debenture Trustee or such holders of such QUIDS fail to make such declaration, the holders of at least 25% in aggregate liquidation preference of the QUIPS shall have such right. The holders of a majority in aggregate outstanding principal amount of QUIDS may annul such declaration and waive the default if the default (other than the non-payment of the principal of QUIDS which has become due solely by such acceleration) has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee, and should the holders of such QUIDS fail to annul such declaration and waive such default, the holders of a majority in aggregate liquidation preference of the QUIPS shall have such right. The holders of a majority in aggregate outstanding principal amount of the QUIDS affected thereby may, on behalf of the holders of all the QUIDS, waive any past default, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each outstanding QUIDS, and should the holders of such QUIDS fail to annul such declaration and waive such default, the holders of a majority in aggregate liquidation preference of the QUIPS shall have such right. The Company is required to file annually with the Debenture Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants applicable to it under the Indenture. 24 In case a Debenture Event of Default shall occur and be continuing, the Property Trustee will have the right to declare the principal of and the interest on such QUIDS and any other amounts payable under the Indenture, to be forthwith due and payable and to enforce its other rights as a creditor with respect to such QUIDS. Enforcement of Certain Rights by Holders of QUIPS If a Debenture Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the QUIDS on the date such interest or principal is otherwise payable, a holder of QUIPS may institute a Direct Action for payment. The Company may not amend the Indenture to remove the foregoing right to bring a Direct Action without the prior written consent of the holders of all of the QUIPS. Notwithstanding any payment made to such holder of QUIPS by the Company in connection with a Direct Action, the Company shall remain obligated to pay the principal of or interest on the QUIDS held by the Issuer or the Property Trustee and the Company shall be subrogated to the rights of the holder of such QUIPS with respect to payments on the QUIPS to the extent of any payments made by the Company to such holder in any Direct Action. The holders of QUIPS will not be able to exercise directly any other remedy available to the holders of the QUIDS. Consolidation, Merger, Sale of Assets and Other Transactions The Indenture provides that 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, unless (i) in case the Company consolidates with or merges into another Person or conveys, transfers or leases its properties and assets substantially as an entirety to any Person, the successor Person is organized under the laws of the United States or any state or the District of Columbia, and such successor Person expressly assumes the Company's obligations on the QUIDS issued under the Indenture; (ii) immediately after giving effect thereto, no Debenture Event of Default, and no event which, after notice or lapse of time or both, would become a Debenture Event of Default, shall have happened and be continuing; (iii) if at the time any QUIPS are outstanding, such transaction is permitted under the Trust Agreement or Guarantee and does not give rise to any breach or violation of the Trust Agreement and Guarantee, (iv) any such lease shall provide that it will remain in effect so long as any QUIDS are outstanding, and (v) certain other conditions as prescribed in the Indenture are met. The general provisions of the Indenture do not afford holders of the QUIDS protection in the event of a highly leveraged or other transaction involving the Company that may adversely affect holders of the QUIDS. Satisfaction and Discharge Under the terms of the Indenture, the Company will be discharged from any and all obligations in respect of the QUIDS (except in each case to register the transfer or exchange of the QUIDS, replace stolen, lost or mutilated QUIDS, maintain paying agencies and hold moneys for payment in trust) if the Company deposits with the Debenture Trustee, in trust, moneys or Government Obligations (as defined in the Indenture), or a combination thereof, in an amount sufficient to pay all the principal of, and interest on, the QUIDS on the dates such payments are due in accordance with the terms of the QUIDS. Such defeasance or discharge may occur only if, among other things, the Company has delivered to the Debenture Trustee an Opinion of Counsel to the effect that the holders of the QUIDS will not recognize gain, loss or income for federal income tax purposes as a result of the satisfaction and discharge of the Indenture and such holders will be subject to federal income taxation on the same amounts and in the same manner and at the same times as if such satisfaction and discharge had not occurred. Subordination In the Indenture, the Company has covenanted and agreed that any QUIDS issued thereunder will be subordinate and junior in right of payment to all Senior Debt to the extent provided in the Indenture. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of the Company, the holders of Senior Debt will first be entitled to receive payment in full of principal of and premium, if any, and interest, if any, on such Senior Debt before the holders of QUIDS or the Property Trustee on behalf of the holders of QUIPS will be entitled to receive or retain any payment in respect of the principal of and premium, if any, or interest, if any, on the QUIDS. 25 In the event of the acceleration of the maturity of any QUIDS, the holders of all Senior Debt outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon (including any amounts due upon acceleration) before the holders of QUIDS will be entitled to receive or retain any payment in respect of the principal of or premium, if any, or interest, if any, on the QUIDS. No payments on account of principal (or premium, if any) or interest, if any, in respect of the QUIDS may be made if there shall have occurred and be continuing a default in any payment with respect to Senior Debt, or an event of default with respect to any Senior Debt resulting in the acceleration of the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default. "Debt" means with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; and (vi) every guarantee of or responsibility or liability for, direct or indirect, as obligor or otherwise of (a) any obligation of the types referred to in clauses (i) through (v) of another Person or (b) the payment of any dividends of another Person. "Senior Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of the Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the QUIDS or to other Debt which is pari passu with, or subordinated to, the QUIDS; provided, however, that Senior Debt shall not be deemed to include (i) any Debt of the Company which when incurred and without respect to any election under Section 1111 (b) of the Bankruptcy Code, was without recourse to the Company, (ii) any Debt of the Company to any of its subsidiaries, (iii) Debt to any employee of the Company, (iv) any liability for taxes, and (v) indebtedness or monetary obligations to trade creditors or assumed by the Company or any of its subsidiaries in the ordinary course of business in connection with the obtaining of materials or services. The Indenture places no limitation on the amount of additional Senior Debt that may be incurred by the Company. Governing Law The Indenture and the QUIDS will be governed by and construed in accordance with the laws of the State of New York. Information Concerning the Debenture Trustee The Company and its affiliates utilize various of the banking services offered by the Debenture Trustee. Such services include acting as a depositary and providing lines of credit. In addition, the Debenture Trustee acts as indenture trustee under the Mortgage and Deed of Trust dated January 13, 1937 under which the Company's First Mortgage Bonds are issued. The Debenture Trustee shall have and be subject to all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to such provisions, the Debenture Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of QUIDS, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Debenture Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Debenture Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. DESCRIPTION OF GUARANTEE The Guarantee will be executed and delivered by the Company concurrently with the issuance by the Issuer of the QUIPS for the benefit of the holders from time to time of such QUIPS. The Bank of New York will act as indenture trustee ("Guarantee Trustee") under the Guarantee for the purposes of compliance with the Trust Indenture Act and the Guarantee will be qualified as an Indenture under the Trust Indenture Act. This summary of certain provisions of the Guarantee does 26 not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the Guarantee, including the definitions therein of certain terms, and the Trust Indenture Act. The form of the Guarantee has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the QUIPS. General The Company will irrevocably and unconditionally agree to pay in full on a subordinated basis, to the extent set forth herein, the Guarantee Payments (as defined below) to the holders of the QUIPS, as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert other than the defense of payment. The following payments with respect to the QUIPS, to the extent not paid by or on behalf of the Issuer (the "Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated and unpaid Distributions required to be paid on the QUIPS, to the extent that the Issuer has funds on hand available therefor at the time, (ii) the Redemption Price with respect to any QUIPS called for redemption to the extent that the Issuer has funds on hand available therefor at such time, or (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Issuer (unless the QUIDS are distributed to holders of the QUIPS), the lesser of (a) the Liquidation Distribution to the extent that the Issuer has funds on hand available therefor at such time and (b) the amount of assets of the Issuer remaining available for distribution to holders of QUIPS. The Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of the applicable QUIPS or by causing the Issuer to pay such amounts to such holders. The Guarantee will be an irrevocable guarantee on a subordinated basis of the Issuer's obligations under the QUIPS, but will apply only to the extent that the Issuer has funds on hand available to make such payments, and is not a guarantee of collection. If the Company does not make interest payments on the QUIDS held by the Issuer, the Issuer will not be able to pay Distributions on the QUIPS and will not have funds legally available therefor. The Guarantee will rank subordinate and junior in right of payment to all general liabilities of the Company. See "--Status of the Guarantee". The Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Company, whether under the Indenture or any existing or other indenture that the Company may enter into in the future or otherwise. The Company has, through the Guarantee, the Trust Agreement, the QUIDS, the Indenture and the Expense Agreement, taken together, fully, irrevocably and unconditionally guaranteed all of the Issuer's obligations under the QUIPS. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Issuer's obligations under the QUIPS. See "Relationship Among the QUIPS, the QUIDS and the Guarantee--General". Status of the Guarantee The Guarantee will constitute an unsecured obligation of the Company and will rank subordinate and junior in right of payment to all general liabilities of the Company. The Guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against the Guarantor to enforce its rights under the Guarantee without first instituting a legal proceeding against any other person or entity). The Guarantee will be held for the benefit of the holders of the QUIPS. The Guarantee will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by the Issuer or upon distribution of the QUIDS to the holders of the QUIPS in exchange for all of the QUIPS. The Guarantee does not place a limitation on the amount of additional Senior Debt that may be incurred by the Company. Amendments and Assignment Except with respect to any changes which do not materially adversely affect the rights of holders of the QUIPS (in which case no vote will be required), the Guarantee may not be amended without the prior approval of the holders of not less than a majority of the aggregate liquidation preference of the outstanding QUIPS. The manner of obtaining any such approval will be as set forth under "Description of the QUIPS--Voting Rights; Amendment of the Trust Agreement". All guarantees and 27 agreements contained in the Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the QUIPS then outstanding. Events of Default An event of default under the Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of not less than a majority in aggregate Liquidation Amount of the QUIPS 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 Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. Any holder of the QUIPS may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other person or entity. The Company, as guarantor, is required to file annually with the Guarantee Trustee a certificate as to whether or not the Company is in compliance with all the conditions and covenants applicable to it under the Guarantee. Information Concerning the Guarantee Trustee The Company and its affiliates utilize various of the banking services offered by the Guarantee Trustee. Such services include acting as a depositary and providing lines of credit. In addition, the Guarantee Trustee acts as indenture trustee under the Mortgage and Deed of Trust dated January 13, 1937 under which the Company's First Mortgage Bonds are issued. The Guarantee Trustee, other than during the occurrence and continuance of a default by the Company in performance of the Guarantee, undertakes to perform only such duties as are specifically set forth in each Guarantee and, after default with respect to the Guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Guarantee at the request of any holder of any QUIPS unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. Termination of the Guarantee The Guarantee will terminate and be of no further force and effect upon full payment of the Redemption Price of the QUIPS, upon full payment of the amounts payable upon liquidation of the Issuer or upon distribution of QUIDS to the holders of the QUIPS in exchange for all of the QUIPS. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the QUIPS must restore payment of any sums paid under the QUIPS or the Guarantee. Governing Law The Guarantee will be governed by and construed in accordance with the laws of the State of New York. The Expense Agreement Pursuant to an Expense Agreement entered into by the Company under the Trust Agreement (the "Expense Agreement"), the Company will irrevocably and unconditionally guarantee to each person or entity to whom the Issuer becomes indebted or liable, the full payment of any costs, expenses or liabilities of the Issuer, other than obligations of the Issuer to pay to the holders of any QUIPS or other similar interests in the Issuer the amounts due such holders pursuant to the terms of the QUIPS or such other similar interests, as the case may be. RELATIONSHIP AMONG THE QUIPS, THE QUIDS AND THE GUARANTEE Payments of Distributions and other amounts due on the QUIPS (to the extent the Issuer has funds available for the payment of such Distributions) are irrevocably guaranteed by the Company as and to the extent set forth under "Description of Guarantee". Taken together, the Company's obligations under the QUIDS, the Indenture, the Trust Agreement, the Expense Agreement and the Guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of 28 distributions and other amounts due on the QUIPS. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Issuer's obligations under the QUIPS. If and to the extent that the Company does not make payments on the QUIDS, the Issuer will not pay Distributions or other amounts due on the QUIPS. The Guarantee does not cover payment of Distributions when the Issuer does not have sufficient funds to pay such Distributions. In such event, a holder of QUIPS may institute a legal proceeding directly against the Company to enforce payment of such Distributions to such holder after the respective due dates. The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all general liabilities of the Company. Sufficiency of Payments As long as payments of interest and other payments are made when due on the QUIDS, such payments will be sufficient to cover Distributions and other payments due on the QUIPS, primarily because (i) the aggregate principal amount of the QUIDS will be equal to the sum of the aggregate stated liquidation amount of the QUIPS and the Common Securities; (ii) the interest rate and interest and other payment dates on the QUIDS will match the Distribution rate and Distribution and other payment dates for the related QUIPS; (iii) the Company shall pay for all and any costs, expenses and liabilities of the Issuer except the Issuer's obligations to holders of its QUIPS under the QUIPS; and (iv) the Trust Agreement further provides that the Issuer will not engage in any activity that is not consistent with the limited purposes of the Issuer. Notwithstanding anything to the contrary in the Indenture, the Company has the right to set-off any payment it is otherwise required to make thereunder with and to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee. Enforcement Rights of Holders of QUIPS A holder of QUIPS may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other person or entity. A default or event of default under any Senior Debt of the Company will not constitute a default or Event of Default under the Indenture. However, in the event of payment defaults under, or acceleration of, Senior Debt of the Company, the subordination provisions of the Indenture provide that no payments may be made in respect of the QUIDS until such Senior Debt has been paid in full or any payment default thereunder has been cured or waived. Failure to make required payments on the QUIDS would constitute an Event of Default under the Indenture. Limited Purpose of Issuer The QUIPS evidence a beneficial interest in the Issuer, and the Issuer exists for the sole purpose of issuing the QUIPS and the Common Securities and investing the proceeds thereof in QUIDS. A principal difference between the rights of a holder of a QUIPS and a holder of a QUIDS is that a holder of a QUIDS is entitled to receive from the Company the principal amount of and interest accrued on QUIDS held, while a holder of QUIPS is entitled to receive Distributions from the Issuer (or from the Company under the Guarantee) if and to the extent the Issuer has funds available for the payment of such Distributions. Rights Upon Termination Upon any voluntary or involuntary termination, winding-up or liquidation of the Issuer involving the liquidation of the QUIDS, the holders of the QUIPS will be entitled to receive, out of assets held by the Issuer, the Liquidation Distribution in cash. See "Description of QUIPS--Liquidation Distribution Upon Termination". Upon any voluntary or involuntary liquidation or bankruptcy of the Company, the Property Trustee, as holder of the QUIDS, would be a subordinated creditor of the Company, subordinated in right of payment to all Senior Debt, but entitled to receive payment in full of principal and interest before any stockholders of the Company receive payments or distributions. Since the Company is the guarantor under the Guarantee and has agreed to pay for all costs, expenses and liabilities of the Issuer (other than the Issuer's obligations to the holders of the QUIPS), the positions of a holder of QUIPS and a holder of the QUIDS relative to other creditors and to stockholders of the Company in the event of liquidation or bankruptcy of the Company would be substantially the same. 29 CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following summary describes the principal United States federal income tax consequences of the ownership of QUIPS. Unless otherwise stated, this summary addresses QUIPS held as capital assets by United States Holders (defined below) and does not deal with special situations, such as those of dealers in securities or currencies, financial institutions, insurance companies, persons holding QUIPS as part of a hedging or conversion transaction or a straddle or United States Holders whose "functional currency" is not the U.S. dollar. As used herein, a "United States Holder" means a holder that is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. Furthermore, this summary only addresses the tax consequences to a United States Holder that acquires QUIPS on their original issue at their original offering price. The statements of law or legal conclusion set forth in this summary constitute the opinion of Simpson Thacher & Bartlett, counsel to the Company and the Issuer. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in federal income tax consequences different from those discussed below. Such changes may be applied retroactively in a manner that could cause the tax consequences to vary substantially from the consequences described below, possibly adversely affecting a beneficial owner of QUIPS. In particular, legislation has been proposed that could adversely affect the Company's ability to deduct interest on the QUIDS, which may in turn permit the Company to cause a redemption of the QUIPS. See "--Possible Tax Law Changes". The authorities on which this summary is based are subject to various interpretations and it is therefore possible that the federal income tax treatment of the purchase, ownership and disposition of QUIPS may differ from the treatment described below. PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF QUIPS, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. Classification of the Issuer Under current law and assuming compliance with the terms of the Trust Agreement and certain other documents, the Issuer will be classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes. As a result, each beneficial owner of QUIPS (a "Securityholder") will be treated as owning an undivided beneficial interest in the QUIDS. Accordingly, each Securityholder will be required to include in its gross income its pro rata share of the original issue discount, if any, accrued with respect to the QUIDS whether or not cash is actually distributed to the Securityholders. See "--Original Issue Discount." No amount included in income with respect to the QUIPS will be eligible for the dividends-received deduction. Payments of Interest Except as set forth below, stated interest on a QUID will generally be taxable to a United States Holder as ordinary income at the time it is paid or accrued in accordance with the United States Holder's method of accounting for tax purposes. Original Issue Discount Under income tax regulations that recently became effective, the Company believes that the QUIDS will not be treated as issued with original issue discount ("OID"). It should be noted that these regulations have not yet been addressed in any rulings or other interpretations by the Internal Revenue Service ("IRS"). Accordingly, it is possible that the IRS could take a position contrary to the interpretation described herein. Under the Indenture, the Company has the right to defer the payment of interest on the QUIDS at any time or from time to time for a period not exceeding 20 consecutive quarters with respect to each Extension Period, provided that no Extension Period may extend beyond the Stated Maturity of the QUIDS. Should the Company exercise this right to defer payments of interest, the QUIDs would at that time be treated as issued with OID and all the stated interest payments on the QUIDS would thereafter be treated as OID for as long as they remained outstanding. As a result, all holders would, in effect, be required to accrue interest income even if the holders are on a cash method of accounting. Consequently, in the event that 30 the payment of interest is deferred, a holder would be required to include OID in income on an economic accrual basis notwithstanding that the Company will not make any interest payments during such period on the QUIDS. Distribution of QUIDS to Holders of QUIPS Generally, a distribution by the Issuer of the QUIDS pursuant to a liquidation of the Issuer (as described under the caption "Certain Terms of QUIPS--Redemption--Special Event Redemption or Distribution of QUIDS") will be non-taxable and will result in the Securityholder receiving directly his pro rata share of the QUIDS previously held indirectly through the Issuer, with a holding period and aggregate tax basis equal to the holding period and aggregate tax basis such Securityholder had in its QUIPS before such distribution. If, however, the liquidation of the Issuer were to occur because the Issuer is subject to United States federal income tax with respect to income accrued or received on the QUIDS, the distribution of QUIDS would be a taxable event to each holder and a holder would recognize gain or loss as if the holder had exchanged its QUIPS for the QUIDS it received upon liquidation of the Issuer. A Securityholder will accrue interest in respect of QUIDS received from the Issuer in the manner described above under "--Original Issue Discount". Sales or Redemption of QUIPS Gain or loss will be recognized by a Securityholder on a sale of QUIPS (including a redemption for cash) in an amount equal to the difference between the amount realized and the Securityholder's adjusted tax basis in the QUIPS sold or so redeemed. Gain or loss recognized by a Securityholder on QUIPS held for more than one year will generally be taxable as long-term capital gain or loss. The QUIPS may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying QUIDS. A Securityholder that disposes of its QUIPS between record dates for payments of Distributions (and consequently does not receive a Distribution from the Issuer for the period prior to such disposition) will nevertheless be required to include in income as ordinary income accrued but unpaid interest on the QUIDS through the date of disposition and to add such amount to its adjusted tax basis in its QUIPS disposed of. Such Securityholder will recognize a capital loss on the disposition of its QUIPS to the extent the selling price (which may not fully reflect the value of accrued but unpaid interest) is less than the Securityholder's adjusted tax basis in the QUIPS (which will include accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for federal income tax purposes. Information Reporting and Backup Withholding The Administrative Trustees will report OID accrued, if any, on the QUIPS held of record by United States Holders (other than corporations and other exempt Securityholders) annually to the such holders and to the Internal Revenue Service. The Administrative Trustees currently intend to deliver such reports to holders of record prior to January 31 following each calendar year. It is anticipated that persons who hold QUIPS as nominees for beneficial holders will report the required tax information to beneficial holders on Form 1099. "Backup withholding" at a rate of 31% will apply to payments of interest to non-exempt United States Holders unless the Securityholder furnishes its taxpayer identification number in the manner prescribed in applicable Treasury Regulations, certifies that such number is correct, certifies as to no loss of exemption from backup withholding and meets certain other conditions. Payment of the proceeds from the disposition of QUIPS to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner establishes an exemption from information reporting and backup withholding. Any amounts withheld from a Securityholder under the backup withholding rules will be allowed as a refund or a credit against such Securityholder's United States federal income tax liability, provided the required information is furnished to the Internal Revenue Service. 31 Possible Tax Law Changes On March 19, 1996, President Clinton announced a 1997 balanced budget proposal (the Revenue Reconciliation Bill of 1996, the "Bill"). The Bill would, among other things, deny interest deductions on a debt instrument issued on or after December 7, 1995 if the instrument had a maximum weighted average maturity of more than 40 years. The Bill would also generally deny interest deductions for interest on an instrument, issued by a corporation, that has a maximum term of more than 20 years and that is not shown as indebtedness on the separate balance sheet of the issuer or, where the instrument is issued to a related party (other than a corporation), where the holder or some other related party issues a related instrument that is not shown as indebtedness on the issuer's consolidated balance sheet. For purposes of determining the weighted average maturity or the term of an instrument, any right to extend would be treated as exercised. The above-described provisions of the Bill were proposed to be effective generally for instruments issued on or after December 7, 1995. If either provision were to apply to the QUIDS, the Company would be unable to deduct interest on the QUIDS. However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees issued a joint statement to the effect that it was their intention that the effective date of the President's legislative proposals, if adopted, will be no earlier than the date of appropriate Congressional action. The Company believes that, under current law, it will be able to deduct interest on the QUIDS. There can be no assurance, however, that current or future legislative or administrative proposals or final legislation will not affect the ability of the Company to deduct interest on the QUIDS. Such a change would give rise to a Tax Event, which would permit the Company to cause a redemption of the QUIPS upon receiving an opinion of counsel, as described more fully under "Description of QUIPS--Redemption--Special Event Redemption or Distribution of QUIDS". Such a tax law change would not alter the United States federal income tax consequences of the purchase, ownership and disposition of QUIPS. UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the Company and the Issuer have agreed that the Issuer will sell to each of the Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs & Co. is acting as representative, has severally agreed to purchase from the Issuer the respective number of QUIPS set forth opposite its name below: NUMBER OF QUIPS ----- UNDERWRITER Goldman, Sachs & Co. ................................................. Dean Witter Reynolds Inc.............................................. A.G. Edwards & Sons, Inc.............................................. Lehman Brothers Inc................................................... Prudential Securities Incorporated.................................... Wheat, First Securities, Inc.......................................... Total ........................................................... 2,800,000 ========= Under the terms and conditions set forth in the Underwriting Agreement, the Underwriters are committed to take and pay for all such QUIPS offered hereby, if any are taken. The Underwriters propose to offer the QUIPS in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus and in part to certain securities dealers at such price less a concession of $_____ per QUIPS. The Underwriters may allow, and such dealers may reallow, a concession not to exceed $_____ per QUIPS to certain brokers and dealers. After the QUIPS are released for sale to the public, the offering price and other selling terms may from time to time be varied by the underwriters. In view of the fact that the proceeds from the sale of the QUIPS will be used to purchase the QUIDS issued by the Company, the Underwriting Agreement provides that the Company will pay as Underwriters' Compensation for the 32 Underwriters' arranging the investment therein of such proceeds an amount of $_____ per QUIPS for the accounts of the several Underwriters. Prior to this offering, there has been no public market for the QUIPS. The QUIPS have been approved for listing on the New York Stock Exchange (the "NYSE"), subject to notice of issuance. Trading of the QUIPS on the NYSE is expected to commence within 30 days after the initial delivery of the QUIPS. The representative of the Underwriters has advised the Company that they intend to make a market in the QUIPS prior to commencement of trading on the NYSE, but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of or the existence of the trading market for the QUIPS. The Company and the Issuer have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. Certain of the Underwriters or their affiliates have provided from time to time, and expect to provide in the future, investment or commercial banking services to the Company and its affiliates, for which such Underwriters or their affiliates have received or will receive customary fees and commissions. LEGAL OPINIONS Certain matters of Delaware law relating to the legality of the QUIPS, the validity of the Trust Agreement and the formation of the Issuer will be passed upon by Richards, Layton & Finger, special Delaware Counsel to the Company and the Issuer. The legality of the Guarantee and the QUIDS will be passed upon for the Company by Simpson Thacher & Bartlett (a partnership which includes professional corporations), and for the Underwriters by Winthrop, Stimson, Putnam & Roberts, New York, New York. Certain matters relating to United States federal income tax considerations will be passed upon for the Company by Simpson Thacher & Bartlett. EXPERTS The consolidated financial statements incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1995 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 33 ================================================================================ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. ---------------------- TABLE OF CONTENTS PAGE Available Information ...................................................... 4 Incorporation of Certain Information by Reference........................... 4 Recent Developments......................................................... 5 Risk Factors ............................................................... 5 Atlantic Capital I.......................................................... 8 Atlantic City Electric Company.............................................. 9 Use of Proceeds............................................................. 9 Accounting Treatment ....................................................... 9 Selected Financial Information ............................................. 9 Description of QUIPS ....................................................... 10 Description of QUIDS ....................................................... 19 Description of Guarantee.................................................... 27 Relationship among the QUIPS, the QUIDS and the Guarantee............................................................. 29 Certain Federal Income Tax Consequences..................................... 30 Underwriting................................................................ 32 Legal Opinions ............................................................. 33 Experts..................................................................... 33 ================================================================================ ================================================================================ 2,800,000 ATLANTIC CAPITAL I % CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES (QUIPS(SM)) GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY ATLANTIC CITY ELECTRIC COMPANY ---------------------- PROSPECTUS ---------------------- GOLDMAN, SACHS & CO. DEAN WITTER REYNOLDS INC. A.G. EDWARDS & SONS, INC. LEHMAN BROTHERS PRUDENTIAL SECURITIES INCORPORATED WHEAT FIRST BUTCHER SINGER ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The estimated expenses in connection with the issuance and distribution of the Securities covered by this Registration Statement, other than underwriting discounts and commissions, are as follows: (a) SEC registration fee (actual) ............................ $ 24,138 (b) Printing fees and expenses ............................... 5,000 (c) Legal fees and expenses .................................. 125,000 (d) Accounting fees and expenses ............................. 20,000 (e) Blue Sky fees and expenses ............................... 5,000 (f) New York Stock Exchange Listing Fee ...................... 26,900 (g) Rating Agency Fees ....................................... 135,000 (h) Trustees' Fees ........................................... 10,000 (i) Other .................................................... 23,962 -------- Total .................................................... $375,000 ======== ITEM 16. EXHIBITS 1.1 Proposed form of Underwriting Agreement for QUIPS. 4.1 Form of Junior Subordinated Indenture between the Company and The Bank of New York, as Debenture Trustee. 4.2 Certificate of Trust of Atlantic Capital I. 4.3 Trust Agreement of Atlantic Capital I. 4.4 Form of Amended and Restated Trust Agreement. 4.5 Form of Preferred Security Certificate for Atlantic Capital I (included in Exhibit 4.4). 4.6 Form of Guarantee Agreement. 5.1 Opinion of Simpson Thacher & Bartlett, relating to the legality of the Junior Subordinated Debentures and the Guarantee. 5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, relating to the legality of the Preferred Securities of Atlantic Capital I. 8.1 Opinion of Simpson Thacher & Bartlett, as to certain United States federal income tax matters. 12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges 12.2 Statement re: Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends. 23.1 Consent of Deloitte & Touche LLP. 23.2 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1 hereto). 23.3 Consent of Richards, Layton & Finger, special Delaware counsel (included in Exhibit 5.2 hereto). 23.4 Consent of Simpson Thacher & Bartlett (included in Exhibit 8.1 hereto). 24.1 Powers of Attorney.* 25.1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee for the Junior Subordinated Indenture. 25.2 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, as Property Trustee for the Amended and Restated Trust Agreement of Atlantic Capital I. 25.3 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, as Guarantee Trustee for the Guarantee for Atlantic Capital I. - ---------- * Previously filed. II-1 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ATLANTIC CITY ELECTRIC COMPANY 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 AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF EGG HARBOR AND STATE OF NEW JERSEY ON SEPTEMBER 17, 1996. Atlantic City Electric Company By: /s/ L.M. Walters -------------------------------------- (Vice President, Treasurer and Assistant Secretary) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING OFFICERS AND DIRECTORS OF ATLANTIC CITY ELECTRIC COMPANY ON SEPTEMBER 17, 1996 IN THE CAPACITIES INDICATED BELOW. SIGNATURE TITLE --------- ----- * Principal Executive Officer, Director - --------------------------------- (J.L. Jacobs) * Principal Financial and Accounting Officer - --------------------------------- (M.J. Barron) * Director - --------------------------------- (M.I. Harlacher, Jr.) Director - --------------------------------- (M.J. Chesser) * Director - --------------------------------- (M.T. Powell) II-2 SIGNATURE TITLE --------- ----- * Director - --------------------------------- (J.E. Franklin II) * Director - --------------------------------- (H.K. Levari, Jr.) * The undersigned, by signing his name hereto, does hereby sign this Registration Statement on behalf of each of the above-indicated directors and officers of the registrant pursuant to powers of attorney signed by such directors and officers. /s/ L.M. Walters --------------------------------- Attorney-in-fact PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ATLANTIC CAPITAL I 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 AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF EGG HARBOR AND STATE OF NEW JERSEY ON SEPTEMBER 17, 1996. Atlantic Capital I By: Atlantic City Electric Company as Depositor By: /s/ L.M. Walters -------------------------------------- (Vice President, Treasurer and Assistant Secretary) II-3 EXHIBIT INDEX EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ ----------- ------ 1.1 Proposed form of Underwriting Agreement for QUIPS ......... 4.1 Form of Junior Subordinated Indenture between the Company and The Bank of New York, as Debenture Trustee .... 4.2 Certificate of Trust of Atlantic Capital I ................ 4.3 Trust Agreement of Atlantic Capital I ..................... 4.4 Form of Amended and Restated Trust Agreement .............. 4.5 Form of Preferred Security Certificate for Atlantic Capital I (included in Exhibit 4.4) ....................... 4.6 Form of Guarantee Agreement ............................... 5.1 Opinion of Simpson Thacher & Bartlett, relating to the legality of the Junior Subordinated Debentures and the Guarantee ................................................. 5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, relating to the legality of the Preferred Securities of Atlantic Capital I .......................... 8.1 Opinion of Simpson Thacher & Bartlett, as to certain United States federal income tax matters .................. 12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges ................................................... 12.2 Statement re: Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends ............ 23.1 Consent of Deloitte & Touche LLP .......................... 23.2 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1 hereto) ....................................... 23.3 Consent of Richards, Layton & Finger, special Delaware counsel (included in Exhibit 5.2 hereto) .................. 23.4 Consent of Simpson Thacher & Bartlett (included in Exhibit 8.1 hereto) ....................................... 24.1 Powers of Attorney* ....................................... 25.1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee for the Junior Subordinated Indenture ............. II-4 EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ ----------- ------ 25.2 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, as Property Trustee for the Amended and Restated Trust Agreement of Atlantic Capital I ........................... 25.3 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of New York, as Guarantee Trustee for the Guarantee for Atlantic Capital I ................................................. - --------------------- * Previously filed. II-5 EX-1.1 2 UNDERWRITING AGREEMENT Exhibit 1.1 ATLANTIC CITY ELECTRIC COMPANY [ ]% Cumulative Quarterly Income Preferred Securities (liquidation amount $25 per preferred security) Underwriting Agreement New York, New York September [___], 1996 Goldman, Sachs & Co. Dean Witter Reynolds Inc. A.G. Edwards & Sons, Inc. Lehman Brothers Inc. Prudential Securities Incorporated Wheat, First Securities, Inc. c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: Atlantic Capital I, a statutory business trust formed under the laws of the State of Delaware (the Trust), and Atlantic City Electric Company, a New Jersey corporation (the Company), confirm their agreement with you (collectively, the Underwriters, which term shall also include any underwriter substituted as hereinafter provided in Section 8), for whom Goldman, Sachs & Co. is acting as Representative, with respect to the Trust's [ ]% Cumulative Quarterly Income Preferred Securities (liquidation amount $25 per preferred security) (the Preferred Securities), representing undivided beneficial interests in the assets of the Trust, guaranteed by the Company to the extent set forth in the Guarantee Agreement dated as of September [__], 1996, between the Company and The Bank of New York, as Guarantee Trustee. Under this underwriting agreement, the Trust shall issue and sell 2,800,000 Preferred Securities (the Securities), and the Underwriters, acting severally and not jointly, shall purchase the respective number of such Preferred Securities set forth in Schedule A hereto. Concurrently with the issuance of the Securities and the Company's purchase of all of the beneficial interests represented by common securities of the Trust (the Common Securities), the Trust will invest the proceeds of each thereof in the Company's [ ]% Junior Subordinated Deferrable Interest -1- Debentures (the Subordinated Debentures). The Subordinated Debentures will be issued under a Junior Subordinated Indenture, dated as of September [__], 1996 (the Indenture), between the Company and The Bank of New York, as Debenture Trustee. The Company and the Trust have filed with the Securities and Exchange Commission (the Commission) a registration statement on Form S-3 (No. 333-06625), including a preliminary prospectus dated September [__], 1996 for the registration of, among other things, the Securities, the Guarantee Agreement and the Subordinated Debentures (collectively, the Registered Securities) under the Securities Act of 1933, as amended (the Act) and have filed such amendments thereto and such amended preliminary prospectuses as may have been required to the date hereof, and will file such additional amendments thereto and such additional amended prospectuses as may hereafter be required. Such registration statement (as amended, if applicable) and the prospectus constituting a part thereof (including in each case all documents incorporated by reference therein, all exhibits and the information, if any, deemed to be part thereof pursuant to Rule 430A(b) under the Act), as from time to time amended or supplemented pursuant to the Act or otherwise, are hereinafter referred to as the Registration Statement and the Prospectus, respectively, except that if any revised prospectus shall be provided to the Underwriters by the Company or the Trust for use in connection with the offering of the Securities which differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective (whether or not such revised prospectus is required to be filed by the Company or the Trust pursuant to Rule 424(b) under the Act), the term Prospectus shall refer to such revised prospectus from and after the time it is first provided to the Underwriters for such use, and if the Company or the Trust files any documents pursuant to Section 13, 14 or 15 of the Securities Exchange Act of 1934 (the 1934 Act) after the time the Registration Statement becomes effective and prior to the termination of the offering of the Securities by the Representative, which documents are deemed to be incorporated by reference in the Prospectus, the term Prospectus shall refer to the Prospectus as supplemented by the documents so filed from and after the time said documents are filed with the Commission. Any preliminary prospectus included in the Registration Statement or filed with the Commission pursuant to Rule 424(a) under the Act is hereinafter called a "Preliminary Prospectus". 1. Purchase and Sale. Upon the basis of the warranties and representations and on the terms and subject to the conditions set forth herein, the Trust agrees to issue and sell to each Underwriter, severally and not jointly, and each Underwriter agrees, severally and not jointly, to purchase from the Trust, at the price of $25 per Security, the number of Securities set forth opposite such Underwriter's name in Schedule A hereto plus any additional Securities which such Underwriter -2- may become obligated to purchase pursuant to the provisions of Section 8 hereof. As compensation to the Underwriters for their commitments hereunder, and in view of the fact that the proceeds of the sale of the Securities will be used by the Trust to purchase the Subordinated Debentures of the Company, the Company hereby agrees to pay at the Closing Date (as defined below), to Goldman, Sachs & Co., for the accounts of the several Underwriters, an amount equal to $[ ] per Security for the Securities to be delivered by the Trust at the Closing Date. Each Underwriter hereby advises the Company and the Trust that it intends to effect an immediate distribution of the Securities purchased from the Trust hereunder for sale on the terms and conditions set forth in the Prospectus. 2. Delivery and Payment. The Securities to be purchased by each Underwriter hereunder will be represented by one or more definitive global Securities in book-entry form which will be deposited by or on behalf of the Trust with The Depository Trust Company (DTC) or its designated custodian and registered in the name of Cede & Co., as nominee of DTC. Delivery of and payment for the Securities shall be made at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York (the Closing Location), at 10:00 A.M., New York City time on the third business day following the date hereof or such other place, date and time as the Representative and the Company shall agree upon in writing, which date and time may be postponed by agreement between the Representative and the Company or as provided in Section 8 hereof (such date and time being herein called the Closing Date). The Trust will deliver the Securities to the Representative, for the respective accounts of the several Underwriters, against payment by or on behalf of the several Underwriters through the Representative of the purchase price thereof by wire transfer of immediately available funds to the Trust, by causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at DTC. The Company and the Trust agree to have the certificates representing the Securities available for inspection and checking by the Representative at the office of DTC or its designated custodian (the Designated Office), not later than 10:00 A.M., New York City time, on the last business day prior to the Closing Date. At the Closing Date, the Company will pay, or cause to be paid, the compensation payable to the Underwriters under Section 1 hereof by wire transfer of immediately available funds to Goldman, Sachs & Co., on behalf of the Underwriters. For purposes of this Section 2, Business Day shall mean a day other than a Saturday, Sunday or other day on which any major stock exchange is closed or on which banking institutions -3- in New York are generally authorized or obligated by law or executive order to close. 3. Conditions of Underwriters' Obligations. The several obligations of the Underwriters hereunder, as to the Securities to be delivered at the Closing Date, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and the Trust herein are, at and as of the Closing Date, true and correct and to the following additional conditions: (a) That all legal proceedings to be taken and all legal opinions to be rendered in connection with the issue and sale of the Securities shall be satisfactory in form and substance to Winthrop, Stimson, Putnam & Roberts, of counsel to the Underwriters. (b) That, at the Closing Date, the Representative shall be furnished with the following opinions, dated the date thereof, with such changes therein as may be agreed upon by the Company and the Underwriters with the approval of Winthrop, Stimson, Putnam & Roberts, of counsel to the Underwriters: (1) Opinion of Simpson Thacher & Bartlett, New York, New York, of counsel to the Company and the Trust, substantially in the form heretofore approved, (2) Opinion of Winthrop, Stimson, Putnam & Roberts, New York, New York, of counsel to the Underwriters, substantially in the form heretofore approved by the Underwriters, (3) Opinion of James E. Franklin, II, Esq., Senior Vice President, Secretary and General Counsel of the Company, substantially in the form heretofore approved, and (4) Opinion of Richards, Layton & Finger, special Delaware Counsel for the Trust and the Company, substantially in the form heretofore approved. (c) That, at the Closing Date, the Representative shall have received a letter, from Deloitte & Touche LLP in form and substance satisfactory to the Representative dated as of the Closing Date (i) confirming that they are independent public accountants within the meaning of the Act and the applicable published rules and regulations of the Commission thereunder, (ii) stating that in their opinion the financial statements examined by them and included or incorporated by reference in the Prospectus complied as to form in all material respects with the applicable accounting requirements of the Commission, including applicable published rules and regulations, and (iii) covering, as of a -4- date not more than five business days prior to the date of such letter, such additional matters as the Representative shall request. (d) That no amendment to the Registration Statement or the Prospectus (or any document which would be deemed incorporated in the Prospectus by reference) filed subsequent to the execution and delivery by the Company and the Trust hereof shall contain material information substantially different from that contained in the Registration Statement, or in the Prospectus, which is unsatisfactory in substance to the Representative or unsatisfactory in form to Winthrop, Stimson, Putnam & Roberts, of counsel to the Underwriters. (e) That, prior to the Closing Date, the Registration Statement shall have become effective and no stop order with respect to such effectiveness shall have been issued under the Act by the Commission or proceedings therefor initiated or threatened; any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been disclosed to the Representative and complied with; and a Prospectus containing the price of the Securities and any price-related or other information previously omitted from the effective Registration Statement pursuant to Rule 430A, in form satisfactory to the Representative, shall have been transmitted to the Commission for filing pursuant to Rule 424(b) under the Act within the time period prescribed by Rule 430A, and prior to the Closing Date the Company or the Trust shall have provided evidence satisfactory to the Representative of such timely filing, or a post-effective amendment providing such information shall have been promptly filed and declared effective in accordance with the requirements of Rule 430A. (f) That, on the Closing Date, there shall have been no change in the business, properties or financial condition of the Company or the Trust from that set forth in the Registration Statement or the Prospectus (other than changes referred to in or contemplated by the Registration Statement or the Prospectus) except changes arising from transactions in the ordinary course of business none of which, by itself or in conjunction with other changes, has had a materially adverse effect on the business, properties or financial condition of the Company, or any development involving any such material adverse change, and that the Company shall, on the Closing Date, have delivered to the Representative a certificate of its President, any Vice President or its Treasurer, in form satisfactory to the Representative, to the effect that, to the best of his knowledge, information and belief, there has been no such change, and the representations and warranties of the Company contained -5- herein are true and correct in all material respects as of the Closing Date. (g) That the Trust shall, on the Closing Date, have delivered to the Representative a certificate of a trustee or officer of the Trust, in form satisfactory to the Representative, to the effect that, to the best of his knowledge, information and belief, there has been no change described in Section 3(f) with respect to the Trust and the representations and warranties of the Trust contained herein are true and correct in all material respects as of the Closing Date. (h) That each of the Company and the Trust shall have performed such of its respective obligations under this agreement as are to be performed at or before the Closing Date by the terms hereof. (i) That the Securities to be sold at such Closing Date shall have been duly listed, subject to notice of issuance, on the New York Stock Exchange. (j) That on or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities or preferred stock by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities or preferred stock. (k) That, on or after the date hereof and prior to the Closing Date, there shall not have occurred any change or development involving a prospective change not disclosed in or contemplated by the Prospectus in or affecting the business or properties of the Company which in the reasonable judgment of the Representatives, is so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated by the Prospectus. (l) That the Trust Agreement, the Guarantee Agreement and the Indenture shall have been executed and delivered, in each case in a form reasonably satisfactory to the Representative. (m) That, at or before 8 P.M. New York City time on the first full business day after the date hereof, or at such later time and day as the Representative may from time to time consent to in writing or by telegram confirmed in writing, an appropriate order or orders of the Board of Public Utilities, State of New Jersey, necessary to permit -6- the sale of the Securities to the Underwriters and the transactions contemplated herein, shall be in full force and effect. If any of the conditions specified in this Section 3 shall not have been fulfilled, this agreement may be terminated by the Representative with the consent of Underwriters, who may include the Representative, which have agreed to purchase in the aggregate 50% or more of the principal amount of the Securities upon notice thereof to the Company, by telephone, confirmed in writing. Any such termination shall have the effects provided in Section 9 hereof. 4. Conditions of the Obligations of the Company and the Trust. The obligations of the Company and the Trust to sell and deliver the Securities are subject to (a) the accuracy of the warranties and representations of the Underwriters and (b) to the condition specified in subsections (e) and (m) of Section 3 hereof. If any of the conditions specified above in this Section 4 shall not have been fulfilled, this agreement may be terminated by the Company upon written notice of such termination to the Representative prior to the Closing Date. Any such termination shall be without liability of any party to any other party except as otherwise provided in Section 5(i) hereof. 5. Certain Covenants of the Company and the Trust. In further consideration of the agreements of the Underwriters herein contained, each of the Company and the Trust, jointly and severally, covenants as follows: (a) To prepare, and file or transmit for filing with the Commission in accordance with Rule 430A and Rule 424(b) under the Act, the Prospectus in form satisfactory to the Representative, or, if required by Rule 430A, a post-effective amendment to the Registration Statement (including an amended Prospectus), in either case containing all information omitted from the Registration Statement at the time it became effective pursuant to Rule 430A. (b) As soon as the Company or the Trust is advised thereof, to advise the Underwriters and confirm the advice in writing (i) of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus has been filed, and to furnish each Underwriter with copies thereof, (ii) of any request made by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information with respect thereto or (iii) of the entry of any stop order suspending the effectiveness of the Registration Statement or any order preventing or suspending the use of the Prospectus or of the initiation or threat of any proceeding for any such purpose and, if any such order -7- should be entered by the Commission, promptly to make every reasonable effort to obtain the lifting or removal thereof; and if any amendment to the Registration Statement or any supplement to the Prospectus shall be required, promptly to furnish a copy to the Representative for its review prior to filing and, except for any document required to be filed by the Company pursuant to the 1934 Act, not to file any such amendment or supplement to which the Representative objects. (c) To deliver to the Underwriters, without charge, as soon as practicable, and from time to time thereafter during such period of time (not exceeding nine months) after the Prospectus has been filed with the Commission pursuant to Rule 424(b), as the Underwriters are required by law to deliver a prospectus, as many copies of the Prospectus (as supplemented or amended if the Company or the Trust shall have made any supplements or amendments thereto) as the Representative may reasonably request; and in case any Underwriter is required to deliver a prospectus after the expiration of nine months after the Prospectus has been filed with the Commission pursuant to Rule 424(b), to prepare and furnish to such Underwriter, upon request, at the expense of such Underwriter, a reasonable quantity of a supplemented or amended Prospectus or supplements or amendments to the Prospectus complying with Section 10(a) of the Act. (d) To furnish to the Representative a copy, certified by the Secretary or an Assistant Secretary of the Company, of the Registration Statement as initially filed with the Commission and all amendments thereto (exclusive of exhibits), and, upon request, to furnish to the Representative sufficient plain copies thereof (exclusive of exhibits) as the Representative may reasonably request. (e) For such period of time (not exceeding nine months) after the Prospectus has been filed with the Commission pursuant to Rule 424(b) as a prospectus relating to the Securities is required to be delivered under the Act, if any event shall have occurred as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if for any other reason it shall be necessary during such period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act or the Exchange Act, to notify the Representative and upon its request to file such document and forthwith to prepare and furnish, at its own expense, to the Underwriters and to dealers (whose names and addresses are furnished to the Company or the Trust by the Representative) to whom Securities may have been sold by the Underwriters, and, upon -8- request, to any other dealers making such request, copies of such amendments or supplements to the Prospectus. (f) In the case of the Company, to make generally available to its security holders, as soon as practicable but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earning statement (which need not be audited by independent public accountants) of the Company covering a period of at least twelve months beginning after such effective date and otherwise complying with Section 11(a) of the Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158). (g) To use its best efforts to qualify the Securities for offer and sale under the securities or blue sky laws of such jurisdictions as the Representative may designate within three months after the date hereof, and to pay, or to reimburse the Representatives and their counsel for, reasonable legal fees, filing fees and expenses in connection therewith (including legal fees, filing fees and expenses paid and incurred prior to the date hereof), provided, however, that neither the Company nor the Trust shall be required to qualify as a foreign corporation or to file a consent to service of process or to file annual reports or to comply with any other requirements deemed by the Company to be unduly burdensome. (h) To pay all expenses, fees and taxes (other than transfer taxes on sales by the Underwriters) in connection with the issuance and delivery of the Securities, except that the Company shall be required to pay the fees and disbursements (other than the fees and disbursements referred to in paragraph (g) of this Section 5) of Winthrop, Stimson, Putnam & Roberts, of counsel to the Underwriters, only in the events provided in paragraph (i) of this Section 5, the Underwriters hereby agreeing to pay such fees and disbursements in any other event. (i) If the Underwriters shall not take up and pay for the Securities at the Closing Date due to the failure of the Company or the Trust to comply with any of the conditions specified in Section 3 hereof, or, if this agreement shall be terminated in accordance with the provisions of Section 3, 4 or 9 hereof, to pay the out-of-pocket expenses of the Underwriters, including fees and disbursements of Winthrop, Stimson, Putnam & Roberts, of counsel to the Underwriters. (j) Not to offer, sell, contract to sell or otherwise dispose of any additional securities of the Trust or the Company substantially similar to any of the Securities or any securities that are convertible into or exchangeable for, or that represent the right to receive any such similar -9- securities without the consent of the Representatives prior to the earlier of (i) the termination of trading restrictions on the Securities, which terminations shall be promptly communicated to the Company by the Representatives and (ii) 90 days following the Closing Date, which consent shall not be unreasonably withheld. (k) In the case of the Company, to issue the Guarantee Agreement and the Subordinated Debentures concurrently with the issuance and sale of the Securities as contemplated herein. (l) In the case of the Trust, to use the net proceeds received by it from the sale of the Securities pursuant to this agreement in the manner specified in the Prospectus under the caption "Use of Proceeds." (m) To use its best efforts to list, subject to notice of issuance, on the New York Stock Exchange (the Exchange) (i) the Securities and (ii) upon any distribution upon the liquidation of the Trust to holders of the Securities, the Subordinated Debentures. 6. Representations and Warranties of, and Indemnity by, the Company and the Trust. Each of the Company and the Trust, jointly and severally, represents and warrants to, and agrees with, each of the Underwriters that: (a) The Trust has been duly created and is validly existing as a statutory business trust in good standing under the Business Trust Act of the State of Delaware (the Delaware Business Trust Act) with the trust power and authority to own property and conduct its business as described in the Prospectus, and has conducted and will conduct no business other than the transactions contemplated by this agreement and described in the Prospectus; the Trust is not a party to or bound by any agreement or instrument other than this agreement, the trust agreement among the Company, as depositor, the trustees named therein (the Issuer Trustees), and the several Holders, as defined therein (as amended and restated from time to time, the Trust Agreement) and the agreements and instruments contemplated by the Trust Agreement and described in the Prospectus; the Trust has no liabilities or obligations other than those arising out of the transactions contemplated by this agreement and the Trust Agreement and described in the Prospectus; and the Trust is not a party to or subject to any action, suit or proceeding of any nature. (b) The Company has been duly incorporated and is validly existing and in good standing as a corporation under the laws of the State of New Jersey, with full power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and is -10- duly qualified to do business and is in good standing in each jurisdiction in which it owns or leases property or in which it conducts business so as to make such qualification necessary, except where the failure to be so qualified, considering all such cases in the aggregate, does not involve a material risk, liability or disability to the business, properties, financial position or results of operations of the Company. (c) All of the outstanding beneficial interests in the Trust have been, and the Securities, upon issuance and delivery and payment therefor in the manner described herein, will be, duly authorized, validly issued, fully paid and non-assessable and will conform to the description of the Securities contained in the Prospectus. (d) The execution and delivery hereof by the Trust, the issue and sale of the Securities and the Common Securities by the Trust, the compliance by the Trust with all of the provisions of this agreement, the purchase of the Subordinated Debentures by the Trust from the Company, the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, and the consummation by the Trust of the transactions contemplated herein and in the Trust Agreement, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, agreement or instrument to which the Trust is a party or by which the Trust is bound or to which any of the property or assets of the Trust is subject, nor will such action result in any violation of the provisions of the Trust Agreement or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Trust or any of its properties. (e) The execution and delivery hereof by the Company, the issue and sale of the Securities and the Common Securities by the Trust, the compliance by the Company with all of the provisions of this agreement, the purchase of the Common Securities by the Company from the Trust, the issuance by the Company of the Subordinated Debentures and the Guarantee Agreement, the execution, delivery and performance by the Company of the Trust Agreement, the Guarantee Agreement, the Indenture and the Subordinated Debentures (collectively, the "Company Agreements"), the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, and the consummation by the Company of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to -11- which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties, or result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the Company. (f) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body having jurisdiction over the Trust or the Company or any of their properties is required for the issue and sale of the Securities and Common Securities by the Trust, the issuance by the Company of the Subordinated Debentures and the Guarantee Agreement, the purchase of the Subordinated Debentures by the Trust from the Company, the purchase of the Common Securities by the Company from the Trust, the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, the execution, delivery and performance by the Company of this agreement and the Company Agreements and by the Trust of this agreement, or the consummation of the transactions contemplated herein or therein, except the order of the Board of Public Utilities, State of New Jersey referred to in Section 3(m) hereof with respect to the issuance by the Company of the Subordinated Debentures and the Guarantee Agreement, registration of the Securities under the Act, registration of the Securities under the Exchange Act, the qualification of the Trust Agreement, the Indenture and the Guarantee Agreement under the Trust Indenture Act of 1939, as amended (the TIA) and such other consents, approvals, authorizations, registrations or qualifications as may be required under the Act under state securities or Blue Sky laws in connection with the issuance and sale, as the case may be, of the Securities. (g) The Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to the Representative, have been declared effective by the Commission in such form, and no other document with respect to the Registration Statement or document incorporated by reference therein has heretofore been filed, or transmitted for filing, with the Commission. The Registration Statement complied, and with respect to any further amendments thereto, will comply, in each case as of the applicable effective date thereof, in all material respects with the applicable provisions of the Act and the TIA and the rules and regulations of the Commission thereunder, and such Registration Statement, as of such effective time, did not contain any untrue statement of a material fact or omit to -12- state a material fact required to be stated therein or necessary to make the statements therein not misleading; the Prospectus complies and, as it may be amended or supplemented, will comply, in all material respects, to the requirements of the Act and the rules and regulations of the Commission thereunder, and does not and, as of the applicable filing date, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; the documents incorporated in the Prospectus by reference pursuant to Item 12 of Form S-3, as of their respective filing or effectiveness dates, as applicable, complied or will comply in all material respects with the applicable provisions of the Act or the 1934 Act, as applicable, and the rules and regulations of the Commission thereunder, provided, however, that neither the Company nor the Trust makes any warranty or representation to any Underwriter with respect to any statements or omissions made therein in reliance upon and in conformity with information furnished in writing to the Company or the Trust by, or through the Representative on behalf of, any Underwriter expressly for use therein. (h) The Company and the Trust, jointly and severally, agree to indemnify and hold harmless each of the Underwriters and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Act, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act or otherwise, and to reimburse the Underwriters and such controlling person or persons, if any, for any legal or other expenses incurred by them as such expenses are incurred in connection with investigating or defending any action or claim, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or in the Prospectus or any preliminary prospectus or, if the Company or the Trust shall furnish or cause to be furnished to the Underwriters any amendments or supplements thereto, or shall make any filings pursuant to Section 13, Section 14, or Section 15 of the 1934 Act which are incorporated therein by reference, in the Prospectus as so amended or supplemented (provided that if such Prospectus, or such Prospectus as amended or supplemented, is used after the period of time referred to in Section 5(f) hereof, it shall contain such amendments or supplements as the Company or the Trust shall have deemed necessary to comply with Section 10(a) of the Act), or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities -13- or actions arise out of or are based upon (i) any such untrue statement or alleged untrue statement or omission or alleged omission which was made in the Registration Statement or Prospectus or any preliminary prospectus, or in the Prospectus as so amended or supplemented, in reliance upon and in conformity with information furnished in writing to the Company or the Trust through the Representative on behalf of any Underwriter expressly for use therein, or (ii) any statements in or omissions from the part of the Registration Statement that shall constitute the Statement of Eligibility under the Trust Indenture Act of 1939 of any indenture trustee under an indenture of the Company or the Trust, and except that this indemnity shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) on account of any losses, claims, damages, liabilities or actions arising from the sale of the Securities to any person if a copy of the Prospectus (excluding any documents incorporated by reference therein), as the same may then be supplemented or amended, had not been sent or given by or on behalf of such Underwriter to such person with or prior to the written confirmation of the sale involved where such delivery is required by the Act, the Company or the Trust had furnished copies thereof to such Underwriter and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact from which such losses, claims, damages, liabilities or actions result was corrected in the Prospectus as then supplemented or amended. Each Underwriter agrees within 20 New York business days after the receipt by it of notice of the commencement of any action in respect of which indemnity from the Company or the Trust on account of its agreement contained in this Section 6(h) may be sought by it, or by any person controlling it, to notify such indemnifying party in writing of the commencement thereof, but the omission of such Underwriter so to notify the indemnifying party of any such action shall not release the indemnifying party from any liability which it may have to such Underwriter or to such controlling person otherwise than on account of the indemnity agreement contained in this Section 6(h). In case any such action shall be brought against any Underwriter or any such person controlling such Underwriter and such Underwriter shall notify the indemnifying party of the commencement thereof, as above provided, the indemnifying party shall be entitled to participate in (and, to the extent that it shall wish, including the selection of counsel, to direct, jointly with any other indemnifying party similarly notified) the defense thereof at its own expense; provided that the indemnifying party will not select counsel that is counsel to such indemnifying party or to which the indemnified party otherwise reasonably objects. In case the indemnifying party elects to direct such defense and select such counsel, and provides notice thereof to such indemnified party, any Underwriter or controlling person shall have the right to employ its own counsel, but, in any -14- such case, the fees and expenses of such counsel subsequently incurred shall be at the expense of such Underwriter or controlling person unless the indemnifying party has agreed in writing to pay such fees and expenses. The Company and the Trust shall not be liable for any settlement of any such action effected without their consent. (i) If an Underwriter or controlling person entitled to indemnification by the terms of Section 6(h) hereof shall have given notice to the Company or the Trust of a claim in respect thereof pursuant to Section 6(h), and if such claim for indemnification is thereafter held by a court to be unavailable for any reason other than by reason of the terms of this agreement, or if such claim is unavailable under controlling precedent, the Underwriter or such person shall be entitled to contribution from each such notified party to the liabilities and expenses for which the Underwriter or such person would have been indemnified pursuant to Section 6(h), except to the extent that contribution is not permitted under Section 11(f) of the Act. In determining the amount of contribution to which the Underwriter or such person is entitled, there shall be considered the relative benefits received by the Underwriters on the one hand and the Company and the Trust on the other from the offering of the Securities (taking into account the portion of the proceeds of the offering realized by each); provided, however, that if such allocation shall not be permitted by applicable law, there should be taken into account not only such relative benefits but also the Underwriters' or such persons' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission, and any other equitable considerations appropriate under the circumstances. The Company, the Trust and the Underwriters agree that it would not be equitable if the amount of contribution pursuant to this Section 6(i) were determined by pro rata or per capita allocation. (j) The obligations of the Company and the Trust under subsections 6(h) and (i) shall be in addition to any liability which the Company and the Trust may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under subsections 6(h) and (i) shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and each officer and trustee of the Trust (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company or a trustee of -15- the Trust) and to each person, if any, who controls the Company or the Trust within the meaning of the Act. (k) The respective indemnities, agreements, covenants, warranties and representations and other statements of the Company and the Trust as set forth in this agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling person of any Underwriter, and shall survive the delivery of and payment for the Securities hereunder. (l) The Company is not, and after giving effect to the offering and sale of the Securities will not be, an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the Investment Company Act). 7. Indemnity by the Underwriters. (a) Each Underwriter agrees to indemnify, hold harmless and reimburse (i) the Company, its directors and such of its officers as shall have signed the Registration Statement, (ii) each other Underwriter, (iii) each person, if any, who controls the Company or any such other Underwriter within the meaning of Section 15 of the Act, and (iv) the Trust and such of its trustees and officers as shall have signed the Registration Statement, to the same extent and upon the same terms as the indemnity agreement of the Company and the Trust set forth in Sections 6(i) and (j) hereof (including, without limitation, terms relating to notice, participation in the defense of any claims, selection of counsel, payment of expenses and settlement) but only with respect to untrue statements or alleged untrue statements or omissions or alleged omissions made in the Registration Statement, or in the Prospectus or any preliminary prospectus, or in the Prospectus as so amended or supplemented, in reliance upon and in conformity with information furnished in writing to the Company or the Trust by or through the Representative on behalf of, such Underwriter expressly for use therein. (b) The indemnity agreements on the part of each Underwriter contained in Section 7(a) hereof, and the warranties and representations of such Underwriter contained in this agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the Company, the Trust or any officer or director or controlling person, and shall survive the delivery of and payment for the Securities hereunder. 8. Default by an Underwriter. (a) If one or more of the Underwriters under this agreement shall default at the Closing Date in its obligation to purchase the Securities which -16- it or they are obligated to purchase under this agreement (the Defaulted Securities), the Representative may in its discretion arrange for any Underwriter or another party or other parties to purchase the Defaulted Securities on the terms contained herein. If within thirty-six hours after such default by any Underwriter the Representative does not arrange for the purchase of the Defaulted Securities, then the Company and the Trust shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to the Representative to purchase the Defaulted Securities on such terms. In the event that, within the respective prescribed periods, the Representative notifies the Company or the Trust that it has so arranged for the purchase of the Defaulted Securities, or the Company or the Trust notifies the Representative that it has so arranged for the purchase of the Defaulted Securities, the Representative and the Company and the Trust shall each have the right to postpone the Closing Date for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company and the Trust agree to file promptly any amendments to the Registration Statement or the Prospectus which in the opinion of the Representative may thereby be made necessary. The term "Underwriter" as used in this agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this agreement with respect to the Defaulted Securities. (b) If, after giving effect to any arrangements for the purchase of the Defaulted Securities by the Representative and the Company and the Trust as provided in subsection (a) above, the aggregate number of Defaulted Securities which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Securities to be purchased at the Closing Date, then the Company and the Trust shall have the right to require each non-defaulting Underwriter to purchase the number of Securities which such Underwriter agreed to purchase hereunder at the Closing Date and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Securities which such Underwriter agreed to purchase hereunder) of the Defaulted Securities for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Defaulted Securities by the Representative and the Company and the Trust as provided in subsection (a) above, the aggregate number of Defaulted Securities which remains unpurchased exceeds one-eleventh of the aggregate number of all the Securities to be purchased at the Closing Date, or if the Company and the Trust shall not exercise the right described in subsection (b) above to -17- require non-defaulting Underwriters to purchase Defaulted Securities, then this agreement shall thereupon terminate, without liability on the part of any non-defaulting Underwriter, the Company or the Trust, except for the expenses to be borne by the Company and the Trust and the Underwriters as provided in subsections 5(h)-(j) hereof and the indemnity and contribution agreements in subsections 6(i)-(k) hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 9. Termination of Agreement. This agreement may be terminated at any time prior to the Closing Date by the Representative, if prior to such time (i) trading in securities on the New York Stock Exchange shall have been generally suspended or minimum prices shall have been generally established on the New York Stock Exchange by the Commission or by the New York Stock Exchange, or (ii) a general banking moratorium shall have been declared by Federal or New York State authorities, or (iii) there shall have occurred an outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war if the effect of any such event specified in this clause (iii), in the reasonable judgement of the Representative, makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated by the Prospectus. If the Representative elects to terminate this agreement, as provided in this Section 9, the Representative will promptly notify the Company and each other Underwriter by telephone, confirmed by letter. If this agreement shall not be carried out by any Underwriter for any reason permitted hereunder, or if the sale of the Securities to the Underwriters as herein contemplated shall not be carried out because the Company or the Trust is not able to comply with the terms hereof, neither the Company nor the Trust shall be under any obligation under this agreement or be liable to any Underwriter or to any member of any selling group except as provided in Sections 5(h)- (i) and 6(i)-(k) hereof, nor shall the Underwriters be under any liability to the Company or the Trust, or be under any liability under this agreement to one another. 10. Notices. In all dealings hereunder, the Representative shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the Representative. All statements, requests, notices and agreements hereunder shall, unless otherwise expressly provided, be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company or the Trust, shall be -18- delivered or sent by mail, telex or facsimile transmission to the address of the Company or the Trust, as the case may be, set forth in the Registration Statement, Attention: Secretary. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 11. Parties in Interest. The validity and interpretation of this agreement shall be governed by the laws of the State of New York. This agreement has been made and is made solely for the benefit of the Underwriters, the Company (including, to the extent provided herein, the directors thereof and such of the officers thereof as shall have signed the Registration Statement), the Trust (including, to the extent provided herein, the trustees thereof and such of the officers thereof as shall have signed the Registration Statement), and, to the extent provided herein, the controlling persons, if any, referred to in Sections 6 and 7 hereof, and their respective successors, assigns, heirs, executors and administrators, and , except as expressly otherwise provided in Section 8 hereof, no other person shall acquire or have any right under or by virtue of this agreement. No purchaser of any of the Securities from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. All obligations of the Underwriters hereunder are several and not joint. [Remainder of page intentionally left blank] -19- 12. This agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. ATLANTIC CITY ELECTRIC COMPANY By: __________________________ ATLANTIC CAPITAL I By: Atlantic City Electric Company, as Depositor By: __________________________ The foregoing agreement is hereby confirmed and accepted as of the date first above written: GOLDMAN, SACHS & CO. DEAN WITTER REYNOLDS INC. A.G. EDWARDS & SONS, INC. LEHMAN BROTHERS INC. PRUDENTIAL SECURITIES INCORPORATED WHEAT, FIRST SECURITIES, INC. By: _______________________ (Goldman, Sachs & Co.) As Representative -20- SCHEDULE A Number of Securities Name of Underwriter to be Purchased - ------------------- -------------------- Goldman, Sachs & Co. ......................................................... Dean Witter Reynolds Inc...................................................... A.G. Edwards & Sons, Inc...................................................... Lehman Brothers Inc. ......................................................... Prudential Securities Incorporated............................................ Wheat, First Securities, Inc.................................................. TOTAL................................................................... EX-4.1 3 JUNIOR SUBORDINATED INDENTURE [STB DRAFT 9/17/96] EXHIBIT 4.1 ________________________________________________________________________________ ATLANTIC CITY ELECTRIC COMPANY to THE BANK OF NEW YORK Trustee JUNIOR SUBORDINATED INDENTURE Dated as of _________ ___, 1996 ___% Junior Subordinated Deferrable Interest Debentures ________________________________________________________________________________ TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...............1 SECTION 1.1. Definitions............................................1 SECTION 1.2. Compliance Certificates and Opinions...................9 SECTION 1.3. Forms of Documents Delivered to Trustee................9 SECTION 1.4. Acts of Holders...................................... 10 SECTION 1.5. Notices, Etc., to Trustee and Company................ 11 SECTION 1.6. Notice to Holders; Waiver............................ 11 SECTION 1.7. Conflict With Trust Indenture Act.................... 12 SECTION 1.8. Effect of Headings and Table of Contents............. 12 SECTION 1.9. Successors and Assigns............................... 12 SECTION 1.10. Separability Clause.................................. 12 SECTION 1.11. Benefits of Indenture................................ 12 SECTION 1.12. Governing Law........................................ 12 SECTION 1.13. Non-Business Days.................................... 12 ARTICLE II SECURITY FORMS............................. 13 SECTION 2.1. Forms Generally...................................... 13 SECTION 2.2. Form of Face of Security............................. 13 SECTION 2.3. Form of Reverse of Security.......................... 17 SECTION 2.4. Additional Provisions Required in Global Security.... 20 SECTION 2.5. Form of Trustee's Certificate of Authentication...... 20 ARTICLE III THE SECURITIES............................. 20 SECTION 3.1. Title and Terms...................................... 20 SECTION 3.2. Denominations........................................ 22 SECTION 3.3. Execution, Authentication, Delivery and Dating....... 22 SECTION 3.4. Temporary Securities................................. 23 SECTION 3.5. Registration, Transfer and Exchange.................. 23 SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities..... 25 SECTION 3.7. Payment of Interest; Interest Rights Preserved....... 26 SECTION 3.8. Persons Deemed Owners................................ 27 SECTION 3.9. Cancellation......................................... 27 SECTION 3.10. Computation of Interest.............................. 27 SECTION 3.11. Right of Set-Off..................................... 27 SECTION 3.12. Agreed Tax Treatment................................. 28 SECTION 3.13. Change or Extension of Stated Maturity; Adjustment of Stated Maturity Upon an Exchange................... 28 i Page ---- SECTION 3.14. CUSIP Numbers........................................ 28 ARTICLE IV SATISFACTION AND DISCHARGE....................... 29 SECTION 4.1. Satisfaction and Discharge of Indenture.............. 29 SECTION 4.2. Application of Trust Money........................... 29 ARTICLE V REMEDIES................................ 30 SECTION 5.1. Events of Default.................................... 30 SECTION 5.2. Acceleration of Maturity; Rescission and Annulment... 31 SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee............................................ 32 SECTION 5.4. Trustee May File Proofs of Claim..................... 33 SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities......................................... 34 SECTION 5.6. Application of Money Collected....................... 34 SECTION 5.7. Limitation on Suits.................................. 35 SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest............................... 35 SECTION 5.9. Restoration of Rights and Remedies................... 36 SECTION 5.10. Rights and Remedies Cumulative....................... 36 SECTION 5.11. Delay or Omission Not Waiver......................... 36 SECTION 5.12. Control by Holders................................... 36 SECTION 5.13. Waiver of Past Defaults.............................. 37 SECTION 5.14. Undertaking for Costs................................ 37 SECTION 5.15. Waiver of Usury, Stay or Extension Laws.............. 38 ARTICLE VI THE TRUSTEE .............................. 38 SECTION 6.1. Certain Duties and Responsibilities.................. 38 SECTION 6.2. Notice of Defaults................................... 39 SECTION 6.3. Certain Rights of Trustee............................ 40 SECTION 6.4. Not Responsible for Recitals or Issuance of Securities ........................................ 40 SECTION 6.5. May Hold Securities.................................. 41 SECTION 6.6. Money Held in Trust.................................. 41 SECTION 6.7. Compensation and Reimbursement....................... 41 SECTION 6.8. Disqualification; Conflicting Interests.............. 42 SECTION 6.9. Corporate Trustee Required; Eligibility.............. 42 SECTION 6.10. Resignation and Removal; Appointment of Successor.... 42 SECTION 6.11. Acceptance of Appointment by Successor............... 44 SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business........................................... 44 SECTION 6.13. Preferential Collection of Claims Against Company.... 44 ii Page ---- ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY........... 45 SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders............................................ 45 SECTION 7.2. Preservation of Information, Communications to Holders ........................................... 45 SECTION 7.3. Reports by Trustee................................... 45 SECTION 7.4. Reports by Company................................... 46 ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.......... 46 SECTION 8.1. Company May Consolidate, Etc., Only on Certain Terms. 46 SECTION 8.2. Successor Person Substituted......................... 47 ARTICLE IX SUPPLEMENTAL INDENTURES........................ 48 SECTION 9.1. Supplemental Indentures Without Consent of Holders... 48 SECTION 9.2. Supplemental Indentures with Consent of Holders...... 48 SECTION 9.3. Execution of Supplemental Indentures................. 50 SECTION 9.4. Effect of Supplemental Indentures.................... 50 SECTION 9.5. Conformity with Trust Indenture Act.................. 50 SECTION 9.6. Reference in Securities to Supplemental Indentures... 50 ARTICLE X COVENANTS............................... 51 SECTION 10.1. Payment of Principal, Premium and Interest........... 51 SECTION 10.2. Maintenance of Office or Agency...................... 51 SECTION 10.3. Money for Security Payments to be Held in Trust...... 51 SECTION 10.4. Statement as to Compliance........................... 53 SECTION 10.5. Additional Sums...................................... 53 SECTION 10.6. Additional Covenants................................. 53 ARTICLE XI REDEMPTION OF SECURITIES........................ 54 SECTION 11.1. Company's Rights of Redemption....................... 54 SECTION 11.2. Applicability of This Article........................ 55 SECTION 11.3. Election to Redeem; Notice to Trustee................ 55 SECTION 11.4. Selection of Securities to be Redeemed............... 55 SECTION 11.5. Notice of Redemption................................. 56 SECTION 11.6. Deposit of Redemption Price.......................... 56 SECTION 11.7. Payment of Securities Called for Redemption.......... 57 ARTICLE XII SUBORDINATION OF SECURITIES...................... 57 SECTION 12.1. Securities Subordinate to Senior Debt................ 57 SECTION 12.2. Payment Over of Proceeds Upon Dissolution, Etc....... 57 iii Page ---- SECTION 12.3. Prior Payment to Senior Debt Upon Acceleration of Securities. ....................................... 58 SECTION 12.4. No Payment When Senior Debt in Default............... 59 SECTION 12.5. Payment Permitted If No Default...................... 59 SECTION 12.6. Subrogation to Rights of Holders of Senior Debt...... 60 SECTION 12.7. Provisions Solely to Define Relative Rights.......... 60 SECTION 12.8. Trustee to Effectuate Subordination.................. 61 SECTION 12.9. No Waiver of Subordination Provisions................ 61 SECTION 12.10. Notice to Trustee.................................... 61 SECTION 12.11. Reliance on Judicial Order or Certificate of Liquidating Agent.................................. 61 SECTION 12.12. Trustee Not Fiduciary for Holders of Senior Debt..... 62 SECTION 12.13. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights................... 62 SECTION 12.14. Article Applicable to Paying Agents.................. 62 Annex A Form of Trust Agreement Annex B Form of Amended and Restated Trust Agreement Annex C Form of Guarantee Agreement iv JUNIOR SUBORDINATED INDENTURE, dated as of _________ __, 1996 between ATLANTIC CITY ELECTRIC COMPANY, a New Jersey corporation (hereinafter called the "Company") having its principal office at 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234, and THE BANK OF NEW YORK, a New York banking corporation, as Trustee (hereinafter called the "Trustee") having its principal corporate trust office at 101 Barclay Street, New York, New York 10286. RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its ___% Junior Subordinated Deferrable Interest Debentures (hereinafter called the "Securities") of substantially the tenor hereinafter provided, to evidence loans made to the Company of the proceeds from the issuance by Atlantic Capital I, a Delaware statutory business trust ("Atlantic Capital I") of its ___% Cumulative Quarterly Income Preferred Securities (the "Preferred Securities") and common securities of Atlantic Capital I (the "Common Securities" and, collectively with the Preferred Securities, the "Trust Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered. All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and 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 any series thereof, as follows: ARTICLE I 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 the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation; and 2 (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. Certain terms, used principally in Article Six, are defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 1.4. "Additional Interest" means the interest, if any, that shall accrue on any interest on the Securities the payment of which has not been made (due to deferral of the payment of interest during an Extension Period or due to default in the payment thereof) on the applicable Interest Payment Date and which shall accrue at the Interest Rate and which shall be payable to the extent permitted by law (whether or not so stated). "Additional Sums" has the meaning specified in Section 10.5. "Additional Taxes" means the sum of any additional taxes, duties and other governmental charges to which Atlantic Capital I has become subject from time to time as a result of a Tax Event. "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; provided, however, that an Affiliate of the Company shall not be deemed to include Atlantic Capital I. 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. "Atlantic Capital I" has the meaning specified in the first recital of this Indenture. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities. "Board of Directors" means either the board of directors of the Company or any committee of that board duly authorized to act hereunder. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, or such committee of the Board of Directors or officers of the Company to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee. 3 "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee, or, with respect to Securities which at the time of determination are registered in the Securities Register in the name of Atlantic Capital I, the principal office of the Property Trustee, is closed for business. "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 on such date. "Common Securities" has the meaning specified in the first recital of this Indenture. "Common Stock" means the common stock of the Company. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Guarantee" means the guarantee by the Company of distributions on the Preferred Securities to the extent provided in the Guarantee Agreement, substantially in the form attached hereto as Annex C, as amended from time to time. "Company Request" and "Company Order" mean, respectively, the written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Controller, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which at the date hereof is 101 Barclay Street, New York, New York 10286. "Corporation" means a corporation, association, company, joint-stock company or business trust. "Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued 4 for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; and (vi) every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise. "Defaulted Interest" has the meaning specified in Section 3.7. "Depositary" means, with respect to the Securities issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Company pursuant to Section 3.1 (or any successor thereto). "Dollar" means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts. "Event of Default" has the meaning specified in Article Five. "Extension Period" has the meaning specified in Section 3.1. "Foreign Currency" means any currency issued by the government of one or more countries other than the United States of America or by any recognized confederation or association of such governments. "Global Security" means a Security in the form prescribed in Section 2.4 issued to the Depositary or its nominee and registered in the name of such Depositary or its nominee. "Government Obligations" means securities which are (i) direct obligations of the United States of America or (ii) 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 by the United States of America and which, in either case, are full faith and credit obligations of the United States of America and 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 Government Obligation or a specific payment of interest on or principal of any such 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 Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. "Holder" means a Person in whose name a Security is registered in the Securities Register. 5 "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. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate" means the rate of interest specified or determined as specified in the Security as being the rate of interest payable on the Security. "Investment Company Event" means the receipt by Atlantic Capital I of an Opinion of Counsel, rendered by a law firm having a recognized national tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a 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"), Atlantic Capital I is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities. "Junior Subordinated Payment" has the meaning specified in Section 12.2. "Lien" means any mortgage, pledge, lien, security interest or other encumbrance. "Maturity", when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "1940 Act" means the Investment Company Act of 1940, as amended. "Notice of Default" has the meaning specified in Section 5.1(3). "Officers' Certificate" means a certificate signed by the Chairman and Chief Executive Officer, President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, 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, including General Counsel of the Company. "Outstanding" means, when used in reference to Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (A) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; 6 (B) Securities for whose payment money or Government Obligations in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; and (C) Securities in substitution for or in lieu of which other Securities have been authenticated and delivered or which have been paid pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or 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 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 such other obligor. Upon the written request of the Trustee, the Company shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of the Company, or any other obligor on the Securities or any Affiliate of the Company or such obligor, and, subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. "Paying Agent" means the Trustee or any Person authorized by the Company to pay the principal of (any 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" means the place or places where the principal of (and premium, if any) and interest on the Securities are payable pursuant to Section 3.1 or 3.11. "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 lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security. 7 "Preferred Securities" has the meaning specified in the first recital of this Indenture. "Proceeding" has the meaning specified in Section 12.2. "Property Trustee" means The Bank of New York, solely in its capacity as Property Trustee of Atlantic Capital I under the Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as therein provided. "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. "Regular Record Date" for the interest payable on any Interest Payment Date means the Business Day next preceding such Interest Payment Date; provided, however, that in the event that the Securities are distributed to holders of Preferred Securities pursuant to a liquidation of the Trust in accordance with Section 9.04 of the Trust Agreement and that at any time thereafter Securities no longer remain in book-entry-only form, the Regular Record Date shall be the date (whether or not a Business Day) which is the fifteenth day of the month in which occurs the relevant Interest Payment Date. "Responsible Officer" when used with respect to the Trustee means any officer of the Trustee assigned by the Trustee from time to time to administer its corporate trust matters. "Securities" has the meaning specified in the Recitals to this instrument. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5. "Senior Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the Securities or to other Debt which is pari passu with, or subordinated to, the Securities, provided, however, that Senior Debt shall not be deemed to include (a) any Debt of the Company which when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without recourse to the Company, (b) any Debt of the Company to any of its Subsidiaries, (c) Debt to any employee of the Company, (d) any liability for taxes, (e) Debt or other monetary obligations to trade creditors created or assumed by the Company or any of its Subsidiaries in the 8 ordinary course of business in connection with the obtaining of goods, materials or services and (f) the Securities. "Special Event" means a Tax Event or an Investment Company Event. "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 interest thereon, means the date specified pursuant to the terms of the Security as the date on which the principal of such Security or such installment of 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. For the purposes of this definition, "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. "Tax Event" means the receipt by Atlantic Capital I of an Opinion of Counsel, rendered by a law firm having a recognized national tax and securities practice, to the effect that, as a result of any amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is adopted or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities, there is more than an insubstantial risk that (i) Atlantic Capital I is, or will be within 90 days of the date of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the Securities, (ii) interest payable by the Company on the Securities is not, or within 90 days of the date of such Opinion of Counsel, will not be, deductible, in whole or in part, for United States federal income tax purposes or (iii) Atlantic Capital I is, or will be within 90 days of the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Trust Agreement" means the Trust Agreement in the form attached hereto as Annex A, as amended and restated by the Amended and Restated Trust Agreement substantially in the form attached hereto as Annex B as amended from time to time. "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 such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbb), as amended and as in effect on the date as of this Indenture, except as provided in Section 9.5. 9 "Trust Securities" has the meaning specified in the first recital of this Indenture. "Vice President" when used with respect to the Company, means any duly appointed or elected vice president, whether or not designated by a number or a word or words added before or after the title "vice president." 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 (including covenants, compliance with which constitutes a condition 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 (including covenants compliance with which constitute a condition 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 (other than the certificates provided pursuant to Section 10.4) 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. Forms 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 10 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 an 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 such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to 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 to 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 is or 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 the certificate of any 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 person acting in other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) The fact and date of the execution by any person 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 and in accordance with such reasonable rules as the Trustee may determine. (d) The ownership of Securities shall be proved by the Securities Register. 11 (e) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done 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. (f) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to take any action under this Indenture by vote or consent. Except as otherwise provided herein, such record date shall be the later of 30 days prior to the first solicitation of such consent or vote or the date of the most recent list of Securityholders furnished to the Trustee pursuant to Section 7.1 prior to such solicitation. If a record date is fixed, those persons who were Securityholders at such record date (or their duly designated proxies), and only those persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date, provided, however, that unless such vote or consent is obtained from the Holders (or their duly designated proxies) of the requisite principal amount of Outstanding Securities prior to the date which is the 120th day after such record date, any such vote or consent previously given shall automatically and without further action by any Holder be canceled and of no further effect. SECTION 1.5. Notices, Etc., to Trustee and 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 (except as otherwise provided in Section 5.1 hereof) hereunder if in writing and mailed, first class, postage prepaid, to the Company addressed to it at the address of its principal 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 the address of such Holder as it appears in the Securities 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 12 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. SECTION 1.7. Conflict With Trust Indenture Act. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control. 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, any Paying Agent and their successors and assigns, the holders of Senior Debt and the Holders of the Securities, 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. Non-Business Days. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal need not be 13 made on such date, but may be made on the next succeeding Business Day (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 Interest Payment Date or Redemption Date or at the Stated Maturity of principal (and no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity of principal, as the case may be, until such next succeeding Business Day). ARTICLE II SECURITY FORMS SECTION 2.1. Forms Generally. The Securities and the Trustee's certificates of authentication thereon shall be in substantially the forms set forth in this Article, 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 applicable tax laws or 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 the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange, the Nasdaq National Market or other applicable interdealer quotation system or self-regulatory organization on which the Securities may be listed or traded, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange, the Nasdaq National Market or other applicable interdealer quotation system or self- regulatory organization on which the Securities may be listed or traded, or otherwise may be typewritten all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 2.2. Form of Face of Security [IF THE SECURITY IS TO BE A GLOBAL SECURITY - This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Security is exchangeable for Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Indenture and no transfer of this Security (other than a transfer of this Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to Atlantic City Electric Company or its agent for registration of transfer, exchange or payment, and any Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized 14 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 inasmuch as the registered owner hereof, Cede & Co., has an interest herein.] ATLANTIC CITY ELECTRIC COMPANY __% Junior Subordinated Deferrable Interest Debentures No.______ $_____________ CUSIP_________ ATLANTIC CITY ELECTRIC COMPANY, a corporation organized and existing under the laws of New Jersey (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 ______ ___, 2026; provided, that the Company may (i) change the maturity date upon the occurrence of an exchange of the Securities for the Trust Securities subject to certain conditions set forth in Section 3.13 of the Indenture, which changed maturity date shall in no case be earlier than ______ ___, 2001 or later than ______ ___, 2045 and/or (ii) extend the maturity date subject to certain conditions specified in Section 3.13 of the Indenture, which extended maturity date shall in no case be later than ______ ___, 2045. The Company further promises to pay interest on said principal sum from ______ ___, 1996 or from the most recent interest payment date (each such date, an "Interest Payment Date") on which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1996, at the rate of ___% per annum, until the principal hereof shall have become due and payable, plus Additional Interest, if any, until the principal hereof is paid or duly provided for 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 rate of ___% per annum, compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Security is not a Business Day, then payment of 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 date the payment was originally payable. A "Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee or the principal office of the Property Trustee under the Trust Agreement, is closed for business. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date (other than a Redemption Date or the maturity date) will, as provided in the Indenture, be paid to the Person in whose 15 name this Security (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day next preceding such Interest Payment Date (if the Securities are distributed to holders of Preferred Securities pursuant to a liquidation of the Trust in accordance with Section 9.4 of the Trust Agreement and at any time thereafter any such Securities no longer remain in book-entry-only form, the Regular Record Date shall be the date (whether or not a business day) which is the fifteenth day of the month in which occurs the relevant Interest Payment Date). Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. So long as no Event of Default under the Indenture has occurred and is continuing, the Company shall have the right at any time during the term of this Security, from time to time, to defer the payment of interest on such Security for up to 20 consecutive quarters with respect to each deferral period (each an "Extension Period"), during which Extension Periods the Company shall have the right to make full or partial payments of interest on any Interest Payment Date, and at the end of which the Company shall pay all interest then accrued and unpaid (together with Additional Interest thereon to the extent permitted by applicable law); provided that during any such Extension Period, the Company will not, and will not permit any Subsidiary of the Company to (i) declare or pay any dividends or distributions or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's outstanding capital stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt security that ranks pari passu with or junior in interest to this Security or make any guarantee payments with respect to the foregoing (other than (a) dividends or distributions in Common Stock of the Company, and (b) payments under the Company Guarantee). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that no Extension Period shall exceed 20 consecutive quarters or extend beyond the Maturity of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period except at the end thereof. The Company shall give the Holder of this Security and the Trustee notice of its election to begin or continue an Extension Period at least one Business Day prior to the earlier of (i) the date the Distributions on the Preferred Securities are payable or (ii) the date the Administrative Trustees are required to give notice to any securities exchange, the Nasdaq National Market or other applicable interdealer quotation system or self-regulatory organization or to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date. Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Company maintained for that purpose in the City of New York, in such coin or currency of the United States of 16 America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Securities Register at the relevant Record Date. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payments to the prior payment in full of all Senior Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 17 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. ATLANTIC CITY ELECTRIC COMPANY By:___________________________ Name: Title: Attest: __________________________ Name: Title: Dated: This is one of the Securities referred to in the within mentioned Indenture. THE BANK OF NEW YORK as Trustee By:_____________________ Authorized Signatory SECTION 2.3. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company designated as its ___% Junior Subordinated Deferrable Interest Debentures (herein called the "Securities"), limited in aggregate principal amount to $72,164,950, issued and to be issued under a Junior Subordinated Indenture, dated as of ______ ___, 1996 (herein called the "Indenture"), between the Company and The Bank of New York, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture or in the Amended and Restated Trust Agreement, dated as of ______ ___, 1996 (the "Trust Agreement"), of Atlantic Capital I among Atlantic City Electric Company, as Depositor, and the Trustees named therein, shall have the meanings assigned to them in the Indenture or the Trust Agreement, as the case may be. 18 On or after ______ ___, 2001, the Company may at any time, at its option, subject to the terms and conditions of Article XI of the Indenture, redeem this Security in whole at any time or in part from time to time, without premium or penalty, at a redemption price equal to 100% of the principal amount thereof plus the accrued and unpaid interest, including Additional Interest, if any, to the date fixed for redemption. If a Special Event shall occur and be continuing, the Company may, at its option, redeem this Security within 90 days of the occurrence of such Special Event, in whole but not in part, subject to the provisions of Section 11.7 and the other provisions of Article XI of the Indenture. The redemption price for this Security if so redeemed shall be equal to 100% of the principal amount thereof plus accrued and unpaid interest, including Additional Interest, if any, to the date fixed for redemption. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default, as defined in the Indenture, shall occur and be continuing, the principal of the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction, discharge and defeasance at any time of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series to be affected by such supplemental indenture. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Securities, 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 Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, if an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, if upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities fail to declare the principal of all the Securities to be immediately due and payable, 19 the holders of at least 25% in aggregate liquidation amount of Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration such principal amount (or specified amount) of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article Twelve of the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the City of New York maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of such series of a different authorized denomination, 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 therewith. Prior to due presentment of this 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 this Security is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Company and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for United States federal, state and local tax purposes it is intended that this Security constitute indebtedness. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 20 SECTION 2.4. Additional Provisions Required in Global Security. Any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3 bear a legend in substantially the following form: "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Security is exchangeable for Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Indenture and may not be transferred except 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." SECTION 2.5. Form of Trustee's Certificate of Authentication. This is one of the Securities referred to in the within-mentioned Indenture. ___________________________ as Trustee By:________________________ Authorized Signatory ARTICLE III THE SECURITIES SECTION 3.1. Title and Terms. The principal amount of the Securities Outstanding (together with any accrued and unpaid interest (including any Additional Interest, to the extent permitted by law) thereon) shall be payable in a single installment on ______ ___, 2026; provided, that the Company may (i) change the maturity date upon the occurrence of an exchange of the Securities for the Preferred Securities subject to certain conditions set forth in Section 3.13, which changed maturity date shall in no case be earlier than ______ ___, 2001 or later than , 2045 and (ii) extend the maturity date subject to certain conditions specified in Section 3.13, which extended maturity date shall in no case be later than ______ ___, 2045. The rate of interest on each Security shall be ___% per annum, accruing from ______ ___, 1996 and, subject to the next paragraph, interest shall be payable, quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year (each such date, an "Interest Payment Date"), commencing December 31, 1996. The rate of any Additional Interest that shall accrue on each Security shall be at the same rate per annum. The amount of interest payable for any period shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on a Security is not a Business Day, then a payment of the interest payable on such date will be made on the next 21 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 date such payment was originally payable. The interest installment so payable (other than interest payable on a Redemption Date or the maturity date), and punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment, which, if such Security is a Global Security issued to the Depositary, shall be the close of business on the Business Day next preceding such Interest Payment Date. The interest so payable on any Security which is not punctually paid or duly provided for on any Interest Payment Date shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name such Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, the Nasdaq National Market or other applicable interdealer quotation system or self-regulatory organization on which the Securities may be listed, and upon such notice as may be required by such exchange or other self-regulatory organization, all as more fully provided in Section 3.7. So long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of the Securities, from time to time, to defer the payment of interest on the Securities for up to 20 consecutive quarters with respect to each deferred period (each, an "Extension Period"), during which Extension Periods the Company shall have the right to make full or partial payments of interest on any Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Securities (together with Additional Interest thereon at the annual rate of %, compounded quarterly, to the extent permitted by applicable law), provided, that during any such Extension Period, the Company will not, and will not permit any Subsidiary of the Company to (i) declare or pay any dividends or distributions or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's outstanding capital stock or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt security that ranks pari passu with or junior in interest to the Securities or make any guarantee payments with respect to the foregoing (other than (a) dividends or distributions in Common Stock of the Company, and (b) payments under the Company Guarantee. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that no Extension Period shall exceed 20 consecutive quarters or extend beyond the Maturity of the Securities. Upon termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Holders of the Securities and the Property Trustee, the Administrative Trustees and the Trustee notice of its election to begin or continue any such Extension Period at least one Business Day prior 22 to the earlier of (i) the date the Distributions on the Preferred Securities are payable or (ii) the date the Administrative Trustees are required to give notice to any securities exchange, the Nasdaq National Market or other applicable interdealer quotation system or self-regulatory organization or to holders of such Preferred Securities of the record date or the date such Distributions are payable, but in any event not less than one Business Day prior to such record date. The Trustee shall promptly give notice of the Company's election to begin or continue any such Extension Period to the holders of the outstanding Preferred Securities. The Place of Payment where the Securities may be presented or surrendered for payment, where the Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and the Indenture may be served shall be the Corporate Trust Office of the Trustee. At any time on or after ______ ___, 2001, the Company may, at its option, subject to the terms and conditions of Article Eleven of the Indenture, redeem the Securities in whole at any time or in part from time to time, without premium or penalty, at a redemption price equal to 100% of the principal amount thereof plus the accrued and unpaid interest, including Additional Interest, if any, to the date fixed for redemption. If a Special Event shall occur and be continuing, the Company may, at its option, redeem the Securities within 90 days of the occurrence of such Special Event, in whole but not in part, subject to the provisions of Article Eleven of the Indenture. The redemption price for any Security so redeemed shall be equal to 100% of the principal amount thereof plus accrued and unpaid interest, including Additional Interest, if any, to the date fixed for redemption. At any time, the Company may terminate Atlantic Capital I and cause the Securities to be distributed to Holders of the Trust Securities in liquidation of Atlantic Capital I. Principal and interest on the Securities shall be payable in Dollars. The Trustee shall initially serve as Securities Registrar and Paying Agent. The Company has no obligation to redeem or purchase any Securities pursuant to any sinking fund or analogous requirement or upon the happening of a specified event or at the option of a Holder thereof. SECTION 3.2. Denominations. The Securities shall be in registered form without coupons and shall be issuable in denominations of $25 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 President or one of its Vice Presidents under its corporate seal reproduced or impressed thereon and 23 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 executed by the Company to the Trustee for authentication; and the Trustee shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. 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 the manual signature of one of its authorized officers or signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. SECTION 3.4. Temporary Securities. Pending the preparation of definitive Securities, 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 denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and 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 are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company in a Place of Payment without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 3.5. Registration, Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a 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. Such 24 register is herein sometimes referred to as the "Securities Register." The Trustee is hereby appointed "Securities Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company in a Place of Payment designated for that purpose 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 any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of a like aggregate principal amount, 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 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 transfer or exchange. Every Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Securities Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any 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 transfer or exchange of Securities. Notwithstanding any of the foregoing, any Global Security shall be exchangeable pursuant to this Section 3.5 for Securities registered in the names of Persons other than the Depositary for such Security or its nominee only if (i) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, (ii) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Securities of such series. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for definitive certificates registered in such names as such Depositary shall direct. Notwithstanding any other provision in this Indenture, a Global Security may not be transferred except as a whole by the Depositary with respect to such Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary. 25 Neither the Company nor the Trustee shall be required (a) to issue, transfer or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption of Securities pursuant to Article Eleven and ending at the close of business on the day of mailing of said notice of redemption or (b) to transfer or exchange any Security so selected for redemption in whole or in part, except, in the case of any Security to be redeemed in part, any portion thereof not to be redeemed. SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Company or the Trustee to save each of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount, Security, and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and to 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 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 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 governmental 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 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 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. 26 SECTION 3.7. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, 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, except that interest payable on the Stated Maturity or the Redemption Date of a Security shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security which is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security. Any interest on any Security which is payable, but is not timely paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest"), shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities in respect of which interest is in default (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 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 Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder at the address of such Holder as it appears in the Securities Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange, the Nasdaq National Market or other applicable interdealer quotation system or self-regulatory organization on which the Securities in respect of which interest is in 27 default may be listed or traded and, upon such notice as may be required by such exchange or other self-regulatory organization (or by the Trustee if the Securities are not listed or traded), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon 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. SECTION 3.8. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of 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. SECTION 3.9. Cancellation. All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose 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 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 shall be disposed of as directed by a Company Order; provided, however, that the Trustee shall not be required to destroy the certificate or certificates representing any of such canceled Securities. SECTION 3.10. Computation of Interest. Interest on the Securities for any period shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 3.11. Right of Set-Off. With respect to Securities which at the time of determination are registered in the Securities Register in the name of Atlantic Capital I (or the Property Trustee), notwithstanding anything to the contrary in this Indenture, the Company shall have the right to set-off any payment it is otherwise required to make hereunder in respect of such Securities 28 to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Company Guarantee. SECTION 3.12. Agreed Tax Treatment. Each Security issued hereunder shall provide that the Company and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security agree that for United States federal, state and local tax purposes it is intended that such Security constitute indebtedness. SECTION 3.13. Change or Extension of Stated Maturity; Adjustment of Stated Maturity Upon an Exchange. The Company shall have the right to (a) change the Stated Maturity of principal of the Securities upon the liquidation of Atlantic Capital I and the exchange of such Securities for the Preferred Securities pursuant to Section 9.2 of the Trust Agreement and (b) extend the Stated Maturity of principal of the Securities provided that at the time of any election of such right to extend the Stated Maturity is made and at the time of such extension (i) the Company is not in bankruptcy, otherwise insolvent or in liquidation, (ii) the Company is not in default in the payment of any interest or principal on the Securities of such series and no deferred interest payments thereon have accrued, (iii) Atlantic Capital I is not in arrears on payments of Distributions on its Preferred Securities and no deferred Distributions thereon are accumulated, (iv) the Securities are rated not less than BBB by Standard & Poor's or Baa3 by Moody's Investors Service, Inc. or the equivalent by any other nationally recognized statistical rating organization and (v) the extended Stated Maturity is no later than the 49th anniversary of the date of the initial issuance of the Preferred Securities; and provided, further, that, if the Company exercises its right to liquidate Atlantic Capital I and exchange the Securities for the Preferred Securities as specified in clause (a) above, any changed Stated Maturity of the Securities shall be (A) no earlier than the date five years after the initial issuance of the Preferred Securities and (B) no later than the date 30 years (plus an extended term of up to an additional 19 years if the above-referenced conditions are satisfied) after the date of the initial issuance of the Preferred Securities. If the Company elects to change or extend the Stated Maturity of the Securities in accordance herewith, the Company shall give notice to Holders of the Securities, the Property Trustee, Atlantic Capital I and the Trustee of such change or extension at least 90 days before the Stated Maturity. SECTION 3.14. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. 29 ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.1. Satisfaction and Discharge of Indenture. If at any time: (a) the Company shall have delivered to the Trustee for cancellation all Securities of a series theretofore authenticated (other than any Securities which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 3.6 and Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereupon repaid to the Company or discharged from such trust, as provided in Section 10.3); or (b) the Company shall deposit or cause to be deposited with the Trustee as trust funds (i) the entire amount in monies or Government Obligations or (ii) a combination of monies and Government Obligations, 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 at maturity or upon redemption under arrangements satisfactory to the Trustee for the giving of notice of redemption, all Securities not theretofore delivered to the Trustee for cancellation, including principal (and premium, if any) and interest due or to become due to their date of maturity or date fixed for redemption, as the case may be, and if such deposit shall be made prior to the stated maturity date of the Securities, the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each to the effect that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, an Opinion of Counsel to the effect that the holders of Securities will not recognize gain, loss or income for federal income tax purposes as a result of the satisfaction and discharge of this Indenture and such holders will be subject to federal income taxation on the same amounts and in the same manner and at the same times as if such satisfaction and discharge had not occurred, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall thereupon cease to be of further effect except for the provisions of Sections 3.5, 3.6, 6.10 and 10.2 which shall survive until the date of maturity or redemption date, as the case may be, and Sections 6.7 and 10.3 which shall survive to such date and thereafter, and the Trustee, on demand of the Company and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture with respect to such series. SECTION 4.2. Application of Trust Money. Subject to the provisions of the last paragraph of Section 10.3, all money or Government Obligations deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, 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 its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for the payment of which such money or obligations have been deposited with or received by the Trustee; provided, however, such moneys or Government Obligations need not be segregated from other funds except to the extent required by law. 30 ARTICLE V REMEDIES SECTION 5.1. Events of Default. "Event of Default" 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, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days (subject to the deferral of any due date in the case of an Extension Period); or (2) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity, provided, however, that an extension of the maturity of the Securities in accordance with the terms of the Indenture shall not constitute an Event of Default; or (3) default in the performance, or breach, in any material respect, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in the performance of which or the breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied; or (4) the entry of a decree or order by a court having jurisdiction in the premises 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 bankruptcy, insolvency, reorganization or other similar law, or appointing a 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 of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (5) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator 31 (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by the Company in furtherance of any such action. SECTION 5.2. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal amount of all the Securities to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, in the case of Securities registered in the Securities Register in the name of Atlantic Capital I (or the Property Trustee), if, upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities fail to declare the principal of all the Securities to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of the Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration such principal amount (or specified amount) of and the accrued interest (including any Additional Interest) on all the Securities shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article Thirteen. At any time after such a declaration of acceleration 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 majority in principal amount of the Outstanding Securities, 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 installments of interest (including any Additional Interest, to the extent permitted by law) on all Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (C) 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, other than the non-payment of the principal of Securities which has become due solely by such acceleration, have been cured or waived as provided in Section 5.13. 32 The holders of a majority in aggregate outstanding principal amount of the Securities may waive any past default, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Trustee) or a default in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the holder of each outstanding Security and, in the case of Securities registered in the Securities Register in the name of Atlantic Capital I (or the Property Trustee), should the holder of such Securities fail to annul such declaration and waive such default, the holders of a majority in aggregate liquidation preference of the Preferred Securities shall have such right. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, with respect to Securities all or part of which are represented by a Global Security, a record date shall be established for determining Holders of Outstanding Securities entitled to join in such notice, which record date shall be at the close of business on the day the Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day which is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.2. SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1) default is made in the payment of any installment of interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (and premium, if any, on) any Security at the Maturity thereof. The Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for 33 principal, (and premium, if any) and interest (including any Additional Interest, to the extent permitted by law); and, in 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, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the 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 the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders 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, (a) 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 (and premium, if any) or interest (including any Additional Interest)) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest (including any Additional Interest) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Trustee and any predecessor to the Trustee under Section 6.7 and of the Holders allowed in any such judicial proceedings; and (ii) and in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and 34 (b) 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 for distribution in accordance with Section 5.6, 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 to it and any predecessor 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; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 5.5. Trustee May Enforce Claim 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 and any predecessor Trustee and their 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 or property collected or to be applied 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 or property on account of principal (or premium, if any) or interest (including any Additional 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 and any predecessor Trustee under Section 6.7; SECOND: To the payment of the amounts then due and unpaid upon Securities for principal (and premium, if any) and interest (including any Additional Interest), in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest (including any Additional Interest), respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. 35 SECTION 5.7. Limitation on Suits. No Holder of any Securities shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities 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 60 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 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all Holders. SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest. 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 (including any Additional Interest, to the extent permitted by law) on such Security on the respective Stated Maturities (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. In the case of Securities which at the time of determination are registered in the Securities Register in the name of Atlantic Capital I (or the Property Trustee), any holder of the Preferred Securities shall have the right set forth in the preceding sentence to institute a proceeding directly for enforcement of payment of the principal of (and premium, if any) and (subject to Section 3.7) interest (including any Additional Interest) on any Security to such holder of the principal amount of or interest on the Securities having a principal amount equal 36 to the aggregate liquidation preference of the Preferred Securities held of record by 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 discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the 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 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. Except as otherwise provided in the last paragraph of Section 3.6, no delay or omission of the Trustee or of any Holder of any Security 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 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, provided that: (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and 37 (3) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. Upon receipt by the Trustee of any written notice directing the time, method or place of conducting any such proceeding or exercising any such trust or power, with respect to Securities all or part of which are represented by a Global Security, a record date shall be established for determining Holders of Outstanding Securities entitled to join in such notice, which record date shall be at the close of business on the day the Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless the Holders of a majority in principal amount of the Outstanding Securities shall have joined in such notice prior to the day which is 90 days after such record date, such notice shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new notice identical to a notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.12. SECTION 5.13. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default: (1) in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security, 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 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 38 suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, 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 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, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security on or after the respective Stated Maturities expressed in such Securities (or in the case of redemption on or after the Redemption Date). SECTION 5.15. Waiver of Usury, 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 usury, 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 VI THE TRUSTEE SECTION 6.1. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same 39 degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (4) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) 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. Within 90 days after a Responsible Officer of the Trustee obtains actual knowledge of the occurrence of any default hereunder, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Securities Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security, the 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 Trustee in good faith determines that the withholding of such notice is in the interests of the Holders; and provided, further, that, in the case of any default of the character specified in Section 5.1(3), no such notice to Holders of Securities 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. 40 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, Security 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 and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) 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; (d) 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; (e) 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; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, indenture, Security or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (g) 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. 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 assumes no responsibility for their correctness. The Trustee makes no representations 41 as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of the Securities or the proceeds thereof. SECTION 6.5. May Hold Securities. The Trustee, any Paying Agent, Securities Registrar or any other agent of the Company, 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, Paying Agent, Securities Registrar or such other agent. 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 any 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 in such amounts as the Company and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision 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 its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties 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. This indemnification shall survive the termination of this Agreement. To secure the Company's payment obligations in this Section, the Company and the Holders agree that the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee. Such lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an 42 Event of Default specified in Section 5.1(4) or (5) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Reform Act of 1978 or a successor statute. SECTION 6.8. Disqualification; Conflicting Interests. The Trustee shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of Section 310(b) of the Trust Indenture Act. SECTION 6.9. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be (a) a corporation organized and doing business under the laws of the United States of America or of any State, Territory or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal, state, territorial or District of Columbia authority, or (b) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $50,000,000, 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 the aforesaid supervising or examining authority, then, for the purpose 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 anytime 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. Neither the Company nor any Person directly or indirectly controlling, controlled by or under common control with the Company shall serve as Trustee for the Securities. 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 under Section 6.11. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been 43 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. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or by 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 by 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, acting under authority of a Board Resolution, may remove the Trustee, 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 and the appointment of a successor Trustee. (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, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses 44 appear in the Securities Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 6.11. Acceptance of Appointment by Successor. (a) Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to 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 subject nevertheless to its lien provided for in Section 6.7. (b) 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 rights, powers and trusts referred to in paragraph (a) of this Section. (c) 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 of 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, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. SECTION 6.13. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company(or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). 45 ARTICLE VII 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: (a) semi-annually, not more than 15 days after January 15 and July 15, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such January 1 and July 1, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, excluding from any such list names and addresses received by the Trustee in its capacity as Securities 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 Securities 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 privileges of the Trustee, shall be as provided in the Trust Indenture Act. (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 the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act, or any successor section of such Act. SECTION 7.3. Reports by Trustee. (a) 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, at the times and in the manner provided pursuant thereto. 46 (b) Reports so required to be transmitted at stated intervals of not more than 12 months shall be dated as of July 1 in each calendar year and shall be transmitted no later than 60 days after each such July 1, commencing with the first July 1 after the first issuance of Securities under this Indenture. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange or self-regulatory organization upon which the Securities are listed or traded and also with the Commission. The Company will notify the Trustee whenever the Securities are listed or traded on any stock exchange or self-regulatory organization. SECTION 7.4. Reports by Company. The Company shall file with the Trustee and with 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 in the Trust Indenture Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is required to be filed with the Commission. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company shall continue to file with the Commission and provide the Trustee with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Securities Exchange Act of 1934. The Company also shall comply with the other provisions of Trust Indenture Act Section 314(a). ARTICLE VIII 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, unless: (1) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust, shall be organized and existing under the laws of the United States of America or any State or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Securities 47 and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (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; (3) for so long as Securities registered on the Securities Register in the name of Atlantic Capital I (or the Property Trustee) are outstanding, such consolidation, merger, conveyance, transfer or lease is permitted under the Trust Agreement, and the Company Guarantee and does not give rise to any breach or violation of the Trust Agreement or the Company Guarantee; (4) any such lease shall provide that it will remain in effect so long as any Securities are Outstanding; and (5) 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 any such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee, subject to Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1. SECTION 8.2. Successor Person Substituted. Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person 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 in the event of any such conveyance, transfer or lease the Company shall be discharged from all obligations and covenants under the Indenture and the Securities and may be dissolved and liquidated. Such successor Person may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication pursuant to such provisions and any Securities which such successor Person thereafter shall cause to be signed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities 48 theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. ARTICLE IX 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: (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 contained; or (2) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Company; or (3) to add to the covenants of the Company for the benefit of the Holders of Securities or to surrender any right or power herein conferred upon the Company; or (4) to add any additional Events of Default; or (5) 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 that such action pursuant to this clause shall not materially adversely affect the interest of the Holders of Securities or, for so long as any of the Preferred Securities shall remain outstanding, the holders of such Preferred Securities; or (6) to comply with the requirements of the Commission in order to maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 9.2. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities 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 49 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 under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) except to the extent permitted by Section 3.13 change the Stated Maturity of the principal of, or any instalment of interest (including any Additional Interest) on, any Security, or reduce the principal amount thereof or the rate of interest thereon or reduce any premium payable upon the redemption thereof, or change any Place of Payment where, or the coin or currency in which, any Security or interest thereon is payable, 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 thereof), or (2) reduce the percentage in principal amount of the Outstanding Securities, 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, Section 5.13 or Section 10.5, 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 Security affected thereby; or (4) modify the provisions in Article XII of this Indenture with respect to the subordination of Outstanding Securities in a manner adverse to the Holders thereof; provided that, so long as any of the Preferred Securities remains outstanding, no such amendment shall be made that adversely affects the holders of such Preferred Securities in any material respect, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of such Preferred Securities then outstanding unless and until the principal (and premium, if any) of the Securities and all accrued and unpaid interest (including any Additional Interest) thereon have been paid in full; and provided, further that, so long as any of the Preferred Securities remains outstanding, no amendment shall be made to Section 5.8 under this Indenture without the prior consent of the holders of each Preferred Security then outstanding unless and until the principal (and premium, if any) of the Securities and all accrued and unpaid interest (including any Additional Interest) thereon have been paid in full. 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. 50 SECTION 9.3. Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental 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 Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent provided for in this Indenture with respect to such execution and acceptance (including any covenants compliance with which constitutes a condition precedent) have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities 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 so modified as to conform, in the opinion of the Trustee and the Company (as evidenced by an Officers' Certificate), to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. 51 ARTICLE X COVENANTS SECTION 10.1. Payment of Principal, Premium and Interest. The Company will duly and punctually pay the principal of (and premium, if any) and interest on the Securities 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 an office or agency where Securities may be presented or surrendered for payment and an office or agency where Securities may be surrendered for transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company initially appoints the Trustee, acting through its Corporate Trust Office, as its agent for said purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain such 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 may be presented or surrendered for any or all of 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 for such purposes. The Company will give prompt written notice to the Trustee of any such designation and any change in the location of any such office or agency. SECTION 10.3. Money for Security Payments to be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, 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. Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 a.m. New York City time on each due date of the principal of or interest on any Securities, 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 52 entitled to such principal and premium (if any) or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. The Company will cause each Paying Agent 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 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 (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; (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; and (4) comply with the provisions of the Trust Indenture Act applicable to it as a 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 or Government Obligations held in trust by such Paying Agent, such sums or Government Obligations to be held by the Trustee upon the same trusts as those upon which such sums or Government Obligations 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 or Government Obligations. Any money or Government Obligations 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 and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) 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 or Government Obligations, and all liability of the Company as trustee thereof, shall thereupon cease. 53 SECTION 10.4. Statement as to Compliance. The Company shall deliver to the Trustee, within 120 days after the end of each calendar year of the Company ending after the date hereof, an Officers' Certificate which need not comply with Section 1.2, executed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company, as to such officer's 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 under this Indenture. SECTION 10.5. Additional Sums. Except as otherwise specified as contemplated by Section 3.1, in the event that (i) Atlantic Capital I (or the Property Trustee) is the Holder of all of the Outstanding Securities, (ii) a Tax Event in respect of such Atlantic Capital I shall have occurred and be continuing and (iii) the Company shall not have (x) redeemed the Securities pursuant to Section 11.7 hereof or (y) terminated Atlantic Capital I pursuant to Section 9.2(b) of the Trust Agreement, the Company shall pay Atlantic Capital I (and its permitted successors or assigns under the Trust Agreement) for so long as Atlantic Capital I (or its permitted successor or assignee) is the Holder of any Securities, such additional amounts as may be necessary in order that the amount of distributions (including any Additional Amounts (as defined in the Trust Agreement)) then due and payable by Atlantic Capital I on the related Preferred Securities and Common Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes (the "Additional Sums"). Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such reference shall be deemed to include the payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made, provided, however, that the extension of an interest payment period pursuant to Section 3.11 or the Securities shall not extend the payment of any Additional Sums that may be due and payable during such interest payment period. SECTION 10.6. Additional Covenants. The Company covenants and agrees with Atlantic Capital I that it will not, and it will not permit any Subsidiary of the Company to, (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Company's capital stock, or (b) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any debt securities that rank pari passu with or junior to the Securities or make any guarantee payments with respect to the foregoing (other than (a) dividends or distributions in Common Stock of the Company, and (b) payments under the Company Guarantee), if at such time (i) there shall have occurred any event of which the Company has actual knowledge that (a) with the giving of notice or the 54 lapse of time or both, would constitute an Event of Default hereunder and (b) in respect of which the Company shall not have taken reasonable steps to cure, (ii) the Company shall be in default with respect to its payment of any obligations under the Company Guarantee or (iii) the Company shall have given notice of its election to begin an Extension Period as provided herein and shall not have rescinded such notice, or such period, or any extension thereof, shall be continuing. The Company also covenants with Atlantic Capital I (i) to maintain directly or indirectly 100% ownership of the Common Securities of Atlantic Capital I; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate Atlantic Capital I, except (a) in connection with a distribution of the Securities to the holders of Preferred Securities in liquidation of Atlantic Capital I or (b) in connection with certain mergers, consolidations or amalgamations permitted by the Trust Agreement and (iii) to use its reasonable efforts, consistent with the terms and provisions of the Trust Agreement, to cause Atlantic Capital I to remain classified as a grantor trust and not as an association taxable as a corporation for United States federal income tax purposes. ARTICLE XI REDEMPTION OF SECURITIES SECTION 11.1. Company's Rights of Redemption. (a) Unless otherwise specified as contemplated by Section 3.1 with respect to the Securities and notwithstanding any additional redemption rights that may be so specified, the Company may, at its option, redeem the Securities after their date of issuance in whole at any time or in part from time to time, subject to the provisions of this clause (a) and the other provisions of this Article Eleven. Unless otherwise specified as contemplated by Section 3.1, the redemption price for any Security so redeemed pursuant to this clause (a) shall be equal to 100% of the principal amount of such Securities plus any accrued and unpaid interest, including any Additional Interest, to the date fixed for redemption. The Company shall not redeem the Securities in part unless all accrued and unpaid interest (including any Additional Interest) has been paid in full on all Securities Outstanding for all interest periods terminating on or prior to the date fixed for redemption. (b) In the case of Securities in respect of which Atlantic Capital I (or the Property Trustee) is the Holder, except as otherwise specified as contemplated by Section 3.1, if a Special Event shall occur and be continuing, the Company may, at its option, redeem such Securities within 90 days of the occurrence of such Special Event, in whole but not in part, subject to the provisions of this clause (b) and the other provisions of this Article XI. The redemption price for any Security so redeemed pursuant to this clause (b) shall be equal to 100% of the principal amount of such Securities then Outstanding plus accrued and unpaid interest, including any Additional Interest, to the date fixed for redemption. 55 SECTION 11.2. Applicability of This Article. Redemption of Securities at the election of the Company, as permitted by Section 11.1, shall be made in accordance with the terms of the Securities, Section 3.1 and this Article; provided, however, that if any provision of any such form of Security shall conflict with any provision of this Article, the provision of the form of Security shall govern. Each Security shall be subject to partial redemption only in the amount of $25 or integral multiples thereof. SECTION 11.3. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be established by or pursuant to authority of the Board of Directors as evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all of the Securities, the Company shall, not less than 30 nor more than 60 days prior to the date fixed for redemption (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such date and of the principal amount of Securities 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, the Company shall furnish the Trustee with an Officers' Certificate and an Opinion of Independent Counsel evidencing compliance with such restriction. SECTION 11.4. Selection of Securities to be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities 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 a portion of the principal amount of any Security, provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination for such Security or integral multiples thereof. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption and 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 Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. If the Company shall so direct, Securities registered in the name of the Company, any Affiliate or any Subsidiary thereof shall not be included in the Securities selected for redemption. 56 SECTION 11.5. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the date fixed for redemption, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register. Each notice of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed; (d) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that interest thereon, if any, shall cease to accrue on and after said date; and (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities 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 and shall not be irrevocable. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. SECTION 11.6. Deposit of Redemption Price. Prior to 10:00 a.m. New York City time on the Redemption Date specified in the notice of redemption given as provided in Section 11.4, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date all the Securities so called for redemption at the applicable Redemption Price. 57 SECTION 11.7. Payment of Securities Called for Redemption. If any notice of redemption has been given as provided in Section 11.5, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price. On presentation and surrender of such Securities at a place of payment in said notice specified, the said securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price. Upon presentation of any Security redeemed in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities of the same series, of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented. If a Global Security is so surrendered, such new Security will also be a new Global Security. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. ARTICLE XII SUBORDINATION OF SECURITIES SECTION 12.1. Securities Subordinate to Senior Debt. The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article, the payment of the principal of (and premium, if any) and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all Senior Debt. SECTION 12.2. Payment Over of Proceeds Upon Dissolution, Etc. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company (each such event, if any, herein sometimes referred to as a "Proceeding"), then the holders of Senior Debt shall be entitled to receive payment in full of principal of (and premium, if any) and interest, if any, on such Senior Debt, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, before the Holders of the Securities are entitled to receive or retain any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which may be payable or deliverable by reason of the payment of any other Debt of the Company subordinated to the payment of the Securities, such payment or distribution being hereinafter referred to as a "Junior Subordinated Payment"), on account of principal of (or premium, if any) or interest (including 58 any Additional Interest) on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary and to that end the holders of Senior Debt shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any Junior Subordinated Payment, which may be payable or deliverable in respect of the Securities in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any Junior Subordinated Payment, before all Senior Debt is paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution 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 Debt remaining unpaid, to the extent necessary to pay all Senior Debt in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. 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 shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Debt to substantially the same extent as the Securities 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 sale of all or substantially all of its properties and assets as an entirety to another Person or the liquidation or dissolution of the Company following the sale 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 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 sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article Eight. SECTION 12.3. Prior Payment to Senior Debt Upon Acceleration of Securities. In the event that any Securities are declared due and payable before their Maturity, then and in such event the holders of the Senior Debt outstanding at the time such Securities so become due and payable shall be entitled to receive payment in full of all amounts due on or in respect of such Senior Debt (including any amounts due upon acceleration), or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character, whether 59 in cash, properties or securities (including any Junior Subordinated Payment) by the Company on account of the principal of (or premium, if any) or interest (including any Additional Interest) on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 12.2 would be applicable. SECTION 12.4. No Payment When Senior Debt in Default. (a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Debt, or in the event that any event of default with respect to any Senior Debt shall have occurred and be continuing and shall have resulted in such Senior Debt becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment or such event or default, then no payment or distribution of any kind or character, whether in cash, properties or securities (including any Junior Subordinated Payment) shall be made by the Company on account of principal of (or premium, if any) or interest (including any Additional Interest), if any, on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 12.2 would be applicable. SECTION 12.5. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time except during the pendency of any Proceeding referred to in Section 12.2 or under the conditions described in Sections 12.3 and 12.4, from making payments at any time of principal of (and premium, if any) or interest on the Securities, or (b) the application by the Trustee of any money or Government Obligations 60 deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest (including any Additional Interest) on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. SECTION 12.6. Subrogation to Rights of Holders of Senior Debt. Subject to the payment in full of all Senior Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Debt of the Company to substantially the same extent as the Securities are subordinated to the Senior Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt) to the rights of the holders of such Senior Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation or assignment, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt. SECTION 12.7. 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 of the Securities on the one hand and the holders of Senior Debt on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities 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 Securities and creditors of the Company other than their rights in relation to the holders of Senior Debt; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. 61 SECTION 12.8. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof 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 provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. SECTION 12.9. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. SECTION 12.10. 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 Securities. Notwithstanding the provisions of this Article or any other provision of this 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 Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt or from any trustee, agent or representative therefor (whether or not the facts contained in such notice are true); provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including any Additional Interest) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. SECTION 12.11. 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 Article Six, and the Holders of the Securities 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 Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other indebtedness of the Company, the 62 amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 12.12. Trustee Not Fiduciary for Holders of Senior Debt. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article or otherwise. SECTION 12.13. Rights of Trustee as Holder of Senior Debt; 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 Debt which may at any time be held by it, to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XII shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 6.7. SECTION 12.14. 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. * * * * 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 counterparts shall together constitute but one and the same instrument. 63 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. ATLANTIC CITY ELECTRIC COMPANY By:__________________________ [SEAL] Attest:______________________ THE BANK OF NEW YORK as Trustee By:___________________________ [SEAL] Attest:______________________ 64 State of : : ss. County of : On the _____ day of _________, ___ before me personally came __________, to me known, who being duly sworn, did depose and say that he/she is ______ of Atlantic City Electric Company, one of the corporations described in and which executed the foregoing instrument; that 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. _____________________________ Notary Public My Commission Expires: State of New York : : ss. County of New York : On the _____ day of _______, ____ before me personally came __________, to me known, who being duly sworn, did depose and say that he/she is _________ of The Bank of New York, a New York banking corporation, 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/she signed his/her name thereto by like authority. ______________________________ Notary Public My Commission Expires: ATLANTIC CITY ELECTRIC COMPANY Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 317 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Indenture whether or not physically contained therein) and the Junior Subordinated Indenture, dated as of _________ __, 1996. Trust Indenture Act Section Indenture Section (S) 310 (a)(1), (2) and (5)................................................6.9 (a)(3)................................................Not Applicable (a)(4)................................................Not Applicable (b)..............................................................6.8 ................................................................6.10 (c)...................................................Not Applicable (S) 311 (a)............................................................6.13(a) (b)......................................................... 6.13(b) (b)(2).....................................................7.3(a)(2) ...........................................................7.3(a)(2) (S) 312 (a)................................................................7.1 ..............................................................7.2(a) (b).......................................................... 7.2(b) (c)...........................................................7.2(c) (S) 313 (a).............................................................7.3(a) (b)...........................................................7.3(b) (c)...................................................7.3(a), 7.3(b) (d)...........................................................7.3(c) (S) 314 (a)(1), (2) and (3)................................................7.4 (a)(4)..........................................................10.5 (b)...................................................Not Applicable (c)(1)..........................................................10.2 (c)(2)..........................................................10.2 (c)(3)................................................Not Applicable (d)...................................................Not Applicable (e).............................................................10.2 (f)...................................................Not Applicable (S) 315 (a).............................................................6.1(a) (b)..............................................................6.2 ...........................................................7.3(a)(6) (c)...........................................................6.1(b) (d)...........................................................6.1(c) (d)(1).....................................................6.1(a)(1) (d)(2).....................................................6.1(c)(2) (d)(3).....................................................6.1(c)(3) -1- (e).............................................................5.14 (S) 316 (a)................................................................1.1 (a)(1)(A).......................................................5.12 (a)(1)(B).......................................................5.13 (a)(2)................................................Not Applicable (b)..............................................................5.8 (c)...........................................................1.4(f) (S) 317 (a)(1).............................................................5.3 (a)(2)...........................................................5.4 (b).............................................................10.3 (S) 318 (a)................................................................1.7 Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Junior Subordinated Indenture. -2- EX-4.2 4 CERTIFICATE OF TRUST EXHIBIT 4.2 CERTIFICATE OF TRUST OF ATLANTIC CAPITAL I THIS Certificate of Trust of Atlantic Capital I (the "Trust"), dated as of June 20, 1996, is being duly executed and filed by The Bank of New York (Delaware), a Delaware banking corporation, as trustee, to create a business trust under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.). 1. Name. The name of the business trust being created hereby is Atlantic Capital I. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711. 3. Effective Date. This Certificate of Trust shall be effective upon its filing with the Secretary of State. IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK (DELAWARE), as trustee By: /s/ Joseph F. Leary -------------------------- Name: Joseph F. Leary Title: Vice President EX-4.3 5 TRUST AGREEMENT EXHIBIT 4.3 TRUST AGREEMENT This TRUST AGREEMENT, dated as of June 20, 1996, between Atlantic City Electric Company, a New Jersey corporation, as "Depositor" and The Bank of New York (Delaware), a Delaware banking corporation as "Trustee". The Depositor and the Trustee hereby agree as follows: 1. The trust created hereby shall be known as Atlantic Capital I, in which name the Trustee, or the Depositor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Depositor hereby assigns, transfers, conveys and sets over to the Trustee the sum of $10. The Trustee hereby acknowledges receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The Trustee hereby declares that it will hold the trust estate in trust for the Depositor. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss.3801, et seq. (the "Business Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustee is hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in the form attached hereto. 3. The Depositor and the Trustee will enter into an amended and restated Trust Agreement, satisfactory to each such party and substantially in the form included as Exhibit 4.04 to the 1933 Act Registration Statement (as defined below), to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Trust Agreement, the Trustee shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. 4. The Depositor and the Trustee hereby authorize and direct the Depositor, as the sponsor of the Trust, (i) to file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) the Registration Statement on Form S-3 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to such 1933 Act Registration Statement (including the prospectus and the exhibits contained therein), relating to the registration under the Securities Act of 1933, as amended, of the Preferred Securities of the Trust and certain other securities and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under Section 12 of the Securities Exchange Act of 1934, as amended; 2 (ii) to file with one or more national securities exchange (each, an "Exchange") or the National Association of Securities Dealers ("NASD") and execute on behalf of the Trust a listing application or applications and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on any such Exchange or the NASD's Nasdaq National Market ("NASDAQ"); (iii) to file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as the Depositor, on behalf of the Trust, may deem necessary or desirable to register the Preferred Securities under the securities or "Blue Sky" laws of any jurisdiction; and (iv) to execute on behalf of the Trust such Underwriting Agreements with one or more underwriters relating to the offering of the Preferred Securities as the Depositor, on behalf of the Trust, may deem necessary or desirable. In the event that any filing referred to in clauses (i), (ii) and (iii) above is required by the rules and regulations of the Commission, any Exchange, the NASD or state securities or Blue Sky laws, to be executed on behalf of the Trust by a Trustee, the Depositor and any Trustee appointed pursuant to Section 6 hereof are hereby authorized to join in any such filing and to execute on behalf of the Trust any and all of the foregoing. 5. This Trust Agreement may be executed in one or more counterparts. 6. The number of Trustees initially shall be one (1) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Depositor which may increase or decrease the number of Trustees; provided, however, that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable Delaware law. Subject to the foregoing, the Depositor is entitled to appoint or remove without cause any Trustee at any time. The Trustee may resign upon thirty days' prior notice to the Depositor. 7. This Trust Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without regard to conflict of laws principles). 3 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed as of the day and year first above written. ATLANTIC CITY ELECTRIC COMPANY, as Depositor By: /s/ L.M. Walters --------------------------------- Name: L.M. Walters Title: Vice President and Treasurer THE BANK OF NEW YORK (DELAWARE), as Trustee By: /s/ Joseph F. Leary --------------------------------- Name: Joseph F. Leary Title: Vice President EX-4.4 6 AMENDED AND RESTATED TRUST AGREEMENT [STB DRAFT 1/17/96] EXHIBIT 4.4 ================================================================================ AMENDED AND RESTATED TRUST AGREEMENT among ATLANTIC CITY ELECTRIC COMPANY, as Depositor, The Bank of New York, as Property Trustee and The Bank of York (Delaware) as Delaware Trustee and THE ADMINISTRATIVE TRUSTEES NAMED HEREIN Dated as of _________ __, 1996 ATLANTIC CAPITAL I ================================================================================ ATLANTIC CAPITAL I Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939: Trust Indenture Act Section Trust Agreement Section (S) 310 (a)(1)............................ 8.7 (a)(2)............................ 8.7 (a)(3)............................ 8.9 (a)(4)............................ 2.7(a)(ii) (b)............................... 8.8 (S) 311 (a)............................... 8.13 (b)............................... 8.13 (S) 312 (a)............................... 5.7 (b)............................... 5.7 (b)............................... 5.7 (S) 313 (a)............................... 8.14(a) (a)(4)............................ 8.14(b) (b)............................... 8.14(b) (b)............................... 10.8 (b)............................... 8.14(c) (S) 314 (a)............................... 8.15 (b)............................... Not Applicable (c)(1)............................ 8.16 (c)(2)............................ 8.16 (c)(3)............................ Not Applicable (d)............................... Not Applicable (e)............................... 1.1, 816 (S) 315 (a)............................... 8.1(a), 8.3(a) (b)............................... 8.2, 10.8 (c)............................... 8.1(a) (d)............................... Not Applicable (e)............................... Not Applicable (S) 316 (a)............................... Not Applicable (a)(1)(A)......................... Not Applicable (a)(1)(B)......................... Not Applicable (a)(2)............................ Not Applicable (b)............................... Not Applicable (c)............................... 6.7 (S) 317 (a)(1)............................ Not Applicable (a)(2)............................ Not Applicable (b)............................... 5.9 (S) 318 (a)............................... 10.10 - ------------------ Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. TABLE OF CONTENTS Page ---- ARTICLE I DEFINED TERMS .......................... 1 SECTION 1.1. Definitions ................................................ 1 ARTICLE II ESTABLISHMENT OF THE TRUST ..................... 10 SECTION 2.1. Name ....................................................... 10 SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business .............................................. 11 SECTION 2.3. Initial Contribution of Trust Property; Organizational Expenses ................................................. 11 SECTION 2.4. Issuance of the Preferred Securities ....................... 11 SECTION 2.5. Issuance of Common Securities; Subscription and Purchase of Debentures ............................................ 11 SECTION 2.6. Declaration of Trust ....................................... 12 SECTION 2.7. Authorization to Enter into Certain Transactions ........... 12 SECTION 2.8. Assets of Trust ............................................ 16 SECTION 2.9. Title to Trust Property .................................... 16 ARTICLE III PAYMENT ACCOUNT ........................... 16 SECTION 3.1. Payment Account ............................................ 16 ARTICLE IV DISTRIBUTIONS; REDEMPTION ...................... 17 SECTION 4.1. Distributions .............................................. 17 SECTION 4.2. Redemption ................................................. 18 SECTION 4.3. Subordination of Common Securities ......................... 19 SECTION 4.4. Payment Procedures ......................................... 20 SECTION 4.5. Tax Returns and Reports .................................... 20 SECTION 4.6. Payment of Taxes, Duties, Etc. of the Trust ................ 21 SECTION 4.7. Payments under Indenture ................................... 21 ARTICLE V TRUST SECURITIES CERTIFICATES .................... 21 SECTION 5.1. Initial Ownership .......................................... 21 SECTION 5.2. The Trust Securities Certificates .......................... 21 SECTION 5.3. Execution and Delivery of Trust Securities Certificates .... 22 SECTION 5.4. Registration of Transfer and Exchange of Preferred Securities Certificates .................................. 22 Page ---- SECTION 5.5. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates ............................................. 23 SECTION 5.6. Persons Deemed Securityholders ............................. 23 SECTION 5.7. Access to List of Securityholders' Names and Addresses ..... 24 SECTION 5.8. Maintenance of Office or Agency ............................ 24 SECTION 5.9. Appointment of Paying Agent ................................ 24 SECTION 5.10. Ownership of Common Securities by Depositor ................ 25 SECTION 5.11. Book-Entry Preferred Securities Certificates; Common Securities Certificate ................................... 25 SECTION 5.12. Notices to Clearing Agency ................................. 26 SECTION 5.13. Definitive Preferred Securities Certificates ............... 26 SECTION 5.14. Rights of Securityholders .................................. 27 ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING ............. 28 SECTION 6.1. Limitations on Voting Rights ............................... 28 SECTION 6.2. Notice of Meetings ......................................... 29 SECTION 6.3. Meetings of Preferred Securityholders ...................... 29 SECTION 6.4. Voting Rights .............................................. 30 SECTION 6.5. Proxies, etc ............................................... 30 SECTION 6.6. Securityholder Action by Written Consent ................... 30 SECTION 6.7. Record Date for Voting and Other Purposes .................. 30 SECTION 6.8. Acts of Securityholders .................................... 31 SECTION 6.9. Inspection of Records ...................................... 32 ARTICLE VII ............................ 32 REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE ................. 32 SECTION 7.1. Property Trustee ........................................... 32 SECTION 7.2. Delaware Trustee ........................................... 33 SECTION 7.3. Representations and Warranties of Depositor ................ 33 ARTICLE VIII THE TRUSTEES ........................... 34 SECTION 8.1. Certain Duties and Responsibilities ........................ 34 SECTION 8.2. Certain Notices ............................................ 35 SECTION 8.3. Certain Rights of Property Trustee ......................... 36 SECTION 8.4. Not Responsible for Recitals or Issuance of Securities ..... 38 SECTION 8.5. May Hold Securities ........................................ 39 SECTION 8.6. Compensation; Indemnity; Fees .............................. 39 SECTION 8.7. Corporate Property Trustee Required; Eligibility of Trustees .................................. 40 SECTION 8.8. Conflicting Interests ...................................... 40 SECTION 8.9. Co-Trustees and Separate Trustee ........................... 40 Page ---- SECTION 8.10. Resignation and Removal; Appointment of Successor ......... 42 SECTION 8.11. Acceptance of Appointment by Successor .................... 43 SECTION 8.12. Merger, Conversion, Consolidation or Succession to Business ................................................ 44 SECTION 8.13. Preferential Collection of Claims Against Depositor or Trust ................................................... 44 SECTION 8.14. Reports by Property Trustee ............................... 45 SECTION 8.15. Reports to the Property Trustee ........................... 45 SECTION 8.16. Evidence of Compliance with Conditions Precedent .......... 45 SECTION 8.17. Number of Trustees ........................................ 45 SECTION 8.18. Delegation of Power ....................................... 46 ARTICLE IX TERMINATION, LIQUIDATION AND MERGER ................ 46 SECTION 9.1. Termination Upon Expiration Date .......................... 46 SECTION 9.2. Early Termination ......................................... 46 SECTION 9.3. Termination ............................................... 47 SECTION 9.4. Liquidation ............................................... 47 SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of the Trust ............................................ 48 ARTICLE X MISCELLANEOUS PROVISIONS ..................... 50 SECTION 10.1. Limitation of Rights of Securityholders ................... 50 SECTION 10.2. Amendment ................................................. 50 SECTION 10.3. Separability .............................................. 51 SECTION 10.4. GOVERNING LAW ............................................. 51 SECTION 10.5. Payments Due on Non-Business Day .......................... 51 SECTION 10.6. Successors ................................................ 52 SECTION 10.7. Headings .................................................. 52 SECTION 10.8. Reports, Notices and Demands .............................. 52 SECTION 10.9. Agreement Not to Petition ................................. 53 SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act .... 53 SECTION 10.11. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE ................................. 53 SECTION 10.12. Counterparts .............................................. 54 Exhibit A Certificate of Trust Exhibit B Form of Certificate Depository Agreement Exhibit C Form of Common Securities Certificate Exhibit D Form of Expense Agreement Exhibit E Form of Preferred Securities AMENDED AND RESTATED TRUST AGREEMENT, dated as of September __, 1996, among (i) Atlantic City Electric Company, a New Jersey corporation (including any successors or assigns, the "Depositor"), (ii) The Bank of New York, a New York banking corporation duly organized and existing under the laws of the State of New York, as property trustee (in such capacity, the "Property Trustee" and, in its separate corporate capacity and not in its capacity as Property Trustee, the "Bank"), (iii) The Bank of New York (Delaware), as Delaware trustee (the "Delaware Trustee"), (iv) Robert K. Marshall, an individual, and Stephanie M. Scola, an individual, each of whose address is c/o Atlantic City Electric Company, 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234-4130 (each, an "Administrative Trustee" and, collectively, the "Administrative Trustees" and, collectively with the Property Trustee and Delaware Trustee, the "Trustees") and (v) the several Holders, as hereinafter defined. W I T N E S S E T H : WHEREAS, the Depositor and the Delaware Trustee have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by the entering into of that certain Trust Agreement, dated as of June 20, 1996 (the "Original Trust Agreement"), and by the execution and filing by the Delaware Trustee with the Secretary of State of the State of Delaware of the Certificate of Trust, filed on June 20, 1996, attached as Exhibit A (the "Certificate of Trust"); and WHEREAS, the Depositor and the Delaware Trustee desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities by the Trust to the Depositor, (ii) the issuance and sale of the Preferred Securities by the Trust pursuant to the Underwriting Agreement, (iii) the acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures and (iv) the appointment of the Property Trustee and the Administrative Trustees; NOW THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party, for the benefit of the other parties and for the benefit of the Securityholders, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I DEFINED TERMS SECTION 1.1. Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: 2 (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Amount" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the amount of Additional Interest (as defined in the Indenture) paid by the Depositor on a Like Amount of Debentures for such period. "Additional Sums" has the meaning specified in Section 10.5 of the Indenture. "Administrative Trustee" means each of Robert K. Marshall and Stephanie M. Scola, each solely in such person's capacity as Administrative Trustee of the Trust formed and continued hereunder and not in such person's individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "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. "Bank" has the meaning specified in the preamble to this Trust Agreement. "Bankruptcy Event" means, with respect to any Person: (a) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person or of any substantial part 3 of its property or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" has the meaning specified in Section 10.9. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors, or such committee of the Board of Directors or officers of the Company to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustees. "Book-Entry Preferred Securities Certificates" means a beneficial interest in the Preferred Securities Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 5.11. "Business Day" means a day other than (a) a Saturday or Sunday, (b) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed, or (c) a day on which the Property Trustee's Corporate Trust Office or the Corporate Trust Office of the Debenture Trustee is closed for business. "Certificate Depository Agreement" means the agreement among the Trust, the Depositor and The Depository Trust Company, as the initial Clearing Agency, dated as of the Closing Date, relating to the Trust Securities Certificates, substantially in the form attached as Exhibit B, as the same may be amended and supplemented from time to time. "Certificate of Trust" has the meaning specified in the recitals hereof. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The Depository Trust Company will be the initial Clearing Agency. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person who maintains an account with and for whom from time to time a 4 Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, 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. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Corporate Trust Office" means the principal office of the Property Trustee located in New York, New York, which at the date hereof is 101 Barclay Street, New York, New York 10286. "Debenture Event of Default" means an "Event of Default" as defined in the Indenture. "Debenture Redemption Date" means, with respect to any Debentures to be redeemed under the Indenture, the date fixed for redemption under the Indenture. "Debenture Tax Event" means a "Tax Event" as defined in the Indenture. "Debenture Trustee" means The Bank of New York, a New York banking corporation, as trustee under the Indenture. "Debentures" means the aggregate principal amount of the Depositor's ____% Junior Subordinated Deferrable Interest Debentures, issued pursuant to the Indenture. "Definitive Preferred Securities Certificates" means either or both (as the context requires) of (a) Preferred Securities Certificates issued as Book-Entry Preferred Securities Certificates as provided in Section 5.11(a) and (b) Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.13. 5 "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801, et seq., as it may be amended from time to time. "Delaware Trustee" means the commercial bank or trust company identified as the "Delaware Trustee" in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust formed and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Distribution Date" has the meaning specified in Section 4.1(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "Early Termination Event" has the meaning specified in Section 9.2. "Event of Default" 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): (a) the occurrence of a Debenture Event of Default; or (b) default in the payment of any Distribution when it becomes due and payable, and continuation of such default for a period of 30 days; or (c) default in the payment of any Redemption Price of any Trust Security when it becomes due and payable; or (d) default in the performance, or breach, in any material respect, of any covenant or warranty of the Trustees in this Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is dealt with in clause (b) or (c) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the defaulting Trustee or Trustees by the Holders of at least 25% in aggregate liquidation preference of the Outstanding Preferred Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) the occurrence of a Bankruptcy Event with respect to the Trust. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 6 "Expense Agreement" means the Agreement as to Expenses and Liabilities between the Depositor and the Trust, substantially in the form attached as Exhibit D, as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. "Guarantee" means the Guarantee Agreement executed and delivered by the Depositor and The Bank of New York, as trustee, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the holders of the Preferred Securities, as amended from time to time. "Indenture" means the Junior Subordinated Indenture, dated as of [ ], 1996, between the Depositor and the Debenture Trustee, as trustee, as amended or supplemented from time to time. "Investment Company Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm having a recognized national tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a 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"), the Trust is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities under this Trust Agreement. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Debentures to be contemporaneously redeemed in accordance with the Indenture the proceeds of which will be used to pay the Redemption Price of such Trust Securities and (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a dissolution or liquidation of the Trust, Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Debentures are distributed. "Liquidation Amount" means the stated amount of $25 per Trust Security. "Liquidation Date" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 9.4(a). "Liquidation Distribution" has the meaning specified in Section 9.4(d). "1940 Act" means the Investment Company Act of 1940, as amended. 7 "Officers' Certificate" means a certificate signed by the Chairman and Chief Executive Officer, President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary, of the Depositor, and delivered to the appropriate Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 8.16 shall be the principal executive, financial or accounting officer of the Depositor. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Trust, the Property Trustee, or the Depositor or General Counsel of the Depositor, and who shall be reasonably acceptable to the Property Trustee. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to Preferred Securities, means, as of the date of determination, all Preferred Securities theretofore executed and delivered under this Trust Agreement, except: (a) Preferred Securities theretofore cancelled by the Property Trustee or delivered to the Property Trustee for cancellation; (b) Preferred Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Preferred Securities; provided that, if such Preferred Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (c) Preferred Securities which have been paid or in exchange for or in lieu of which other Preferred Securities have been executed and delivered pursuant to this Trust Agreement, including pursuant to Sections 5.4, 5.5, 5.11 and 5.13; 8 provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Trustee knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustees the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. "Owner" means each Person who is the beneficial owner of a Book-Entry Preferred Securities Certificate as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the beneficial owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.9 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee with the Bank in its trust department for the benefit of the Securityholders in which all amounts paid in respect of the Debentures will be held and from which the Property Trustee or Paying Agent in accordance with Section 5.9 shall make payments to the Securityholders in accordance with Sections 4.1 and 4.2. "Person" means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $25 and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Preferred Securities Certificate" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit E. "Property Trustee" means the commercial bank or trust company identified as the "Property Trustee" in the preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust heretofore created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. 9 "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the Stated Maturity of the Debentures (as defined in the Indenture) shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to Redemption Date of any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions to such Redemption Date, plus the related amount of the premium, if any, paid by the Depositor upon the concurrent redemption of a Like Amount of Debentures, allocated on a pro rata basis (based on Liquidation Amounts) among the Trust Securities. "Registrar" shall mean the registrar for the Preferred Securities appointed by Depositor to Section 5.4 and shall be initially The Bank of New York. "Relevant Trustee" shall have the meaning specified in Section 8.10. "Responsible Officer," when used with respect to the Property Trustee means an officer of the Property Trustee assigned by the Property Trustee to administer its corporate trust matters. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.4. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person shall be deemed to be a beneficial owner within the meaning of the Delaware Business Trust Act. "Special Event" means either a Tax Event or an Investment Company Event. "Tax Event" means the receipt by the Trust of an Opinion of Counsel, rendered by a law firm having a national tax and securities practice, to the effect that, as a result of any amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is adopted or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under this Trust Agreement, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date of such Opinion of Counsel, subject to United States federal income tax with respect to income received or accrued on the Debentures, (ii) interest payable by the Depositor on the Debentures is not, or within 90 days after the date of such Opinion of Counsel, will not be, deductible by the Depositor, in whole or in part, for United States federal income tax purposes or (iii) the Trust is, or will be within 90 days after the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges. 10 "Transfer Agent" shall mean one or more transfer agents for the Preferred Securities appointed by the Depositor pursuant to Section 5.4 and shall be initially The Bank of New York. "Trust" means the Delaware business trust heretofore created and continued hereby and identified on the cover page to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Amended and Restated Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "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. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held by the Property Trustee or the Trust pursuant to the terms of this Trust Agreement. "Trust Security" means any one of the Common Securities or the Preferred Securities. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Trustees" means, collectively, the Property Trustee, the Delaware Trustee and the Administrative Trustees. "Underwriting Agreement" means the Underwriting Agreement, dated _________ [ ], 1996, among the Trust, the Depositor and the Underwriters named therein. ARTICLE II ESTABLISHMENT OF THE TRUST SECTION 2.1. Name. The Trust heretofore created and continued hereby shall be known as "Atlantic Capital I," as such name may be modified from time to time by the Administrative Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees engage in the transactions contemplated hereby, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. 11 SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is c/o The Bank of New York (Delaware), White Clay Center, Route 273 Newark, Delaware, 19711, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal executive office of the Trust is c/o Atlantic City Electric Company, 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234-4130. SECTION 2.3. Initial Contribution of Trust Property; Organizational Expenses. The Property Trustee acknowledges receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. The Depositor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Depositor shall make no claim upon the Trust Property for the payment of such expenses. SECTION 2.4. Issuance of the Preferred Securities. On _______ __, 1996 the Depositor, on behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.2 and deliver to the Underwriters named in the Underwriting Agreement Preferred Securities Certificates, registered in the name of the nominee of the initial Clearing Agency, in an aggregate amount of 2,800,000 Preferred Securities having an aggregate Liquidation Amount of $70,000,000, against receipt of the aggregate purchase price of such Preferred Securities of $70,000,000, which amount such Administrative Trustee shall promptly deliver to or at the direction of the Property Trustee. SECTION 2.5. Issuance of Common Securities; Subscription and Purchase of Debentures. On the Closing Date, an Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Property Trustee on behalf of the Trust, in an aggregate principal amount of $72,164,950, and in satisfaction of the purchase price for such Debentures, (i) an Administrative Trustee, on behalf of the Trust, shall execute and deliver to the Depositor Common Securities Certificates, registered in the name of the Depositor, evidencing 86,598 Common Securities having an aggregate Liquidation Amount of $2,164,950, and (ii) the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $70,000,000, representing the proceeds from the sale of the Preferred Securities pursuant to the Underwriting Agreement. 12 SECTION 2.6. Declaration of Trust; Appointment of Property Trustee and Administrative Trustees. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures and (b) to engage in those activities necessary, convenient or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Securityholders. The Administrative Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. Anything in this Trust Agreement to the contrary notwithstanding, 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 Property Trustee or the Administrative Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act. SECTION 2.7. Authorization to Enter into Certain Transactions. (a) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section, Article VIII and in accordance with the following provisions (i) and (ii), the Administrative Trustees shall have the authority to enter into all transactions and agreements determined by the Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following: (i) As among the Trustees, each Administrative Trustee shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) to cause the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Expense Agreement the Certificate Depository Agreement and, such agreements as may be necessary or desirable in connection with the consummation of the Underwriting Agreement, and such other agreements as may be necessary or desirable in connection with the purposes and function of the Trust; (C) to qualify the Trust to do business in any jurisdiction as may be necessary or desirable; (D) the collection of interest, principal and any other payments made in respect of the Debentures in the Payment Account; 13 (E) assisting in the registration of the Preferred Securities under the Securities Act of 1933, as amended, and under state securities or blue sky laws, and the qualification of this Trust Agreement as a trust indenture under the Trust Indenture Act; (F) assisting in the listing of the Preferred Securities upon such national securities exchange, the Nasdaq National Market or such other interdealer quotation system or self-regulatory organization as shall be determined by the Depositor and the registration of the Preferred Securities under the Exchange Act and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (G) the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (H) the appointment of a Paying Agent, authenticating agent and a Registrar in accordance with this Trust Agreement; (I) registering transfer of the Trust Securities in accordance with this Trust Agreement; (J) to the extent provided in this Trust Agreement, the winding-up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (K) unless otherwise determined by the Depositor, the Property Trustee or the Administrative Trustees, or as otherwise required by the Delaware Business Trust Act or the Trust Indenture Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Administrative Trustees) any documents that the Administrative Trustees have the power to execute pursuant to this Trust Agreement; and (L) the taking of any action incidental to the foregoing as the Administrative Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following ministerial matters: 14 (A) the establishment of the Payment Account; (B) the receipt of the Debentures; (C) the deposit of interest, principal and any other payments made in respect of the Debentures in the Payment Account; (D) the distribution of amounts owed to the Securityholders in respect of the Trust Securities in accordance with the terms of this Trust Agreement; (E) subject to the applicable provisions of this Trust Agreement, the exercise of all of the rights, powers and privileges of a holder of the Debentures, which the Property Trustee, in its sole discretion, deems necessary or advisable to exercise under the circumstances; (F) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (G) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (H) to the extent provided in this Trust Agreement, the winding-up of the affairs of and liquidation of the Trust and the execution of the certificate of cancellation to be prepared and filed by the Administrative Trustees with the Secretary of State of the State of Delaware; (I) subject to the applicable provisions of this Trust Agreement, after an Event of Default the taking of any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); (J) registering transfers of the Trust Securities in accordance with this Trust Agreement; and (K) except as otherwise provided in this Section 2.7(a)(ii), the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Administrative Trustees set forth in Section 2.7(a)(i) or of the Depositor set forth in Section 2.7(c). 15 (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests herein, including to Securityholders, except as expressly provided herein or in the Guarantee, (iii) take any action that would cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. (c) In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) the preparation and filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on the appropriate form in relation to the Preferred Securities and the Debentures, including any amendments thereto; (ii) the determination of the states in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and the doing of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Trustees of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such states; (iii) the preparation for filing by the Trust and execution on behalf of the Trust of 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 Preferred Securities file or cause the Administrative Trustees to file thereafter with such exchange such notifications and documents as may be necessary from time to time to maintain such listing; (iv) the preparation for filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Exchange Act, including any amendments thereto; 16 (v) the negotiation of the terms of, and the execution and delivery of, the Underwriting Agreement providing for the sale of the Preferred Securities and such other agreements as may be necessary or desirable in connection with the consummation thereof; and (vi) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Administrative Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act, or taxed as other than a grantor trust for United States federal income tax purposes and so that the Debentures will be treated as indebtedness of the Depositor for United States federal income tax purposes. In this connection, subject to the provisions of Section 10.2, the Depositor and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust as amended or restated from time to time or this Trust Agreement, that each of the Depositor and the Administrative Trustees determines in their discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the holders of the Preferred Securities. SECTION 2.8. Assets of Trust. The assets of the Trust shall consist of the Trust Property. SECTION 2.9. Title to Trust Property. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Securityholders in accordance with this Trust Agreement. ARTICLE III PAYMENT ACCOUNT SECTION 3.1. Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and any agent of the Property Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. 17 (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Debentures. Amounts held in the Payment Account shall not be invested by the Property Trustee pending distribution thereof. ARTICLE IV DISTRIBUTIONS; REDEMPTION SECTION 4.1. Distributions. (a) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accrue from the Closing Date, and, except in the event that the Depositor exercises its right to defer the payment of interest on the Debentures pursuant to Section 3.1 of the Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 1996. Distributions on the Trust Securities will accumulate from the Closing Date. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall 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, payment of such Distribution shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date (each date on which distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). (b) The Trust Securities represent undivided beneficial interests in the Trust Property, and, the Distributions on the Trust Securities shall be payable at a rate of ____% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any full quarterly period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of Distributions for any partial period shall be computed on the basis of the actual number of days elapsed in a 360-day year of twelve 30-day months. The amount of Distributions payable for any period shall include the Additional Amounts, if any. (c) Distributions on the Trust Securities shall be made by the Property Trustee from the Payment Account and shall be deemed payable on each Distribution Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Distributions. (d) Distributions on the Trust Securities with respect to a Distribution Date (other than a Redemption Date) shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be one Business Day prior to such Distribution Date; provided, however, that in the event that the 18 Preferred Securities do not remain in book-entry-only form, the relevant record date shall be the date 15 days prior to such Distribution Date. SECTION 4.2. Redemption. (a) On each Debenture Redemption Date and on the Stated Maturity of the Debentures (as defined in the Indenture), the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. (b) Notice of redemption shall be given by the Property Trustee 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 Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the CUSIP number; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the total Liquidation Amount of the particular Trust Securities to be redeemed; and (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that distributions thereon will cease to accrue on and after said date. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at stated maturity of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then on hand and available in the Payment Account for the payment of such Redemption Price. (d) If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Property Trustee shall, so long as the Preferred Securities are in book-entry-only form, irrevocably deposit with the Clearing Agency for the Preferred Securities funds sufficient to pay the applicable Redemption Price and shall give such Clearing Agency irrevocable instructions and authority to pay the Redemption Price to the holders thereof. If the Preferred Securities are no longer in book-entry-only form, the Property Trustee, subject to Section 4.2(c), shall irrevocably deposit with the Paying Agent funds sufficient to pay the applicable Redemption Price and shall give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders thereof upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, 19 Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Securities Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon such Redemption Date, all rights of Securityholders holding Trust Securities so called for redemption will cease, except the right of such Securityholders to receive the Redemption Price and any Distribution payable on or prior to the Redemption Date, but without interest thereon, and such Trust Securities will cease to be outstanding. In the event that any Redemption Date is not a Business Day, then payment of the Redemption Price payable on such date shall 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. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities will continue to accrue, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) Subject to Section 4.3(a), if less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated on a pro rata basis (based on Liquidation Amounts) among the Common Securities and the Preferred Securities. The particular Preferred Securities to be redeemed shall be selected on a pro rata basis (based upon Liquidation Amounts) not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption, by such method (including, without limitation, by lot) as the Property Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or an integral multiple of $25 in excess thereof) of the Liquidation Amount of Preferred Securities of a denomination larger than $25. The Property Trustee shall promptly notify the Transfer Agent and Registrar in writing of the Preferred Securities selected for redemption and, in the case of any Preferred Securities selected for partial redemption, the Liquidation Amount thereof to be redeemed. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Preferred Securities that has been or is to be redeemed. SECTION 4.3. Subordination of Common Securities. (a) Payment of Distributions (including Additional Amounts, if applicable) on, and the Redemption Price of, the Trust Securities, as applicable, shall be made, subject to Section 4.2(f), pro rata among the Common Securities and the Preferred Securities based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date any Event of Default resulting from a Debenture Event of Default 20 shall have occurred and be continuing, no payment of any Distribution (including Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Amounts, if applicable) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Preferred Securities, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions (including Additional Amounts, if applicable) on, or the Redemption Price of, Preferred Securities then due and payable. (b) In the case of the occurrence of any Event of Default resulting from a Debenture Event of Default, the Holder of Common Securities will be deemed to have waived any right to act with respect to any such Event of Default under this Trust Agreement until the effect of all such Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until any such Event of Default under this Trust Agreement with respect to the Preferred Securities has been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities and not the Holder of the Common Securities, and only the Holders of the Preferred Securities will have the right to direct the Property Trustee to act on their behalf. SECTION 4.4. Payment Procedures. Payments of Distributions (including Additional Amounts, if applicable) in respect of the Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency in immediately available funds, which shall credit the relevant Persons' accounts at such Clearing Agency on the applicable distribution dates. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Common Security Holder. SECTION 4.5. Tax Returns and Reports. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense, and file all United States federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustees shall (a) prepare and file (or cause to be prepared and filed) the appropriate Internal Revenue Service form required to be filed in respect of the Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the appropriate Internal Revenue Service form required to be furnished to such Securityholder or the information required to be provided on such form. The Administrative Trustees shall provide the Depositor and the Property Trustee with a copy of all such returns and reports promptly after such filing or furnishing. The Trustees shall comply with United States federal withholding and backup withholding tax laws and 21 information reporting requirements with respect to any payments to Securityholders under the Trust Securities. SECTION 4.6. Payment of Taxes, Duties, Etc. of the Trust. Upon receipt under the Debentures of Additional Sums, the Property Trustee shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority which the Property Trustee is directed in writing to pay by the Administrative Trustees. SECTION 4.7. Payments under Indenture. The Holders of Common Securities will be subrogated to the rights of any Holder of Preferred Securities (and any Owner with respect thereto) to the extent of any payment to such Holder (and Owner) pursuant to Section 5.8 of the Indenture. ARTICLE V TRUST SECURITIES CERTIFICATES SECTION 5.1. Initial Ownership. Upon the creation of the Trust and the contribution by the Depositor pursuant to Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust. SECTION 5.2. The Trust Securities Certificates. The Preferred Securities Certificates shall be issued in minimum denominations of $25 Liquidation Amount and integral multiples of $25 in excess thereof, and the Common Securities Certificates shall be issued in denominations of $25 Liquidation Amount and integral multiples thereof. Subject to Section 2.4 relating to the original issuance of the Preferred Securities Certificate registered in the name of the nominee of the Depositary Trust Company, the Trust Securities Certificates shall be executed on behalf of the Trust by the manual or facsimile signature of at least one Administrative Trustee and, if executed on behalf of the Trust by facsimile signature, countersigned by a Transfer Agent or its agent. Trust Securities Certificates bearing the manual signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust and, if executed on behalf of the Trust by facsimile signature, countersigned by a Transfer Agent or its agent, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities 22 Certificate in such transferee's name pursuant to Sections 5.4, 5.11 and 5.13. Depositor agrees to indemnify, defend and hold each Transfer Agent harmless against any and all costs and liabilities incurred without negligence arising out of or in connection with any such countersigning by it. SECTION 5.3. Execution and Delivery of Trust Securities Certificates. On the Closing Date, the Administrative Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5, to be executed on behalf of the Trust and in the case of Preferred Securities executed by facsimile signature, countersigned by a Transfer Agent or its agent, and delivered to or upon the written order of the Depositor, signed by its chairman of the board, its president, any executive vice president, senior vice president or any vice president, treasurer or assistant treasurer or controller without further corporate action by the Depositor, in authorized denominations. SECTION 5.4. Registration of Transfer and Exchange of Preferred Securities Certificates. The Depositor shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.8, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Preferred Securities Certificates (the "Securities Register") in which, one or more the transfer agents (the each a "Transfer Agent") and registrars designated by the Depositor (each a "Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for, respectively, the transfer and registration of Preferred Securities Certificates and Common Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Bank shall be the initial Registrar. Upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.8, the Administrative Trustees or any one of them shall execute on behalf of the Trust by manual or facsimile signature and, if executed by on behalf of the Trust by facsimile signature, cause a Transfer Agent or its agent to countersign, and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of execution by such Administrative Trustee or Trustees. The Trust shall not be required (i) to register or cause to be registered the transfer or exchange of any Preferred Security during a period beginning at the opening of business 15 days before the day of the mailing of the relevant notice of redemption and ending of the close of business on the day of mailing of such notice of redemption or (ii) to register or cause to be registered the transfer or exchange of any Preferred Securities selected for redemption in whole or in part, except, in the case of any Preferred Security to be redeemed in part, any portion thereof not to be redeemed. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 5.8. 23 Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Property Trustee, the Transfer Agent and the Registrar duly executed by the Holder or his attorney duly authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Property Trustee in accordance with its customary practice. No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but a Transfer Agent may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. SECTION 5.5. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to a Transfer Agent, or if a Transfer Agent shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate and (b) there shall be delivered to such Transfer Agent and the Administrative Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustees, or any one of them, on behalf of the Trust shall execute by manual or facsimile signature and, if executed on behalf of the Trust by facsimile signature, such certificate shall be countersigned by a Transfer Agent, and the Administrative Trustees, or any one of them on behalf of the Trust shall make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section, the Administrative Trustees or the Transfer Agent 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 Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. SECTION 5.6. Persons Deemed Securityholders. The Administrative Trustees, the Property Trustee, each Transfer Agent and each Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving distributions and for all other purposes whatsoever, and neither the Trustees nor any Transfer Agent or Registrar shall be bound by any notice to the contrary. 24 SECTION 5.7. Access to List of Securityholders' Names and Addresses. The Administrative Trustees or the Depositor shall furnish or cause to be furnished (a) to the Property Trustee, semi-annually on or before January 15 and July 15 in each year and (b) to the Property Trustee, promptly after receipt by any Administrative Trustee or the Depositor of a request therefor from the Property Trustee in order to enable the Property Trustee to discharge its obligations under this Trust Agreement, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Securityholders as of the most recent Record Date in each case to the extent such information is in the possession or control of the Administrative Trustees or the Depositor and is not identical to a previously supplied list or has not otherwise been received by the Property Trustee in its capacity as Securities Registrar. The rights of Securityholders to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities, and the corresponding rights of the Trustee shall be as provided in the Trust Indenture Act. Each Holder, by receiving and holding a Trust Securities Certificate, and each Owner shall be deemed to have agreed not to hold the Depositor, the Property Trustee or the Administrative Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. SECTION 5.8. Maintenance of Office or Agency. The Administrative Trustees shall maintain an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Administrative Trustees initially designate the Bank, 101 Barclay Street, New York, New York 10286, as the office for such purposes. The Administrative Trustees shall give prompt written notice to the Depositor, the Property Trustee, the Transfer Agent, the Registrar and to the Securityholders of any change in the location of the Securities Register or any such office or agency. SECTION 5.9. Appointment of Paying Agent. The Paying Agent shall make distributions to Securityholders from the Payment Account and shall report the amounts of such distributions to the Property Trustee and the Administrative Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the distributions referred to above. The Property Trustee shall be entitled to rely upon a certificate of the Paying Agent stating in effect the amount of such funds so to be withdrawn and that same are to be applied by the Paying Agent in accordance with this Section 5.9. The Administrative Trustees may revoke such power and remove the Paying Agent if the Administrative Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Trust Agreement in any material respect. The Paying Agent shall initially be the Bank. The Paying Agent may choose any co-paying that is acceptable to the Administrative Trustees and the Depositor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustees, the Property Trustee and the Depositor. In the event that the Bank shall no longer be the Paying Agent or a successor 25 Paying Agent shall resign or its authority to act be revoked, the Administrative Trustees shall appoint a successor that is acceptable to the Property Trustee and the Depositor to act as Paying Agent (which shall be a bank or trust company). The Administrative Trustees shall cause such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustees to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all unclaimed funds to the Property Trustee and upon resignation or removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6 shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder, and any Paying Agent shall be bound by the requirements with respect to paying agents of securities issued pursuant to the Trust Indenture Act. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. SECTION 5.10. Ownership of Common Securities by Depositor. On the Closing Date, the Depositor shall acquire and retain beneficial and record ownership of the Common Securities. To the fullest extent permitted by law, other than a transfer in connection with a consolidation or merger of the Depositor into another corporation, or any conveyance, transfer or lease by the Depositor of its properties and assets substantially as an entirety to any Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the Common Securities shall be void. The Administrative Trustees shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE". SECTION 5.11. Book-Entry Preferred Securities Certificates; Common Securities Certificate. (a) The Preferred Securities Certificates, upon original issuance, will be issued in the form of a typewritten Preferred Securities Certificate or Certificates representing Book-Entry Preferred Securities Certificates, to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust. Such Preferred Securities Certificate or Certificates shall initially be registered on the Securities Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no beneficial owner will receive a Definitive Preferred Securities Certificate representing such beneficial owner's interest in such Preferred Securities, except as provided in Section 5.13. Unless and until Definitive Preferred Securities Certificates have been issued to beneficial owners pursuant to Section 5.13: (i) the provisions of this Section 5.11(a) shall be in full force and effect; 26 (ii) the Transfer Agent, Registrar and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Trust Agreement relating to the Book-Entry Preferred Securities Certificates (including the payment of the Liquidation Amount of and Distributions on the Book-Entry Preferred Securities and the giving of instructions or directions to Owners of Book-Entry Preferred Securities) as the sole Holder of Book-Entry Preferred Securities and shall have no obligations to the Owners thereof; (iii) to the extent that the provisions of this Section 5.11 conflict with any other provisions of this Trust Agreement, the provisions of this Section 5.11 shall control; and (iv) the rights of the Owners of the Book-Entry Preferred Securities Certificates shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Certificate Depository Agreement, unless and until Definitive Preferred Securities Certificates are issued pursuant to Section 5.13, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit payments on the Preferred Securities to such Clearing Agency Participants. In the event that, in accordance with the procedures of The Depository Trust Company, the Property Trustee receives from The Depository Trust Company an omnibus proxy in connection with any vote solicited of the Holders of Preferred Securities, the Property Trustee shall deliver such omnibus proxy to the Administrative Trustees who shall be solely responsible for soliciting votes from the Owners and in otherwise coordinating with and complying with such procedures in respect of any such solicitation. (b) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate, which may be typewritten. SECTION 5.12. Notices to Clearing Agency. To the extent that a notice or other communication to the Owners is required under this Trust Agreement, unless and until Definitive Preferred Securities Certificates shall have been issued to Owners pursuant to Section 5.13, the Trustees shall give all such notices and communications specified herein to be given to Owners to the Clearing Agency, and shall have no obligations to the Owners. SECTION 5.13. Definitive Preferred Securities Certificates. If (a) the Depositor advises the Trustees in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Preferred Securities Certificates, and the Depositor is unable to locate a qualified successor, (b) the 27 Depositor at its option advises the Trustees in writing that it elects to terminate the book-entry system through the Clearing Agency, or (c) after the occurrence of a Debenture Event of Default, Owners of Preferred Securities Certificates representing beneficial interests aggregating at least a majority of the Liquidation Amount advise the Property Trustee in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interest of the Owners of Preferred Securities Certificates, then the Property Trustee shall notify the Administrative Trustees, and then the Administrative Trustees shall notify the Clearing Agency and the Clearing Agency shall notify all Owners of Preferred Securities Certificates and the other Trustees of the occurrence of any such event and of the availability of the Definitive Preferred Securities Certificates to Owners of such class or classes, as applicable, requesting the same. Upon surrender to the Property Trustee of the typewritten Preferred Securities Certificate or Certificates representing the Book-Entry Preferred Securities Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative Trustees, or any one of them, shall execute the Definitive Preferred Securities Certificates in accordance with the instructions of the Clearing Agency. The Administrative Trustees shall be responsible for obtaining any lists of Owners necessary to effect any exchange of Definitive Preferred Securities Certificates for Book-Entry Preferred Securities Certificates hereunder and for otherwise satisfying any related requirements of the Clearing Agency. Neither the Securities Registrar nor the Trustees 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. Upon the issuance of Definitive Preferred Securities Certificates, the Trustees shall recognize the Holders of the Definitive Preferred Securities Certificates as Securityholders. The Definitive Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustees, as evidenced by the execution thereof by the Administrative Trustees or any one of them. SECTION 5.14. Rights of Securityholders. (a) The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.9, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Securityholders against payment of the purchase price therefor will be fully paid and nonassessable by the Trust. The Holders of the Trust Securities, in their capacities as such, 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. (b) For so long as any Preferred Securities remain Outstanding, if, upon a Debenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of at least 25% in Liquidation 28 Amount of the Preferred Securities then Outstanding shall have such right by a notice in writing to the Depositor and the Debenture Trustee; and upon any such declaration such principal amount of and the accrued interest on all of the Debentures shall become immediately due and payable, provided that the payment of principal and interest on such Debentures shall remain subordinated to the extent provided in the Indenture. (c) For so long as any Preferred Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Trust Agreement, upon a Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have the right to institute a proceeding directly against the Depositor for enforcement of payment to such Holder of the principal amount of or interest on the Debentures having a principal amount equal to the Liquidation Amount of the Preferred Securities of such Holder (a "Direct Action"). In connection with such Direct Action, the Holders of the Common Securities will be subrogated to the rights of any Holder of the Preferred Securities to the extent of any payment made by the Depositor to such Holder of Preferred Securities in such Direct Action. Except as set forth in this Section 5.14(c), the Holders of Preferred Securities will not be able to exercise directly any other rights or remedy available to the holders of the Debentures or, except as set forth in Section 5.14(b), assert directly any other rights in respect of the Debentures. The Depositor may not amend the Indenture to remove the right of Direct Action without the prior written consent of the Holders of all Preferred Securities. ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING SECTION 6.1. Limitations on Voting Rights. (a) Except as provided in this Section, in Sections 5.14, 8.10 and 10.2 and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (b) So long as any Debentures are held by the Property Trustee, the Trustees shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or executing any trust or power conferred on the Debenture Trustee with respect to such Debentures, (ii) waive any past default which is waiveable under Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least a majority in Liquidation Amount of all Outstanding Preferred Securities; provided, however, that where a consent under the Indenture would require the consent of each Holder 29 of Debentures affected thereby, no such consent shall be given by the Property Trustee without the prior written consent of each Holder of Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of Preferred Securities, except pursuant to a subsequent Vote of the Holders of Preferred Securities. The Property Trustee shall notify all Holders of the Preferred Securities of any notice of default received from the Debenture Trustee with respect to the Debentures. In addition to obtaining the foregoing approvals of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust will not be classified as other than a grantor trust for United States federal income tax purposes on account of such action. SECTION 6.2. Notice of Meetings. Notice of all meetings of the Preferred Securityholders, stating the time, place and purpose of the meeting, shall be given by the Administrative Trustees pursuant to Section 10.8 to each Preferred Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. SECTION 6.3. Meetings of Preferred Securityholders. No annual meeting of Securityholders is required to be held. The Administrative Trustees, however, shall call a meeting of Securityholders to vote on any matter upon the written request of the Preferred Securityholders of record of 25% of the Preferred Securities (based upon their Liquidation Amount) and the Administrative Trustees or the Property Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which Preferred Securityholders are entitled to vote. Preferred Securityholders of record of 50% of the Outstanding Preferred Securities (based upon their Liquidation Amount), present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. If a quorum is present at a meeting, an affirmative vote by the Preferred Securityholders of record present, in person or by proxy, holding more than a majority of the Preferred Securities (based upon their Liquidation Amount) held by the Preferred Securityholders of record present, either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Trust Agreement requires a greater number of affirmative votes. 30 SECTION 6.4. Voting Rights. Securityholders shall be entitled to one vote for each $25 of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote. SECTION 6.5. Proxies, etc. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustees, or with such other officer or agent of the Trust as the Administrative Trustees may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Securityholders of record shall be entitled to vote. When Trust Securities are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise or, if earlier, until eleven months after it is sent, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. SECTION 6.6. Securityholder Action by Written Consent. Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Securityholders holding more than a majority of all Outstanding Trust Securities (based upon their Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Trust Agreement) shall consent to the action in writing. SECTION 6.7. Record Date for Voting and Other Purposes. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Trust Agreement, or for the purpose of any other action, the Administrative Trustees may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of a distribution or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. 31 SECTION 6.8. Acts of Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders or Owners may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders or Owners in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to an Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders or Owners 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 Trust Agreement and (subject to Section 8.1) conclusive in favor of the Trustees, if made in the manner provided in this Section. 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 any Trustee receiving the same deems sufficient. The ownership of Preferred Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust 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 Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such liquidation amount. If any dispute shall arise between the Securityholders and the Administrative Trustees or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. 32 A Securityholder may institute a legal proceeding directly against the Depositor under the Guarantee to enforce its rights under the Guarantee without first instituting a legal proceeding against the Guarantee Trustee (as defined in the Guarantee), the Trust or any person or entity. SECTION 6.9. Inspection of Records Subject to Section 5.7 concerning access to the list of Securityholders, upon reasonable notice to the Administrative Trustees and the Property Trustee, the records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE SECTION 7.1. Property Trustee. The Property Trustee hereby represents and warrants for the benefit of the Depositor and the Securityholders that: (a) the Property Trustee is a banking corporation or trust company duly organized, validly existing and in good standing under the laws of the State of New York; (b) the Property Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Property Trustee and constitutes the valid and legally binding agreement of the Property Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (d) the execution, delivery and performance by the Property Trustee of this Trust Agreement will not violate, conflict with or constitute a breach of the Property Trustee's charter or by-laws; and (e) neither the authorization, execution or delivery by the Property Trustee of this Trust Agreement nor the consummation of any of the transactions by the Property Trustee contemplated herein require the consent or approval of, the giving of notice to the registration with or the taking of any other action, under any existing 33 Federal or New York law governing the banking or trust powers of the Property Trustee with respect to any governmental authority or agency. SECTION 7.2. Delaware Trustee. The Delaware Trustee represents and warrants for the benefit of the Depositor and the Securityholders that: (a) the Delaware Trustee is a banking corporation or trust company duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Trust Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Trust Agreement; (c) this Trust Agreement has been duly authorized, executed and delivered by the Delaware Trustee and constitutes the valid and legally binding agreement of the Delaware Trustee enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (d) the execution, delivery and performance by the Delaware Trustee of this Trust Agreement will not violate the Delaware Trustee's charter or by-laws; and (e) neither the authorization, execution or delivery by the Delaware Trustee of this Trust Agreement nor the consummation of any of the transactions by the Delaware Trustee contemplated herein require the consent or approval of, the giving of notice to, the registration with or the taking of any other action, under any existing Federal or Delaware law governing the banking or trust powers of the Delaware Trustee, with respect to any governmental authority or agency. SECTION 7.3. Representations and Warranties of Depositor. The Depositor hereby represents and warrants for the benefit of the Securityholders that: (a) the Trust Securities Certificates issued at each Time of Delivery on behalf of the Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Trust Agreement and the Securityholders will be, as of such date, entitled to the benefits of this Trust Agreement; and (b) there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware 34 or any political subdivision thereof in connection with the execution, delivery and performance by the Bank, the Property Trustee or the Delaware Trustee, as the case may be, of this Trust Agreement. ARTICLE VIII THE TRUSTEES SECTION 8.1. Certain Duties and Responsibilities (a) The duties and responsibilities of the Trustees shall be as restricted to those set forth in the express provisions of this Trust Agreement and, in the case of the Property Trustee, as provided in the Trust Indenture Act, and no implied covenants or obligations shall be read into this Trust Agreement against any of the Trustees. Notwithstanding the foregoing, no provision of this Trust Agreement shall require any of the Trustees to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Notwithstanding anything contained in this Trust Agreement to the contrary, the duties and responsibilities of the Property Trustee under this Trust Agreement shall be subject to the protections, exculpations and limitations on liability afforded to the Property Trustee under the provisions of the Trust Indenture Act, the Delaware Business Trust Act and, to the extent applicable, Rule 3a-7 under the Investment Company Act of 1940, or any successor rule thereunder. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of Section 8.1. Nothing in this Trust Agreement shall be construed to release the Delaware Trustee or any Administrative Trustee from liability for its own grossly negligent action, its own grossly negligent failure to act, or its own willful misconduct. To the extent that, at law or in equity, a Trustee has duties (including fiduciary duties) and liabilities thereto to the Trust or the Securityholders, such Trustee shall not be liable to the Trust or to any Securityholder for such Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Property Trustee, the Delaware Trustee and the Administrative Trustees 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 Depositor and the Securityholders to replace such other duties and liabilities of the Administrative Trustees. (b) All payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Property Trustee or a Paying Agent to 35 make payments in accordance with the terms hereof. Each Securityholder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. (c) All duties and responsibilities of the Property Trust contained in this Trust Agreement are subject to the following: (i) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Payment 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 Trust Agreement, the Trust Indenture Act, the Delaware Business Trust Act and, to the extent applicable, Rule 3a-7 under the Investment Company Act; (ii) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Trust Property or the payment of any taxes or assessments levied thereon or in connection therewith; (iii) the Property Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Depositor, and money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Property Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; and (iv) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the Depositor with their respective duties under this Trust Agreement, nor shall the Property Trustee be liable for the default or misconduct of the Administrative Trustees or the Depositor. SECTION 8.2. Certain Notices. Within five Business Days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.8, notice of such Event of Default to the Securityholders, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived. 36 Within five Business Days after the receipt of notice of the Depositor's exercise of its right to defer the payment of interest on the Debentures pursuant to the Indenture, the Administrative Trustee shall transmit, in the manner and to the extent provided in Section 10.9, notice of such exercise to the Securityholders and the Property Trustee, unless such exercise shall have been revoked. SECTION 8.3. Certain Rights of Property Trustee. Subject to the provisions of Section 8.1: (a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if (i) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action or (ii) in construing any of the provisions of this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Preferred Securityholders are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall be entitled to deliver a notice to the Depositor requesting written instructions of the Depositor as to the course of action to be taken and the Property Trustee may, but shall be under no duty to, take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; provided, however, that if the Property Trustee does not receive such instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (c) any direction or act of the Depositor or the Administrative Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by an Officers' Certificate; (d) whenever in the administration of this Trust Agreement, the Property Trustee shall deem it desirable that a matter be proved or established before undertaking, suffering or omitting any action hereunder, the Property Trustee (unless 37 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 Depositor or the Administrative Trustees; (e) 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 reregistration thereof; (f) the Property Trustee may consult with counsel of its choice (which counsel may be counsel to the Depositor or any of its Affiliates, and may include any of its employees) 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 and in accordance with such advice; the Property Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Agreement from any court of competent jurisdiction; (g) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses (including attorney fees and expenses) and liabilities which might be incurred by it in compliance with such request or direction; (h) 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, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Securityholders, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Property Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Depositor, personally or by agent or attorney; (i) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the 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; provided that the Property Trustee shall be responsible for its own negligence or recklessness with respect to selection of any agent or attorney appointed by it hereunder; (j) whenever in the administration of this Trust Agreement 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 38 request instructions from the Holders of the Trust Securities which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust 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; (k) the Property Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or it by this Trust Agreement; (l) the Property Trustee shall not be charged with knowledge of any default or Event of Default with respect to the Trust Securities or default or Debenture Event of Default with respect to the Debentures unless either (1) a Responsible Officer of the Property Trustee shall have actual knowledge of any such default, Event of Default or Debenture Event of Default or (2) written notice of any such default, Event of Default or Debenture Event of Default shall have been given to the Property Trustee by the Depositor, the Administrative Trustee or by any Holder of the Trust Securities; (m) the Property Trustee 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 Property Trustee 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 the Distributions to Holders of Trust Securities might properly be paid; (n) except as otherwise expressly provided by this Trust Agreement, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Trust Agreement. No provision of this Trust Agreement 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 8.4. Not Responsible for Recitals or Issuance of Securities The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The Trustee make no representations as to the value or condition of the property of the Trust, or any part thereof, or as to the title of the Trust thereto, or as to the 39 security afforded thereby or hereby, or as to the validity of genuineness of any securities at any time pledged and deposited with any trustees hereunder, or as to the validity or sufficiency of this Trust Agreement or the Trust Securities. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. SECTION 8.5. May Hold Securities. Except as provided in the definition of the term "Outstanding" in Article I, any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. SECTION 8.6. Compensation; Indemnity; Fees. The Depositor agrees: (a) to pay to the Trustees from time to time reasonable compensation for all services rendered by them hereunder as agreed to in writing from time to time by the Depositor and such Trustees (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (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 its negligence or bad faith; and (c) to indemnify each of the Trustees or any predecessor Trustee for, and to hold the Trustees harmless against, any loss, damage, claims, liability, penalty or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance of the trust created by, or the administration of, this Trust Agreement, 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 Depositor under this Section, each of the trustees shall have a lien prior to the Trust Securities upon all property and funds held or collected by such Trustee as such, except funds held in trust for the payment of Distributions on the Trust Securities. When a Trustee incurs expenses or renders services after an Event of Default which occurs as a consequence of a Debenture Event of Default specified in Section 5.1(4) or (5) of the Indenture, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Reform Act of 1978 or a successor statute. 40 SECTION 8.7. Corporate Property Trustee Required; Eligibility of Trustees (a) There shall at all times be a Property Trustee hereunder with respect to the Trust Securities. The Property Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person 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 Property Trustee with respect to the Trust Securities 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 VIII. (b) There shall at all times be one or more Administrative Trustees hereunder with respect to the Trust Securities. Each Administrative 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 persons authorized to bind that entity. (c) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. SECTION 8.8. Conflicting Interests. If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property 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 Trust Agreement. SECTION 8.9. Co-Trustees and Separate Trustee. Unless an Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Depositor and the Administrative Trustees, by agreed action of the majority of such Trustees, shall have power to appoint, and upon the written request of the Administrative Trustees, the Depositor shall for such purpose join with the Administrative Trustees in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Property Trustee either to act as co-trustee, jointly with the Property Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such 41 powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (a) The Trust Securities shall be executed and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee. (b) The rights, powers, duties and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (c) Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case a Debenture Event of Default has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section. 42 (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee or any other trustee hereunder. (e) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. SECTION 8.10. Resignation and Removal; Appointment of Successor. No resignation or removal of any Trustee (the "Relevant Trustee") and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 8.11. Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time with respect to the Trust Securities by giving written notice thereof to the Securityholders. If the instrument of acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Relevant Trustee with respect to the Trust Securities. Unless a Debenture Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Common Securityholder. If a Debenture Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a majority in Liquidation Amount of the Preferred Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). An Administrative Trustee may be removed by the Common Securityholder at any time. If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees with respect to the Trust Securities and the Trust, and the successor Trustee shall comply with the applicable requirements of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when a Debenture Event of Default shall have occurred and be continuing, the Preferred Securityholders, by Act of the Securityholders of a majority in Liquidation Amount of the Preferred Securities then Outstanding delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees with respect to the Trust Securities and the Trust, and such successor Trustee shall comply with the applicable requirements of Section 8.11. If an Administrative Trustee shall resign, be removed or 43 become incapable of acting as Administrative Trustee, at a time when a Debenture Event of Default shall have occurred and be continuing, the Common Securityholder, by Act of the Common Securityholder delivered to the Administrative Trustee, shall promptly appoint a successor Administrative Trustee or Administrative Trustees with respect to the Trust Securities and the Trust, and such successor Administrative Trustee or Administrative Trustees shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee with respect to the Trust Securities shall have been so appointed by the Common Securityholder or the Preferred Securityholders and accepted appointment in the manner required by Section 8.11, any Securityholder who has been a Securityholder of Trust Securities 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 Relevant Trustee with respect to the Trust Securities. The retiring Relevant Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 10.8 and shall give notice to the Depositor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Property Trustee. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of remaining Administrative Trustees if there are at least two of them or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirement for Administrative Trustees set forth in Section 8.7). SECTION 8.11. Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Trustee such successor Trustee so appointed shall execute, acknowledge and deliver to the Trust and to 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 Depositor 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 if the Property Trustee is the resigning Trustee shall duly assign, transfer and deliver to the successor Trustee all property and money held by such retiring Property Trustee hereunder. In case of the appointment hereunder of a successor Relevant Trustee with respect to the Trust Securities and the Trust, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and 44 to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and (b) shall add to or change any of the provisions of this Trust Agreement as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees of the same trust and that each such Relevant Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Relevant Trustee and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust; but, on request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust. Upon request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. SECTION 8.12. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Property Trustee or the Delaware 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 such Relevant Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant 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. SECTION 8.13. Preferential Collection of Claims Against Depositor or Trust. If and when the Property Trustee or the Delaware Trustee shall be or become a creditor of the Depositor or the Trust (or any other obligor upon the Debentures or the Trust Securities), the Property Trustee or the Delaware Trustee, as the case may be, shall be subject to and shall take all actions necessary in order to comply with the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor). 45 SECTION 8.14. Reports by Property Trustee. (a) The Property Trustee shall transmit to Securityholders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the time and in the manner provided pursuant thereto. Such of those reports as are required to be transmitted by the Property Trustee pursuant to Section 313(a) of the Trust Indenture Act shall be so transmitted within 60 days after July 1 of each year, commencing July 1, 1997. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each stock exchange upon which the Trust Securities are listed, with the Commission and with the Depositor. The Depositor will notify the Property Trustee when any Trust Securities are listed on any stock exchange. SECTION 8.15. Reports to the Property Trustee. The Depositor and the Administrative 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(a) 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 8.16. Evidence of Compliance with Conditions Precedent. Each of the Depositor and the Administrative 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 Trust 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) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. SECTION 8.17. Number of Trustees. (a) The number of Trustees shall be four, provided that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Administrative Trustees. The Property Trustee and the Delaware Trustee may be the same person. (b) If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 8.10. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Administrative Trustees shall occur, until such vacancy 46 is filled by the appointment of an Administrative Trustee in accordance with Section 8.10, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Administrative Trustees and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. SECTION 8.18. Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing. (b) The Administrative Trustees shall have power to delegate from time to time to such of their number or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE IX TERMINATION, LIQUIDATION AND MERGER SECTION 9.1. Termination Upon Expiration Date. Unless earlier terminated, the Trust shall automatically terminate on _________ __, 2051 (the "Expiration Date"), following the distribution of the Trust Property in accordance with Section 9.4. SECTION 9.2. Early Termination. The first to occur of any of the following events is an "Early Termination Event": (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; (b) the written direction to the Property Trustee from the Depositor at any time (which direction is optional and wholly within the discretion of the Depositor) to terminate the Trust and distribute the Debentures in exchange for the Preferred Securities; 47 (c) the redemption of all of the Trust Securities in connection with the redemption of all of the Debentures; and (d) the entry of an order for dissolution of the Trust by a court of competent jurisdiction. SECTION 9.3. Termination. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 9.4, or upon the redemption of all of the Trust Securities pursuant to Section 4.2, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; and (c) the discharge of all administrative duties of the Administrative Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders. SECTION 9.4. Liquidation. (a) If an Early Termination Event specified in clause (a), (b) or (d) of Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction or the making of reasonable provisions for the payment of liabilities to creditors of the Trust as provided by applicable law, to each Securityholder a Like Amount of Debentures, subject to Section 9.4(d). Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Debentures, or if Section 9.4(d) applies receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate. (b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem 48 appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to holders of Trust Securities Certificates, upon surrender of such certificates to the Administrative Trustees or their agent for exchange, (iii) the Depositor shall use its reasonable efforts to have the Debentures listed on the New York Stock Exchange or on such other stock exchange, interdealer quotation system or self-regulatory organization as the Preferred Securities are then listed or traded, (iv) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures, accruing interest at the rate provided for in the Debentures from the last Distribution Date on which a Distribution was made on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to holders of Trust Securities Certificates with respect to such Debentures), and (v) all rights of Securityholders holding Trust Securities will cease, except the right of such Securityholders to receive Debentures upon surrender of Trust Securities Certificates. (d) In the event that, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be dissolved, wound-up or terminated, by the Property Trustee in such manner as the Property Trustee determines. In such event, on the date of the dissolution, winding-up or other termination of the Trust, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding-up or termination, 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, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if a Debenture Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities. SECTION 9.5. Mergers, Consolidations, Amalgamations or Replacements of the Trust. The Trust may not merge with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except pursuant to this Section 9.5. At the request of the Depositor, with the consent of the Administrative Trustees and without the consent of the 49 holders of the Delaware Trustee, the Property Trustee or the Preferred Securities, the Trust may merge with or into, consolidate, amalgamate, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized as such under the laws of any state; provided, that (i) such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Preferred Securities or (b) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Depositor expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Debentures, (iii) the Successor Securities are listed or traded, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed or traded, if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Preferred 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, replacement, conveyance, transfer or lease, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Preferred Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act, (viii) the Depositor owns all of the Common Securities of such successor entity and guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and (ix) such successor entity expressly assumes all of the obligations of the Trust with respect to the Trustees. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge with or into, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. 50 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. Limitation of Rights of Securityholders. The death or incapacity of any person having an interest, beneficial or otherwise, in a Trust Security shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such person or any Securityholder for such person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. SECTION 10.2. Amendment. (a) This Trust Agreement may be amended from time to time by the Trustees and the Depositor, without the consent of any Securityholders, (i) to cure any ambiguity, 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 Trust Agreement, which shall not be inconsistent with the other provisions of this Trust Agreement, or (ii) to modify, eliminate or add to any provisions of this Trust Agreement to such extent as shall be necessary to ensure that the Trust will be classified for United States federal income tax purposes as a grantor trust at all times that any Trust Securities are outstanding or to ensure that the Trust will not be required to register as an investment company under the 1940 Act; provided, however, that such action shall not adversely affect in any material respect the interests of any Securityholder, and any amendments of this Trust Agreement shall become effective when notice thereof is given to the Securityholders. (b) Except as provided in Section 10.2(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor with (i) the consent of Securityholders representing not less than a majority (based upon Liquidation Amounts) of the Trust Securities then Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status as a grantor trust for United States federal income tax purposes or the Trust's exemption from status of an investment company under the 1940 Act. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being 51 obtained in accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no Trustee shall enter into or consent to any amendment to this Trust Agreement which would cause the Trust to fail or cease to qualify for the exemption from status of an investment company under the 1940 Act or fail or cease to be classified as a grantor trust for United States federal income tax purposes. (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment. (g) Neither the Property Trustee nor the Delaware Trustee shall be required to enter into any amendment to this Trust Agreement which affects its own rights, duties or immunities under this Trust Agreement. The Property Trustee is entitled to receive an Opinion of Counsel and Officers' Certificate a conclusive evidence that any amendment to this Trust Agreement executed pursuant to Section 10.3 is authorized or permitted by, and conforms to, the terms of this Section 10.3, has been duly authorized by and lawfully executed and delivered on behalf of the other requisite parties, and that it is proper for the Property Trustee under the provisions of this Section 10.3 to join in the execution thereof. SECTION 10.3. Separability. In case any provision in this Trust Agreement or in the Trust Securities Certificates 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 10.4. GOVERNING LAW. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. SECTION 10.5. Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day (except as otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as though made on the date fixed for such payment, and no interest shall accrue thereon for the period after such date. 52 SECTION 10.6. Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Depositor, the Trust or the Relevant Trustee, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article Eight of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. SECTION 10.7. Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. SECTION 10.8. Reports, Notices and Demands. Any report, notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Preferred Securityholder, to such Preferred Securityholder as such Securityholder's name and address may appear on the Securities Register; and (b) in the case of the Common Securityholder or the Depositor, to Atlantic City Electric Company, 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234-4130, Attention: Treasurer, facsimile no.: (609) 645-4132. Any notice to Preferred Securityholders shall also be given to such owners as have, within two years preceding the giving of such notice, filed their names and addresses with the Property Trustee for that purpose. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee or the Administrative Trustees shall be given in writing addressed (until another address is published by the Trust) as follows: (a) with respect to the Property Trustee to The Bank of New York, 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust Department; (b) with respect to the Delaware Trustee, to The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711 with a copy to the Property Trustee at the address set forth in clause (a); and (c) with respect to the Administrative Trustees, to them at the address above for notices to the Depositor, marked "Attention: Administrative Trustees of Atlantic Capital I." Such notice, demand or other communication to or upon the Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Property Trustee. 53 SECTION 10.9. Agreement Not to Petition. Each of the Trustees and the Depositor agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor takes action in violation of this Section 10.9, the Property Trustee agrees, for the benefit of Securityholders, that at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Trustee or the Trust may assert. The provisions of this Section 10.9 shall survive the termination of this Trust Agreement. SECTION 10.10. Trust Indenture Act; Conflict with Trust Indenture Act. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required or deemed to be part of this Trust Agreement 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 any provision hereof limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required or deemed provision shall control. (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 10.11. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND INDENTURE. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND 54 SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. SECTION 10.12. Counterparts. This Trust Agreement may contain more than one counterpart of the signature page and this Trust Agreement may be executed by the affixing of the signature of each of the Trustees of 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. ATLANTIC CITY ELECTRIC COMPANY By: ------------------------------------- Name: Title: THE BANK OF NEW YORK as Property Trustee By: ------------------------------------- Name: Title: THE BANK OF NEW YORK (DELAWARE) as Delaware Trustee By: ------------------------------------- Name: Title: By: ------------------------------------- Robert K. Marshall as Administrative Trustee By: ------------------------------------- Stephanie M. Scola as Administrative Trustee EXHIBIT A CERTIFICATE OF TRUST OF ATLANTIC CAPITAL I THIS Certificate of Trust of Atlantic Capital I (the "Trust"), dated as of June 20, 1996, is being duly executed and filed by The Bank of New York (Delaware), a Delaware banking corporation, as trustee, to form a business trust under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.). 1. Name. The name of the business trust created hereby is Atlantic Capital I. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware are The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711. 3. Effective Date. This Certificate of Trust shall be effective upon filing with the Secretary of State. IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK (DELAWARE), as trustee By: ------------------------------------- Name: Title: EXHIBIT B ________ ___, 1996 The Depository Trust Company, 55 Water Street, 49th Floor, New York, New York 10041-0099. Attention: General Counsel's Office Re: Atlantic Capital I ____% Cumulative Quarterly Income Preferred Securities CUSIP 048272 20 7 Ladies and Gentlemen: The purpose of this letter is to set forth certain matters relating to the issuance and deposit with The Depository Trust Company ("DTC") of the Atlantic Capital I ___% Cumulative Quarterly Income Preferred Securities, (the "Preferred Securities"), of Atlantic Capital I, a Delaware business trust (the "Issuer"), created pursuant to a Trust Agreement between Atlantic City Electric Company ("the Company") and The Bank of New York (Delaware), as Trustee, as amended and restated etc. The payment of distributions on the Preferred Securities and payments due upon liquidation of the Issuer or redemption of the Preferred Securities, to the extent the Issuer has funds available for the payment thereof, are guaranteed by the Company to the extent set forth in a Guarantee Agreement dated ______ __, 1996 entered into by the Company and The Bank of New York, as guarantee trustee with respect to the Preferred Securities. The Company and the Issuer propose to sell the Preferred Securities to certain Underwriters (the "Underwriters") pursuant to an Underwriting Agreement dated ______ __, 1996 by and among the Underwriters, the Issuer and the Company, and the Underwriters wish to take delivery of the Preferred Securities through DTC. The Bank of New York is acting as transfer agent and registrar with respect to the Preferred Securities (the "Transfer Agent and Registrar"). To induce DTC to accept the Preferred Securities as eligible for deposit at DTC, and to act in accordance with DTC's rules with respect to the Preferred Securities, the Issuer, the Transfer Agent and Registrar and DTC agree among each other as follows: 1. Prior to the closing of the sale of the Preferred Securities to the Underwriters, which is expected to occur on or about ______ __, 1996, there shall be deposited with, or held by the Transfer Agent and Registrar as custodian for, DTC one or more global certificates (individually and collectively, the "Global Certificate") registered in the name of DTC's nominee, Cede & Co., representing an aggregate of 2,800,000 Preferred Securities and bearing the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 2. The Amended and Restated Trust Agreement of the Issuer provides for the voting by holders (with no provision for revocation of consents or votes by subsequent holders) of the Preferred Securities under certain limited circumstances. The Issuer shall establish a record date for such purposes and shall, to the extent possible, give DTC notice of such record date not less than 15 calendar days in advance of such record date. 3. In the event of a stock split, conversion, recapitalization, reorganization or any other similar transaction resulting in the cancellation of all or any part of the Preferred Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice of such event as soon as possible but, at least 5 business days prior to the effective date of such event. 4. In the event of distribution on, or an offering or issuance of rights with respect to, the Preferred Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount of and conditions, if any, applicable to the payment of any such distribution or any such offering or issuance of rights; (b) any applicable expiration or deadline date, or any date by which any action on the part of the holders of Preferred Securities is required; and (c) the date any required notice is to be mailed by or on behalf of the Issuer to holders of Preferred Securities or published by or on behalf of the Issuer (whether by mail or publication, the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. The Issuer or the Transfer Agent and Registrar will forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission of multiple CUSIP numbers (if applicable) that includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness Of such notice.) The Publication Date shall be not less than 30 calendar days nor more than 60 calendar days prior to the payment of any such distribution or any such offering or issuance of rights with respect to the Preferred Securities. After establishing the amount of payment to be made on the Preferred Securities, the Issuer or B-2 the Transfer Agent and Registrar will notify DTC's Dividend Department of such payment 5 business days prior to payment date. Notices to DTC's Dividend Department by telecopy shall be sent to (212) 709-1723. Such notices by mail or by any other means shall be sent to: Manager, Announcements Dividend Department The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt of such telecopy by telephoning the Dividend Department at (212) 709-1270. 5. In the event of a redemption by the Issuer of the Preferred Securities, notice specifying the terms of the redemption and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC not less than 30 calendar days prior to such event by a secure means in the manner set forth in paragraph 4. Such redemption notice shall be sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190, and receipt of such notice shall be confirmed by telephoning (516) 227-4070. Notice by mail or by any other means shall be sent to: Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530-4719 6. In the event of any invitation to tender the Preferred Securities, notice specifying the terms of the tender and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by a secure means and in a timely manner as described in paragraph 4. Notices to DTC pursuant to this paragraph and notices of other corporate actions (including mandatory tenders, exchanges and capital changes), shall be sent, unless notification to another department is expressly provided for herein, by telecopy to DTC's Reorganization Department at (212) 709-1093 or (212) 709-1094 and receipt of such notice shall be confirmed by telephoning (212) 709-6884, or by mail or any other means to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 7. All notices and payment advices sent to DTC shall contain the CUSIP number or numbers of the Preferred Securities and the accompanying designation of the Preferred Securities, which, as of the date of this letter, is "Atlantic Capital I ___% Cumulative Quarterly Income Preferred Securities". B-3 8. Distribution payments or other cash payments with respect to the Preferred Securities shall be governed by DTC's current Principal and Income Payments Rider, a copy of which is attached hereto as Annex I. For purposes of this letter, the term "Agent" used in Annex I shall be deemed to refer to The Bank of New York. 9. DTC may direct the Issuer and the Transfer Agent and Registrar to use any other telecopy number or address of DTC as the number or address to which notices or payments may be sent. 10. In the event of a conversion, redemption, or any other similar transaction (e.g., tender made and accepted in response to the Issuer's or the Transfer Agent and Registrar's invitation) necessitating a reduction in the aggregate number of Preferred Securities outstanding evidenced by the Global Certificate, DTC, in its discretion: (a) may request the Issuer or the Transfer Agent and Registrar to issue and countersign a new Global Certificate; or (b) may make an appropriate notation on the Global Certificate indicating the date and amount of such reduction. 11. DTC may discontinue its services as a securities depositary with respect to the Preferred Securities at any time by giving reasonable prior written notice to the Issuer and the Transfer Agent and Registrar (at which time DTC will confirm with the Issuer or the Transfer Agent and Registrar the aggregate number of Preferred Securities deposited with it) and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Issuer may determine to make alternative arrangements for book-entry settlement for the Preferred Securities, make available one or more separate global certificates evidencing Preferred Securities to any Participant having Preferred Securities credited to its DTC account, or issue definitive Preferred Securities to the beneficial holders thereof, and in any such case, DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 12. In the event that the Issuer determines that beneficial owners of Preferred Securities shall be able to obtain definitive Preferred Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of the availability of certificates. In such event, the Issuer or the Transfer Agent and Registrar shall issue, transfer and exchange certificates in appropriate amounts, as required by DTC and others, and DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the Global Certificate, duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. B-4 13. This letter 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. Nothing herein shall be deemed to require the Transfer Agent and Registrar to advance funds on behalf of Atlantic Capital I. Very truly yours, ATLANTIC CAPITAL I (As Issuer) By: ------------------------------------- Administrative Trustee THE BANK OF NEW YORK (As Transfer Agent and Registrar) By: ------------------------------------- Name: Title: RECEIVED AND ACCEPTED: THE DEPOSITORY TRUST COMPANY By ---------------------------------- Authorized Officer B-5 EXHIBIT C THIS CERTIFICATE IS NOT TRANSFERABLE Certificate Number Number of Common Securities C-1 Certificate Evidencing Common Securities of Atlantic Capital I ___% Common Securities (liquidation amount $25 per Common Security) Atlantic Capital I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Atlantic City Electric Company (the "Holder") is the registered owner of ____________________ ____________________ (________) common securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated the ____% Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). In accordance with Section 5.10 of the Trust Agreement (as defined below) the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of ______ __, 1996, among Atlantic City Electric Company, a New Jersey corporation, The Bank of New York, a New York banking corporation, as trustee, The Bank of New York (Delaware banking corporation, as trustee, Robert K. Marshall, an individual, as trustee, and Stephanie M. Scola, an individual, a trustee as the same may be amended from time to time (the "Trust Agreement") including the designation of the terms of the Common Securities as set forth therein. The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this ______ day of ______, ____. ATLANTIC CAPITAL I By: ------------------------------------- Name: Administrative Trustee C-2 EXHIBIT D AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT dated as of ______ __, 1996, between Atlantic City Electric Company, a New Jersey corporation ("the Company"), and Atlantic Capital I, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Common Securities (the "Common Securities") to and receive Debentures from the Company and to issue and sell ____% Cumulative Quarterly Income Preferred Securities (the "Preferred Securities") with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Trust Agreement of the Trust dated as of ______ __, 1996 as the same may be amended from time to time (the "Trust Agreement"); WHEREAS, The Company will directly or indirectly own all of the Common Securities of Trust and will issue the Debentures; NOW, THEREFORE, in consideration of the purchase by each holder of the Preferred Securities, which purchase The Company hereby agrees shall benefit the Company and which purchase the Company acknowledges will be made in reliance upon the execution and delivery of this Agreement, the Company and Trust hereby agree as follows: ARTICLE I Section 1.1. Guarantee by the Company. Subject to the terms and conditions hereof, the Company hereby irrevocably and unconditionally guarantees to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Trust, other than obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be. 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. SECTION 1.2. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all holders of all the Preferred Securities (whether upon redemption, liquidation, exchange or otherwise) and (b) the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any holder of Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by the Company and The Bank of New York as guarantee trustee or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. Section 1.3. Waiver of Notice. The Company hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 1.4. No Impairment. The obligations, covenants, agreements and duties of the Company under this 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 extension of time for the payment by the Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) 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. There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing. D-2 Section 1.5. Enforcement. A Beneficiary may enforce this Agreement directly against the Company and the Company waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against the Company. Section 1.6. Subrogation. The Company shall be subrogated to all (if any) rights of the Trust in respect of any amounts paid to the Beneficiaries by the Company under this Agreement; provided, however, that the Company shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II Section 2.1. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries. Section 2.2. Amendment. So long as there remains any Beneficiary or any Preferred Securities of any series are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the holders of the Preferred Securities. Section 2.3. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail) or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed): Atlantic Capital I c/o The Bank of New York 101 Barclay Street - 21W New York, New York 10286 [Attention: Corporate Trust Department Facsimile No.: (212) [815-5915] D-3 Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township New Jersey 08234-4130 Facsimile No.: (609) 645-4132 Attention: Treasurer Section 2.4. This agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York. THIS AGREEMENT is executed as of the day and year first above written. ATLANTIC CITY ELECTRIC COMPANY By: ------------------------------------- Name: Title: ATLANTIC CAPITAL I By: ------------------------------------- Name: Administrative Trustee D-4 EXHIBIT E IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This Preferred Security is a Global Certificate within the meaning of the Trust Agreement hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to Atlantic Capital I or its agent for registration of transfer, exchange or payment, and any 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 inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Certificate Number Number of Preferred Securities P- CUSIP NO. 048272 20 7 Certificate Evidencing Preferred Securities of Atlantic Capital I ___% Cumulative Quarterly Income Preferred Securities (liquidation amount $25 per Preferred Security) Atlantic Capital I, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that ____________________ (the "Holder") is the registered owner of ______ (______) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the Atlantic Capital I ____% Cumulative Quarterly Income Preferred Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The 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 as provided in Section 5.4 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of ______ __, 1996, among Atlantic City Electric Company, a New Jersey corporation, (the "Company"), The Bank of New York, a New York banking corporation, as trustee, The Bank of New York (Delaware), a Delaware banking corporation, as trustee, Robert K. Marshall, an individual, as trustee, and Stephanie M. Scola, an individual, as trustee as the same may be amended from time to time (the "Trust Agreement") including the designation of the terms of Preferred Securities as set forth therein. The Holder is entitled to the benefits of the Guarantee Agreement entered into by the Company and The Bank of New York, as guarantee trustee, dated as of ______ __, 1996 (the "Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Trust Agreement and the Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. E-2 Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate this ___________ day of ______, ____, 1996. ATLANTIC CAPITAL I By: ------------------------------------- Name: Administrative Trustee E-3 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security 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) Signature(s) Guaranteed: - ------------------------------------- THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. E-4 EX-4.6 7 GUARANTEE AGREEMENT [ST&B DRAFT 9/17/96] Exhibit 4.6 ----------------------------------------------------------------- GUARANTEE AGREEMENT Between Atlantic City Electric Company (as Guarantor) and The Bank of New York (as Trustee) dated as of _________ __, 1996 ----------------------------------------------------------------- CROSS-REFERENCE TABLE* Section of Section of Trust Indenture Act Guarantee of 1939, as amended Agreement - ------------------- ---------- 310(a)................................................ 4.1(a) 310(b) ............................................... 4.1(c), 208 310(c) ............................................... Inapplicable 311(a) ............................................... 2.2(b) 311(b) ............................................... 2.2(b) 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(e) ............................................... 1.1, 2.5, 3.2 314(f) ............................................... 2.1, 3.2 315(a) ............................................... 3.1(d) 315(b) ............................................... 2.7 315(c) ............................................... 3.1 315(d) ............................................... 3.1(d) 316(a) ............................................... 1.1, 2.6, 5.4 316(b) ............................................... 5.3 316(c) ............................................... 8.2 317(a) ............................................... Inapplicable 317(b) ............................................... Inapplicable 318(a)................................................ 2.1(b) 318(b) ............................................... 2.1 318(c) ............................................... 2.1(a) - --------- * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS .............................. 2 SECTION 1.1. Definitions........................................ 2 ARTICLE II TRUST INDENTURE ACT.......................... 5 SECTION 2.1. Trust Indenture Act; Application. ................. 5 SECTION 2.2. List of Holders.................................... 5 SECTION 2.3. Reports by the Guarantee Trustee................... 5 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........................... 6 SECTION 2.8. Conflicting Interests.............................. 7 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE........... 7 SECTION 3.1. Powers and Duties of the Guarantee Trustee......... 7 SECTION 3.2. Certain Rights of Guarantee Trustee................ 9 ARTICLE IV GUARANTEE TRUSTEE........................... 11 SECTION 4.1. Guarantee Trustee; Eligibility. ................... 11 SECTION 4.2. Compensation and Reimbursement..................... 11 SECTION 4.3. Appointment, Removal and Resignation of the Guarantee Trustee................................. 12 ARTICLE V GUARANTEE .............................. 13 SECTION 5.1. Guarantee. ........................................ 13 SECTION 5.2. Waiver of Notice and Demand. ...................... 13 Page ---- 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 AND SUBORDINATION...................... 15 SECTION 6.1. Subordination. .................................... 15 ARTICLE VII TERMINATION.............................. 15 SECTION 7.1. Termination. ...................................... 15 ARTICLE VIII MISCELLANEOUS ............................ 16 SECTION 8.1. Successors and Assigns. ........................... 16 SECTION 8.2. Amendments. ....................................... 16 SECTION 8.3. Notices. .......................................... 16 SECTION 8.4. Benefit. .......................................... 17 SECTION 8.5. Interpretation. ................................... 17 SECTION 8.6. GOVERNING LAW. .................................... 18 GUARANTEE AGREEMENT ______________ This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of _______ __, 1996, is executed and delivered by Atlantic City Electric Company, a New Jersey corporation (the "Guarantor"), and The Bank of New York, a New York banking corporation organized under the laws of the State of New York, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Atlantic Capital I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of ________ __, 1996 among the Issuer Trustees named therein, the Guarantor, as Depositor, and the Holders (as therein defined) from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing 2,800,000 of its ___% Cumulative Quarterly Income Preferred Securities (liquidation preference $25 per preferred security) (the "Preferred Securities") representing preferred undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Trust Agreement; WHEREAS, the Preferred Securities will be issued by the Issuer and the proceeds thereof, together with the proceeds from the issuance of the Issuer's Common Securities (as defined below), will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor which will be deposited with The Bank of New York, as Property Trustee under the Trust Agreement, as trust assets; and WHEREAS, as incentive for the Holders to purchase Preferred Securities the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders (as defined herein) of the 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 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 from time to time of the Preferred Securities. 2 ARTICLE I DEFINITIONS SECTION 1.1. Definitions. As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement as in effect on the date hereof. "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, provided, however, that an Affiliate of the Guarantor shall not be deemed to include the Issuer. 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. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Debt" means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; and (vi) every obligation of the type referred to in clauses (i) through (v) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement; provided, however, that, except with respect to a default in payment of any Guarantee Payments, the Guarantor shall have received notice of default and shall not have cured such default within 60 days after receipt of such notice. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on 3 behalf of the Issuer: (i) any accumulated and unpaid Distributions (as defined in the Trust Agreement) required to be paid on the Preferred Securities, to the extent the Issuer shall have funds on hand available therefor at such time, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price"), with respect to the Preferred Securities called for redemption by the Issuer to the extent the Issuer shall have funds on hand available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of the Issuer, unless Debentures are distributed to the Holders in exchange for all of the Preferred Securities, the lesser of (a) the aggregate of the liquidation preference of $25 per Preferred Security plus accumulated and unpaid Distributions on the Preferred Securities to the date of payment to the extent the Issuer shall have funds on hand available to make such payment at such time and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means The Bank of New York, 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. "Holder" means any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the Guarantee Trustee. "Indenture" means the Junior Subordinated Indenture dated as of ______ __, 1996, as supplemented and amended between the Guarantor and the Bank of New York, as trustee. "List of Holders" has the meaning specified in Section 2.2(a). "Majority in liquidation preference of the Securities" means, except as provided by the Trust Indenture Act, a vote by the Holder(s), voting separately as a class, of more than 50% of the liquidation preference of all then outstanding Preferred Securities issued by the Issuer. "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chairman and Chief Executive Officer, President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of such Person, and delivered to the Guarantee Trustee. 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 definitions relating thereto; 4 (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. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Guarantee Trustee, any Senior Vice President, 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 Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Guarantor whether or not such claim for post-petition interest is allowed in such proceeding), on Debt, whether incurred on or prior to the date of this Guarantee or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the Guarantee or to other Debt which is pari passu with, or subordinated to, the Guarantee; provided, however, that Senior Debt shall not be deemed to include (a) any Debt of the Guarantor which when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without recourse to the Guarantor, (b) any Debt of the Guarantor to any of its Subsidiaries, (c) Debt to any employee of the Guarantor, (d) any liability for taxes, (e) Debt or other monetary obligations to trade creditors created or assumed by the Guarantor or any of its Subsidiaries in the ordinary course of business in connection with the obtaining of goods, materials or services and (f) Debt issued under the Indenture and (g) the Guarantee. "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, as amended. 5 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 or deemed to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2. List of Holders. (a) The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (i) semiannually, on or before January 15 and July 15 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (ii) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished; 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) of the Trust Indenture Act (subject to the provisions of Section 311(b) of the Trust Indenture Act) and Section 312(b) of the Trust Indenture Act. SECTION 2.3. Reports by the Guarantee Trustee. Not later than July 15 of each year, commencing July 15, 1997, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313(a) of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313(a) of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. 6 SECTION 2.4. Periodic Reports to Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act 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 such 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 liquidation preference of the Preferred Securities may, by vote on behalf of all of the Holders, 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 therefrom. 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, 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, except in the case of a default in the payment of a Guarantee Payment, 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. (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 Trust Agreement shall have obtained written notice, of such Event of Default. 7 SECTION 2.8. Conflicting Interests. The Trust 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 THE 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, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising his or her rights pursuant to Section 5.4(iv) 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, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting (and, as to the Guarantee Trustee cessation of holding) 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 occured and is continuing, the Guarantee Trustee may in its discretion proceed to protect and enforce its rights and other rights of the Holders by such appropriate judicial proceedings as it shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Guaranty Agreement or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. (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 such duties and 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. 8 (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 (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 or of the Trust Indenture Act 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 liquidation preference of the 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; (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 hereunder 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; and 9 (v) whether or not therein expressly so provided, every provision of this Guarantee Agreement relating to the conduct or affecting the liability of or affording protection to the Guarantee Trustee shall be subject to the provisions of this Section. 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 reasonably 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 an Officers' Certificate of the Guarantor unless otherwise prescribed herein. (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 to take 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 of the Guarantor which, upon receipt of such request from the Guarantee Trustee, 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 re-recording, re-filing or registration thereof). (v) The Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one 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 10 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 its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such 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, and the signature of the Preferred 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 (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions. (xi) the Guarantee Trustee shall not be charged with knowledge of any Event of Default unless either (1) a Responsible Officer of the Trustee shall have actual knowledge of the Event of Default or (2) written notice of such Event of Default shall have been given to the Guarantee Trustee by the Guarantor, any other obligor on the Preferred Securities or by any Holder of the Preferred Securities. 11 (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 to act in accordance with such power and authority. 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 Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000, and shall be a corporation meeting the requirements of Section 310(c) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section and to the extent permitted by the Trust Indenture Act, 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. Compensation and Reimbursement. The Guarantor agrees: 12 (a) to pay the Guarantee Trustee from time to time such reasonable compensation as the Guarantor and the Guarantee Trustee shall from time to time agree in writing 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); (b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with the provisions of this Guarantee (including the reasonable compensation and expenses of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify each of the Guarantee Trustee and any predecessor Guarantee Trustee for, and to hold it harmless from and against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based upon the income of the Guarantee Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance of the trust created by, or the administration of, this Guarantee Agreement, 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 Guarantor under this Section, the Guarantee Trustee shall have a lien prior to the Preferred Securities upon all the property and funds held or collected by the Guarantee Trustee as such, except funds held in trust for the payment of principal of, and premium (if any) or interest on, particular obligations of the Guarantor under this Guarantee Agreement. The provisions of this Section shall survive the termination of this Guarantee Agreement. SECTION 4.3. Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.3(b), unless an Event of Default shall have occurred and be continuing, the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed 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 hereunder 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 13 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 4.3 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, 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. (e) The Guarantor shall give notice of each resignation and each removal of the Guarantee Trustee and each appointment of a successor Guarantee Trustee to all Holders in the manner provided in Section 8.3 hereof. Each notice shall include the name of the successor Guarantee Trustee and the address of its Corporate Trust Office. 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 or on behalf of the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer 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 Issuer to pay such amounts to the Holders. SECTION 5.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of the 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 Guarantee Trustee, Issuer 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. 14 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 Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Debentures as so provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (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 Preferred Securities, or any action on the part of the Issuer 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 Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the 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 the consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4. Rights of Holders. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) if an Event of Default has occurred and is continuing, the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in 15 liquidation preference of the Preferred Securities 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 this Guarantee Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other Person. SECTION 5.5. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon distribution of Debentures to Holders as provided in the Trust Agreement. SECTION 5.6. Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Issuer pursuant to Section 5.1; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which 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 Issuer with respect to the 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 Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI COVENANTS AND SUBORDINATION SECTION 6.1. Subordination. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all general liabilities of the Guarantor. Nothing in this Section 6.1 shall apply to claims of, or payments to, the Guarantee Trustee under or pursuant to Section 4.2 hereof. 16 ARTICLE VII TERMINATION SECTION 7.1. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price of all Preferred Securities, (ii) the distribution of Debentures to the Holders in exchange for all of the Preferred Securities or (iii) full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Issuer. 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 must restore payment of any sums paid with respect to Preferred Securities or under this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Successors and Assigns. This Guarantee Agreement may be amended only by an instrument in writing entered into by the Guarantor and the Guarantee Trustee. 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 Preferred Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article Eight of the Indenture and pursuant to which the assignee agrees in writing to perform the Guarantor's obligations hereunder, the Guarantor shall not assign its obligations hereunder. Nothing herein contained shall be deemed to require the Guarantee Trustee to enter into any amendment of this Guarantee Agreement. SECTION 8.2. Amendments. Except with respect to any changes which do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in liquidation preference of all the outstanding Preferred Securities. The provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval. SECTION 8.3. Notices. 17 Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address set forth below or such other address, facsimile number or to the attention of such other Person as the Guarantor may give notice of to the Holders: Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 Facsimile No.: (609) 645-4132 Attention: Treasurer with a copy to: Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township, New Jersey 08324-4130 Facsimile No.: (609) 645-4132 Attention: General Counsel (b) if given to the Issuer, in care of the Guarantee Trustee, at the Issuer's (and the Guarantee Trustee's) address set forth below or such other address, facsimile number or to the attention of such other Person as the Guarantee Trustee on behalf of the Issuer may give notice to the Holders: Atlantic Capital I c/o Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 Facsimile No: (609) 645-4132 Attention: Treasurer with a copy to: The Bank of New York 101 Barclay Street New York, New York 10286 Facsimile No.: (212) 815-5999 Attention: Corporate Trust Department (c) if given to any Holder, at the address set forth on the books and records of the Issuer. All notices hereunder 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 18 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 8.4. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities. SECTION 8.5. Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) capitalized terms used in this Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) 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; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 8.6. GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. 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 counterparts shall together constitute but one and the same instrument. 19 THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. ATLANTIC CITY ELECTRIC COMPANY By:___________________________ Name: Title: THE BANK OF NEW YORK, as Guarantee Trustee By:___________________________ Name: Title: EX-5.1 8 OPINION RE: LEGALITY Exhibit 5.1 SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, N.Y. 10017-3954 (212) 455-2000 FAX: (212) 455-2502 September 17, 1996 Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 Ladies and Gentlemen: We have acted as counsel for Atlantic City Electric Company, a New Jersey corporation (the "Company"), and Atlantic Capital I, a statutory business trust created under the Business Trust Act of the State of Delaware (the "Trust"), in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-3 (Registration No. 333-06625), as amended (the "Registration Statement"), relating to (i) the issuance by the Trust of its Cumulative Quarterly Income Preferred Securities ("QUIPS") (the "Preferred Securities") and (ii) in connection therewith, the deposit by the Company with the Trust as trust assets of its Junior Subordinated Deferrable Interest Debentures (the "Junior Subordinated Debentures"). Concurrently with the delivery of Junior Subordinated Debentures to the Trust, the Company will make a cash contribution to the Trust, the proceeds of which will be used by the Trust to purchase as trust assets additional Junior Subordinated Debentures. The Junior Subordinated Debentures are to be issued under an Indenture (the "Indenture"), to be entered into by and between the Company and The Bank of New York, as trustee. The Preferred Securities will be guaranteed (the "Guarantee") by the Company to the extent described in the Prospectus forming a part of the Registration Statement. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, certificates of public officials and other instruments and have made such other and further investigations, as we have deemed relevant or necessary as a basis for the opinions hereinafter set forth. Atlantic City Electric Company -2- September 17, 1996 Based on the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that: 1. Assuming that the Indenture and the Junior Subordinated Debentures have been duly authorized, when (i) the Registration Statement has become effective under the Act, (ii) the Indenture has been duly executed and delivered, (iii) the terms of the Junior Subordinated Debentures have been duly established in accordance with the Indenture and (iv) the Junior Subordinated Debentures have been duly executed and authenticated in accordance with the Indenture and duly issued and delivered to the Trust as contemplated by the Registration Statement and upon payment therefor, the Junior Subordinated Debentures will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms. 2. Assuming that the Guarantee has been duly authorized, when (i) the Registration Statement has become effective under the Act, (ii) the Guarantee has been duly executed and delivered and (iii) the Preferred Securities have been duly issued and delivered as contemplated by the Registration Statement and upon payment therefor, the Guarantee will constitute a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. Our opinions set forth in paragraphs 1 and 2 above are subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. We are members of the Bar of the State of New York and we do not express any opinion herein concerning any law other than the law of the State of New York and the federal law of the United States. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the heading "Legal Opinions" in the Prospectus forming a part of the Registration Statement. Very truly yours, /s/ Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT EX-5.2 9 OPINION RE: LEGALITY EXHBIT 5.2 RICHARDS, LAYTON & FINGER ONE RODNEY SQUARE P.O. BOX 551 WILMINGTON, DELAWARE 19899 TELEPHONE (302) 658-6541 TELECOPIER (302) 658-6548 WRITER'S DIRECT DIAL NUMBER September 17, 1996 Atlantic Capital I c/o Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 Re: Atlantic Capital I Ladies and Gentlemen: We have acted as special Delaware counsel for Atlantic Capital I, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of the Trust, dated June 20, 1996 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on June 20, 1996; (b) The Trust Agreement of the Trust, dated as of June 20, 1996, among Atlantic City Electric Company, a New Jersey corporation ("Atlantic Electric"), and the trustees of the Trust named therein; (c) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus"), relating to the __% Cumulative Quarterly Income Preferred Securities of the Trust, representing preferred undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" Atlantic Capital I -2- September 17, 1996 and collectively, the "Preferred Securities"), as filed by Atlantic Electric, the Trust and others as set forth therein with the Securities and Exchange Commission on September 17, 1996; (d) A form of Amended and Restated Trust Agreement of the Trust, to be entered into among Atlantic Electric, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the Trust (the "Trust Agreement"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated the date hereof, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement. For the purposes of this opinion, we have not reviewed any documents other than the documents listed above, and we have assumed that there exists no provision in any document that we have not reviewed that bears upon or is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For the purposes of this opinion, we have assumed (i) that the Trust Agreement constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Trust Agreement and the Certificate are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due creation or due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation, organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Trust Agreement and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with Atlantic Capital I -3- September 17, 1996 the Trust Agreement and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act, 12 Del. C. ss. 3801, et seq. 2. The Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 3. The Preferred Security Holders, as beneficial owners of the Trust, will 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. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Trust Agreement. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, /s/ RICHARDS, LAYTON & FINGER EX-8.1 10 OPINION RE: TAX MATTERS Exhibit 8.1 SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, N.Y. 10017-3954 (212) 455-2000 FAX: (212) 455-2502 September 17, 1996 Atlantic City Electric Company 6801 Black Horse Pike Egg Harbor Township, NJ 08234-4130 Ladies and Gentlemen: We have acted as special United States tax counsel to the Atlantic City Electric Company (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission (the "Commission") of a Registration Statement on Form S-3 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"), relating to the proposed issuance of 2,800,000 of ___% Cumulative Quarterly Income Preferred Securities ("QUIPS"), each with a liquidation preference of $25. Capitalized terms not otherwise defined herein shall have the same meanings as they have in documents listed in the paragraph below (the "Transaction Documents"). We have examined the Registration Statement, the Company's prospectus, and in each case as filed as an exhibit to the Regsitration Statement, (i) the form of the Amended and Restated Trust Agreement among the Company and the several trustees named therein, (ii) the form of the Junior Subordinated Indenture between the Company and The Bank of New York, as Trustee, and (iii) the form of the Guarantee Agreement between the Company, as Guarantor, and The Bank of New York, as Guarantee Trustee. In addition, we have examined such other documents, statutes and authorities, and have made such other and further investigations, as we have deemed relevant and necessary as a basis for the opinion hereinafter set forth. Based on the foregoing, we hereby confirm that the statements set forth in the Prospectus under the caption "Certain Federal Income Tax Consequences", insofar as they purport to constitute a summary of matters of United States federal income tax law and regulations or legal conclusions with respect thereto, constitute an accurate summary of the United States federal income tax matters described therein. We express no opinion with respect to the transactions referred to herein and in the Prospectus other than as expressly set forth herein. Our opinions are not binding on the IRS and the IRS could disagree with the opinions expressed herein. Although we Atlantic City Electric -2- September 17, 1996 Company believe that the opinions we express herein would be sustained if challenged, there can be no assurance that this will be the case. Our opinions are based upon the Code, the Treasury regulations promulgated thereunder and other relevant authorities and law, all as in effect on the date hereof. Consequently, future changes in the law may cause the tax treatment of the transactions referred to herein to be materially different from that described above. We are members of the Bar of the State of New York and we do not express any opinion herein concerning any law other than the federal law of the United States. This opinion letter is being delivered to each of the addressees solely for their benefit and none of the addressees may use, circulate, quote or otherwise refer to this opinion letter, or the opinions expressed herein, for any purpose without our express written consent. We hereby consent to the filing of this letter as an exhibit to the Registration Statement and to the use of our name in the section entitled "Certain Federal Income Tax Consequences" contained in the Registration Statement. Very truly yours, /s/ Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT EX-12.1 11 STATEMENT RE: COMPUTATION OF RATIOS Exhibit 12.1 Atlantic City Electric Company SEC Registration Method Ratio of Earnings to Fixed Charges
Years Ended December 31, Twelve Months ------------------------------------------------------------- Ended 1991 1992 1993 1994 1995 June 30, 1996 --------- --------- --------- --------- --------- ------------- Net Income .................................... $ 107,428 $ 107,446 $ 109,026 $ 93,174 $ 98,752 $ 100,642 ========= ========= ========= ========= ========= ========= Federal Income Taxes Current ...................................... $ 37,759 $ 33,661 $ 29,680 $ 30,014 $ 32,458 $ 38,209 Deferred ..................................... 3,957 16,064 18,747 8,650 18,230 14,495 Investment Tax Credits-net .................... (2,537) (2,534) (2,534) (2,534) (2,534) (2,534) --------- --------- --------- --------- --------- --------- Total Taxes ................................... $ 39,179 $ 47,191 $ 45,893 $ 36,130 $ 48,154 $ 50,170 ========= ========= ========= ========= ========= ========= Fixed charges Interest on long term debt ................... $ 49,081 $ 50,719 $ 56,279 $ 53,747 $ 56,547 $ 57,309 Amortization of debt expense, discount and premium, net .................. 2,520 2,565 3,106 3,599 3,782 4,010 Interest on short term debt .................. 1,946 1,579 1,421 1,778 3,081 3,200 Other interest expense ....................... 1,179 1,099 212 (664) (531) 72 Interest factors associated with rentals ..... 5,551 4,177 3,884 4,148 4,364 4,116 --------- --------- --------- --------- --------- --------- Total Fixed Charges ........................... $ 60,277 $ 60,139 $ 64,902 $ 62,608 $ 67,243 $ 68,707 ========= ========= ========= ========= ========= ========= Earnings before income taxes and fixed charges(a) ................................... $ 205,279 $ 213,716 $ 218,950 $ 190,884 $ 212,777 $ 218,189 ========= ========= ========= ========= ========= ========= Ratio of earnings to Fixed Charges ............ 3.41 3.55 3.37 3.05 3.16 3.18
- ------------------ (a) Excludes the amount of capitalized interest associated with fixed charges. EX-12.2 12 STATEMENT RE: COMPUTATION OF RATIOS Exhibit 12.2 Atlantic City Electric Company SEC Registration Method Ratio of Earnings to Combined Fixed Charges & Preferred Dividend Requirements
Twelve Twelve Years Ended December 31, Months Months ------------------------------------------------------------- Ended June Ended June 1991 1992 1993 1994 1995 30, 1995 30, 1996 --------- --------- --------- --------- --------- --------- --------- Net Income ......................... $ 107,428 $ 107,446 $ 109,026 $ 93,174 $ 98,752 $ 76,298 $ 100,642 ========= ========= ========= ========= ========= ========= ========= Federal Income Taxes Current ........................... $ 37,759 $ 33,661 $ 29,680 $ 30,014 $ 32,458 $ 40,507 38,209 Deferred .......................... 3,957 16,064 18,747 8,650 18,230 (11,925) 14,495 Investment Tax Credits-net ......... (2,537) (2,534) (2,534) (2,534) (2,534) (2,534) (2,534) --------- --------- --------- --------- --------- --------- --------- Total Taxes ........................ $ 39,179 $ 47,191 $ 45,893 $ 36,130 $ 48,154 $ 26,048 $ 50,170 ========= ========= ========= ========= ========= ========= ========= Fixed charges Interest on long term debt ........ $ 49,081 $ 50,719 $ 56,279 $ 53,747 $ 56,547 $ 54,229 $ 57,309 Amortization of debt expense, discount and premium, net ....... 2,520 2,565 3,106 3,599 3,782 3,644 4,010 Interest on short term debt ....... 1,946 1,579 1,421 1,778 3,081 2,933 3,200 Other interest expense ............ 1,179 1,099 212 (664) (531) (291) 72 Interest factors associated with rentals ......................... 5,551 4,177 3,884 4,148 4,364 4,298 4,116 --------- --------- --------- --------- --------- --------- --------- Total Fixed Charges ................ $ 60,277 $ 60,139 $ 64,902 $ 62,608 $ 67,243 $ 68,813 $ 68,707 ========= ========= ========= ========= ========= ========= ========= Earnings before income taxes and fixed charges(a) .................. $ 205,279 $ 213,716 $ 218,850 $ 190,884 $ 212,777 $ 165,934 $ 218,189 ========= ========= ========= ========= ========= ========= ========= Preferred dividend requirements(b) $ 22,395 $ 25,636 $ 24,730 $ 23,196 $ 21,760 $ 21,021 $ 19,588 ========= ========= ========= ========= ========= ========= ========= Combined fixed charges and preferred dividend requirement .............. $ 82,672 $ 85,775 $ 89,632 $ 85,804 $ 89,003 $ 85,394 $ 88,295 ========= ========= ========= ========= ========= ========= ========= Ratio of earnings to Combined Fixed Charges & Preferred Dividend Requirements....................... 2.48 2.49 2.44 2.22 2.39 1.93 2.47
- ------------------ (a) Excludes the amount of capitalized interest associated with fixed charges. (b) Represents pre-tax earnings required to cover preferred stock dividend requirement. EX-23.1 13 INDEPENDENT AUDITORS' CONSENT EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Atlantic City Electric Company and Atlantic Capital I on Form S-3 of our report dated February 2, 1996, appearing in the Annual Report on Form 10-K of Atlantic City Electric Company for the year ended December 31, 1995 and to the reference to us under the heading "Experts" in this Registration Statement. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Parsippany, New Jersey September 17, 1996 EX-25.1 14 FORM T-1 EXHIBIT 25.1 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) ____________ ----------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (Jurisdiction of incorporation (I.R.S. Employer if not a U.S. national bank) Identification No.) 48 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) ----------------- ATLANTIC CITY ELECTRIC COMPANY (Exact name of obligor as specified in its charter) New Jersey 21-0398280 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 (Address of principal executive offices) (Zip code) ----------------- Atlantic City Electric Company [ ]% Junior Subordinated Deferrable Interest Debentures* (Title of the indenture securities) - ---------- *Specific title to be determined in connection with sale of [ ]% Junior Subordinated Deferrable Interest Debentures. 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. Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006 State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C. 20429 New York Clearing House Association New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 2.) Item 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. - A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. - A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. - The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. - A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. - -------- *Pursuant to General Instruction B, the Trustee has responded only to Items 1, 2 and 16 of this form since to the best of the knowledge of the Trustee the obligor is not in default under any indenture under which the Trustee is a trustee. NOTE Inasmuch as this Form T-1 is being filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, 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 17th day of September, 1996. THE BANK OF NEW YORK By:/s/ LUCILLE FIRRINCIELI ------------------------ Lucille Firrincieli Assistant Vice President - 2 - EXHIBIT 7 (Page 1 of 3) Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1996, published 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 Thousands - ------ ------------ Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin......................................... $ 3,650,068 Interest-bearing balances....................................... 738,260 Securities: Held-to-maturity securities..................................... 784,969 Available-for-sale securities................................... 2,033,407 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank: Federal funds sold.............................................. 3,699,232 Securities purchased under agreements to resell...................................................... 20,000 Loans and lease financing receivables: Loans and leases, net of unearned income........................................... 28,109,045 LESS: Allowance for loan and lease losses..................................... 586,658 LESS: Allocated transfer risk reserve.......................................... 429 Loans and leases, net of unearned income, allowance, and reserve................................ 27,521,958 Assets held in trading accounts................................... 678,844 Premises and fixed assets (including capitalized leases)............................................. 608,217 Other real estate owned........................................... 50,599 Investments in unconsolidated subsidiaries and associated companies........................................ 235,670 Customers' liability to this bank on acceptances outstanding......................................... 904,948 Intangible assets................................................. 450,230 Other assets...................................................... 1,299,464 ----------- Total assets...................................................... $42,675,866 =========== EXHIBIT 7 (Page 2 of 3) LIABILITIES - ----------- Deposits: In domestic offices............................................. $19,223,050 Noninterest-bearing................................ 7,675,758 Interest-bearing................................... 11,547,292 In foreign offices, Edge and Agreement subsidiaries, and IBFs.............................. 11,527,685 Noninterest-bearing................................ 48,502 Interest-bearing................................... 11,479,183 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased......................................... 1,498,351 Securities sold under agreements to repurchase................................................. 126,974 Demand notes issued to the U.S. Treasury........................................................ 231,865 Trading liabilities............................................... 479,390 Other borrowed money: With original maturity of one year or less...................... 2,521,578 With original maturity of more than one year ..................................................... 20,780 Bank's liability on acceptances executed and outstanding...................................... 905,850 Subordinated notes and debentures................................. 1,020,400 Other liabilities................................................ 1,543,657 ---------- Total liabilities................................................. 39,099,580 ---------- EQUITY CAPITAL - -------------- Common stock...................................................... 942,284 Surplus........................................................... 525,666 Undivided profits and capital reserves........................................................ 2,124,231 Net unrealized holding gains (losses) on available-for-sale securities................................ (8,063) Cumulative foreign currency translation adjustments........................................ (7,832) ----------- Total equity capital.............................................. 3,576,286 ----------- Total liabilities and equity capital............................. $42,675,866 =========== EXHIBIT 7 (Page 3 of 3) I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman 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 instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot ) Alan R. Griffith ) Directors Thomas A. Renyi ) EX-25.2 15 STATEMENT OF ELIGIBILITY OF TRUSTEE EXHIBIT 25.2 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) ____________ ----------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (Jurisdiction of incorporation (I.R.S. Employer if not a U.S. national bank) Identification No.) 48 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) ----------------- ATLANTIC CAPITAL I (Exact name of obligor as specified in its charter) Delaware To Be Applied For (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 (Address of principal executive offices (Zip code) ----------------- Atlantic Capital I [ ]% Cumulative Quarterly Income Preferred Securities* (Title of the indenture securities) - ---------- *Specific title to be determined in connection with sale of Atlantic Capital I [ ]% Cumulative Quarterly Income Preferred Securities. 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. Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006 State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C. 20429 New York Clearing House Association New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 2.) Item 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. - A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. - A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. - The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. - A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. - -------- *Pursuant to General Instruction B, the Trustee has responded only to Items 1, 2 and 16 of this form since to the best of the knowledge of the Trustee the obligor is not in default under any indenture under which the Trustee is a trustee. NOTE Inasmuch as this Form T-1 is being filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, 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 17th day of September, 1996. THE BANK OF NEW YORK By:/s/ LUCILLE FIRRINCIELI ------------------------ Lucille Firrincieli Assistant Vice President - 2 - EXHIBIT 7 (Page 1 of 3) Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1996, published 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 Thousands - ------ -------------- Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin......................................... $ 3,650,068 Interest-bearing balances....................................... 738,260 Securities: Held-to-maturity securities..................................... 784,969 Available-for-sale securities................................... 2,033,407 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank: Federal funds sold.............................................. 3,699,232 Securities purchased under agreements to resell...................................................... 20,000 Loans and lease financing receivables: Loans and leases, net of unearned income........................................... 28,109,045 LESS: Allowance for loan and lease losses..................................... 586,658 LESS: Allocated transfer risk reserve.......................................... 429 Loans and leases, net of unearned income, allowance, and reserve................................ 27,521,958 Assets held in trading accounts................................... 678,844 Premises and fixed assets (including capitalized leases)............................................. 608,217 Other real estate owned........................................... 50,599 Investments in unconsolidated subsidiaries and associated companies........................................ 235,670 Customers' liability to this bank on acceptances outstanding......................................... 904,948 Intangible assets................................................. 450,230 Other assets...................................................... 1,299,464 ----------- Total assets...................................................... $42,675,866 =========== EXHIBIT 7 (Page 2 of 3) LIABILITIES - ----------- Deposits: In domestic offices............................................. $19,223,050 Noninterest-bearing................................ 7,675,758 Interest-bearing................................... 11,547,292 In foreign offices, Edge and Agreement subsidiaries, and IBFs................................ 11,527,685 Noninterest-bearing................................ 48,502 Interest-bearing................................... 11,479,183 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsid- iaries, and in IBFs: Federal funds purchased......................................... 1,498,351 Securities sold under agreements to repurchase................................................. 126,974 Demand notes issued to the U.S. Treasury........................................................ 231,865 Trading liabilities............................................... 479,390 Other borrowed money: With original maturity of one year or less...................... 2,521,578 With original maturity of more than one year ..................................................... 20,780 Bank's liability on acceptances executed and outstanding...................................... 905,850 Subordinated notes and debentures................................. 1,020,400 Other liabilities................................................ 1,543,657 ---------- Total liabilities................................................. 39,099,580 ---------- EQUITY CAPITAL Common stock...................................................... 942,284 Surplus........................................................... 525,666 Undivided profits and capital reserves........................................................ 2,124,231 Net unrealized holding gains (losses) on available-for-sale securities................................ (8,063) Cumulative foreign currency translation adjustments........................................ (7,832) ----------- Total equity capital.............................................. 3,576,286 ----------- Total liabilities and equity capital............................. $42,675,866 =========== EXHIBIT 7 (Page 3 of 3) I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman 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 instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot ) Alan R. Griffith ) Directors Thomas A. Renyi ) EX-25.3 16 STATEMENT OF ELIGIBILITY OF TRUSTEE EXHIBIT 25.3 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) ____________ ----------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (Jurisdiction of incorporation (I.R.S. Employer if not a U.S. national bank) Identification No.) 48 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) ----------------- ATLANTIC CITY ELECTRIC COMPANY (Exact name of obligor as specified in its charter) New Jersey 21-0398280 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 6801 Black Horse Pike Egg Harbor Township, New Jersey 08234-4130 (Address of principal executive offices) (Zip code) ----------------- Atlantic City Electric Company Guarantee with respect to Atlantic Capital I [ ]% Cumulative Quarterly Income Preferred Securities* (Title of the indenture securities) - ---------- *Specific title to be determined in connection with sale of Atlantic Capital I [ ]% Cumulative Quarterly Income Preferred Securities. 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. Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006 State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C. 20429 New York Clearing House Association New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 2.) Item 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. - A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. - A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. - The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. - A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -------- * Pursuant to General Instruction B, the Trustee has responded only to Items 1, 2 and 16 of this form since to the best of the knowledge of the Trustee the obligor is not in default under any indenture under which the Trustee is a trustee. NOTE Inasmuch as this Form T-1 is being filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, 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 17th day of September, 1996. THE BANK OF NEW YORK By:/s/ LUCILLE FIRRINCIELI ----------------------- Lucille Firrincieli Assistant Vice President - 2 - EXHIBIT 7 (Page 1 of 3) Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 1996, published 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 Thousands - ------ -------------- Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin......................................... $ 3,650,068 Interest-bearing balances....................................... 738,260 Securities: Held-to-maturity securities..................................... 784,969 Available-for-sale securities................................... 2,033,407 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank: Federal funds sold.............................................. 3,699,232 Securities purchased under agreements to resell...................................................... 20,000 Loans and lease financing receivables: Loans and leases, net of unearned income........................................... 28,109,045 LESS: Allowance for loan and lease losses..................................... 586,658 LESS: Allocated transfer risk reserve.......................................... 429 Loans and leases, net of unearned income, allowance, and reserve................................ 27,521,958 Assets held in trading accounts................................... 678,844 Premises and fixed assets (including capitalized leases)............................................. 608,217 Other real estate owned........................................... 50,599 Investments in unconsolidated subsidiaries and associated companies........................................ 235,670 Customers' liability to this bank on acceptances outstanding......................................... 904,948 Intangible assets................................................. 450,230 Other assets...................................................... 1,299,464 ----------- Total assets...................................................... $42,675,866 =========== EXHIBIT 7 (Page 2 of 3) LIABILITIES - ----------- Deposits: In domestic offices............................................. $19,223,050 Noninterest-bearing................................ 7,675,758 Interest-bearing................................... 11,547,292 In foreign offices, Edge and Agreement subsidiaries, and IBFs.............................. 11,527,685 Noninterest-bearing................................ 48,502 Interest-bearing................................... 11,479,183 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased......................................... 1,498,351 Securities sold under agreements to repurchase................................................. 126,974 Demand notes issued to the U.S. Treasury........................................................ 231,865 Trading liabilities............................................... 479,390 Other borrowed money: With original maturity of one year or less...................... 2,521,578 With original maturity of more than one year ..................................................... 20,780 Bank's liability on acceptances executed and outstanding...................................... 905,850 Subordinated notes and debentures................................. 1,020,400 Other liabilities................................................ 1,543,657 ---------- Total liabilities................................................. 39,099,580 ---------- EQUITY CAPITAL - -------------- Common stock...................................................... 942,284 Surplus........................................................... 525,666 Undivided profits and capital reserves........................................................ 2,124,231 Net unrealized holding gains (losses) on available-for-sale securities................................ (8,063) Cumulative foreign currency translation adjustments........................................ (7,832) ----------- Total equity capital.............................................. 3,576,286 ----------- Total liabilities and equity capital............................. $42,675,866 =========== 1996\doc\finsert4.t1 EXHIBIT 7 (Page 3 of 3) I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman 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 instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot ) Alan R. Griffith ) Directors Thomas A. Renyi ) -----END PRIVACY-ENHANCED MESSAGE-----