-----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, PIJiFBHBSEAwbLE/tLd3D7kLq4wzfyfwk+4oK2NwjHNSace129dk2dhomda7IyX6 D0L8H1ShNrxP/EudYWCctQ== 0000950130-98-004505.txt : 19980916 0000950130-98-004505.hdr.sgml : 19980916 ACCESSION NUMBER: 0000950130-98-004505 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19980915 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 SEC ACT: SEC FILE NUMBER: 333-63447 FILM NUMBER: 98709946 BUSINESS ADDRESS: STREET 1: 6801 BLACK HORSE PIKE CITY: EGG HARBOR TOWNSHIP STATE: NJ ZIP: 08232 BUSINESS PHONE: 6096454100 MAIL ADDRESS: STREET 1: PO BOX 1264 CITY: PLEASANTVILLE STATE: NJ ZIP: 08232 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC CAPITAL II CENTRAL INDEX KEY: 0001070410 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-63447-01 FILM NUMBER: 98709947 BUSINESS ADDRESS: STREET 1: 800 KING ST STREET 2: PO BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19899 MAIL ADDRESS: STREET 1: 800 KING ST STREET 2: PO BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19899 S-3 1 PROSPECTUS As filed with the Securities and Exchange Commission on September 15, 1998. Registration Nos. 333-_____ and 333-_________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- Form S-3 Registration Statement under the Securities Act of 1933 ---------------------- ATLANTIC CITY ELECTRIC COMPANY (Exact name of Registrant as specified in its charter) New Jersey 21-0398280 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ATLANTIC CAPITAL II (Exact name of Registrant as specified in its charter) ---------------------- Delaware To Be Applied For (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 800 King Street P.O. Box 231 Wilmington, Delaware 19899 (302) 429-3011 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Barbara S. Graham Senior Vice President and Chief Financial Officer 800 King Street P.O. Box 231 Wilmington, Delaware 19899 (302) 429-3448 (Name and address, including zip code, and telephone number, including area code, of agent for service) ----------------------- It respectfully is requested that the Commission send copies of all notices, orders and communications to: Vincent Pagano, Jr., Esq. Kevin Stacey, Esq. Simpson Thacher & Bartlett Thelen Reid & Priest LLP 425 Lexington Avenue 40 West 57th Street New York, New York 10017 New York, New York 10019 212-455-2000 212-603-2000 Approximate date of commencement of proposed sale to the public: As soon as practicable after the registration statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act of 1933 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 of 1933, check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] -----------------------
CALCULATION OF REGISTRATION FEE ==================================================================================================================================== Proposed Proposed Title of Each Maximum Maximum Class of Amount Offering Aggregate Amount of Securities to be Price Offering Registration to be Registered Registered Per Unit(1) Price(1)(2) Fee - ------------------------------------------------------------------------------------------------------------------------------------ Atlantic Capital II Trust Preferred Capital Securities...................... 1,200,000 $25.00 $30,000,000 $8,850 Atlantic City Electric Company Guarantee with respect to Atlantic Capital II Trust Preferred Capital Securities and obligations with respect to such Preferred Securities under an Indenture and, an Amended and Restated Trust Agreement(3) Atlantic City Electric Company Junior Subordinated Debentures, Series I(4) ====================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee. (2) Exclusive of accrued distributions, if any. (3) No separate consideration will be received for the Atlantic City Electric Company Guarantee and such other obligations. (4) The Junior Subordinated Debentures will be purchased by Atlantic Capital II with the proceeds of the sale of the Preferred Securities. No separate consideration will be received for the Junior Subordinated Debentures. 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. ================================================================================ 2 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + 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 jurisdiction in which such offer, solicitation or sale + + would be unlawful prior to registration or qualification under the securities+ + laws of any such jurisdiction. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS (Subject to Completion, Issued ______________, 1998) 1,200,000 Preferred Securities Atlantic Capital II % CUMULATIVE TRUST PREFERRED CAPITAL SECURITIES (Liquidation Amount $25 per Preferred Security) Fully and Unconditionally Guaranteed to the extent described herein by Atlantic City Electric Company --------------- The ____% Cumulative Trust Preferred Capital Securities (the "Preferred Securities") offered hereby are being issued by and represent undivided beneficial ownership interests in the assets of Atlantic Capital II ("Atlantic Capital"), a statutory business trust created under the laws of the State of Delaware. Atlantic City Electric Company (the "Company"), a New Jersey corporation, will be the owner, directly or indirectly, of the undivided beneficial interests in the assets represented by common securities of Atlantic Capital (the "Common Securities," together with the Preferred Securities herein referred to as the "Trust Securities"). The Bank of New York is the Property Trustee (the "Property Trustee") of Atlantic Capital. Atlantic Capital exists for the sole purpose of issuing the Trust Securities and investing the proceeds thereof in ____% Junior Subordinated Debentures, Series I, Due 2028, to be issued by the Company (the "Subordinated Debentures") in an aggregate principal amount equal to the aggregate liquidation amount of the Trust Securities. The Preferred Securities 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 the Preferred Securities -- Subordination of Common Securities." (continued on following page) --------------- SEE "RISK FACTORS," BEGINNING ON PAGE 9, FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND CERTAIN RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. Application has been made to list the Preferred Securities on the New York Stock Exchange. Trading of the Preferred Securities on the New York Stock Exchange is expected to commence within a thirty-day period after the date of this Prospectus. See "Underwriting." --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY 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. ---------------
Underwriting Price to Discounts and Proceeds to Public(1) Commissions(2) Atlantic Capital(3)(4) -------------- ---------------- ---------------------- Per Preferred Security.. $25.00 (3) $25.00 Total................... $30,000,000 (3) $30,000,000
___________ (1) Plus accrued distributions, if any, from _________, 1998. (2) Atlantic Capital and the Company have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "1933 Act"). See "Underwriting." (3) In view of the fact that the proceeds of the sale of the Preferred Securities will be used to purchase the Subordinated Debentures, the Company has agreed, in the Underwriting Agreement, to pay to the Underwriters, as compensation for their services, $_____ per Preferred Security (or $___________ in the aggregate); provided that such compensation will be $_____ per Preferred Security sold to certain institutions. See "Underwriting." (4) Expenses of the offering, which are payable by the Company, are estimated to be $_______. --------------- The Preferred Securities are offered, subject to prior sale, when, as and if accepted by the Underwriters and subject to approval of certain legal matters by Thelen Reid & Priest LLP, counsel for the Underwriters. It is expected that delivery of the Preferred Securities will be made on or about __________, 1998 through the book-entry facilities of The Depository Trust Company against payment therefor in immediately available funds. --------------- MORGAN STANLEY DEAN WITTER LEGG MASON WOOD WALKER, INC. WHEAT FIRST UNION ____________, 1998 1 Holders of the Preferred Securities will be entitled to receive 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, 1998, at the per annum rate of ____% of the liquidation amount of $25 per Preferred Security (together, at any given time, with any accrued but unpaid amounts and interest thereon, if any, "Distributions"). Interest on the Subordinated Debentures is the sole source of income for Atlantic Capital from which payment of Distributions on the Preferred Securities can be made. The Company has the right to defer payments of interest on the Subordinated Debentures by extending the interest payment period thereon at any time or from time to time for up to 20 consecutive quarters with respect to each deferral period (each, an "Extension Period"); provided that no such Extension Period may extend beyond the maturity of the Subordinated Debentures. Prior to the end of an Extension Period the Company may, and at the end of such Extension Period the Company shall, pay all interest then accrued and unpaid (together with interest thereon at the stated rate borne thereby, compounded quarterly to the extent permitted by applicable law). Upon the termination of any Extension Period and the payment of all amounts then due, including interest on deferred interest payments, the Company may elect a new Extension Period, subject to the above requirements. See "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." If interest payments on the Subordinated Debentures are deferred, Distributions on the Preferred Securities also will be deferred and the Company will not be permitted, to (i) declare or pay dividends or distributions on (other than dividends or distributions paid in shares of Common Stock of the Company) or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, or (ii) make any payment of principal of, interest or premium, if any, on, or repay, repurchase or redeem any indebtedness that is pari passu with the Subordinated Debentures (including other Debt Securities, as defined under "Description of Subordinated Debentures -- General") or make any guarantee payment with respect to such indebtedness. During an Extension Period, interest on the Subordinated Debentures will continue to accrue and, as a result, Distributions on the Preferred Securities will continue to accumulate at the per annum rate of ____% (to the extent permitted by applicable law, compounded quarterly). During an Extension Period, holders of Preferred Securities will be required to accrue interest income (in the form of original issue discount ("OID")) for United States federal income tax purposes in advance of receipt of cash related to such interest income. See "Description of the Preferred Securities -- Distributions" and "Certain United States Federal Income Tax Consequences -- Interest Income and Original Issue Discount." The payment of Distributions and payments on the liquidation of Atlantic Capital or the redemption of the Preferred Securities are guaranteed by the Company to the extent that Atlantic Capital has sufficient funds available to make such payments (the "Guarantee"). See "Description of the Guarantee." If the Company fails to make interest payments on the Subordinated Debentures to Atlantic Capital, Atlantic Capital will have insufficient funds to pay Distributions on the Preferred Securities. In such event, a Holder of Preferred Securities may institute a legal proceeding directly against the Company to enforce payment to such Holder of the principal of or interest on Subordinated Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder. The Company's obligations under the Guarantee and the Subordinated Debentures are unsecured and rank subordinate and junior in right of payment to Senior Indebtedness (as defined under "Description of the Subordinated Debentures -- Subordination") of the Company. Pursuant to the Indenture, the Company, as borrower, has agreed to pay the obligations of Atlantic Capital (other than with respect to the Trust Securities). The Subordinated Debentures and the Guarantee, together with the obligations of the Company with respect to the Preferred Securities under the Indenture and the Trust Agreement (as defined under "Atlantic Capital"), constitute a full and unconditional guarantee of the Preferred Securities by the Company. The Trust Securities are subject to mandatory redemption upon repayment of the Subordinated Debentures at maturity or upon their earlier redemption. Any redemption of Trust Securities by Atlantic Capital will be in amounts having an aggregate liquidation amount equal to the aggregate principal of Subordinated Debentures to be redeemed and will be at a redemption price equal to 100% of such liquidation amount, plus accrued and unpaid Distributions, if any, to the redemption date (the "Redemption Price"). See "Description of the Preferred Securities -- Redemption." The Company will have the option at any time on or after _______________, 2003, to redeem the Subordinated Debentures, in whole or in part. The Company also will have the option, upon the occurrence and during the continuation of a Special Event (as defined under "Description of the Preferred Securities -- Special Event Redemption or Distribution"), (i) to redeem the Subordinated Debentures, in whole but not in part, which will result in the redemption of all of the Trust Securities by Atlantic Capital or (ii) to cause the termination of Atlantic Capital and, in connection therewith, after satisfaction of all amounts due to creditors of Atlantic Capital, if any, to cause the distribution of Subordinated Debentures to the Holders of the Trust Securities. If the Subordinated Debentures are distributed to the Holders of the Trust Securities, the Company will use its best efforts to have the Subordinated Debentures listed on the New York Stock Exchange ("NYSE") or on such other exchange as the Preferred Securities then are listed. See "Description of the Preferred Securities -- Special Event Redemption or Distribution." The Subordinated Debentures are unsecured and rank subordinate and junior in right of payment to all Senior Indebtedness of the Company. The terms of the Subordinated Debentures place no limitation on the amount of Senior Indebtedness that may be incurred by the Company. As of June 30, 1998, the Company had approximately $764,940,000 of principal amount of indebtedness for borrowed money and capital lease obligations constituting Senior Indebtedness. See "Description of the Subordinated Debentures -- Subordination." 2 In the event of the liquidation of Atlantic Capital, the Holders of the Trust Securities will be entitled to receive either (i) Subordinated Debentures in an aggregate principal amount of $25 per Trust Security or (ii) a liquidation amount of $25 per Trust Security, plus accrued and unpaid Distributions thereon to the date of payment, subject to certain limitations. See Description of the "Preferred Securities -- Liquidation Distribution upon Termination." The Preferred Securities will be represented by a global certificate registered in the name of The Depository Trust Company ("DTC") or its nominee. Beneficial interests in the Preferred Securities will be shown on, and transfers thereof will be effected only through, records maintained by participants in DTC. Except as described herein, Preferred Securities in certificated form will not be issued in exchange for the global certificate. See "Description of the Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company." 3 No dealer, salesman or other person has been authorized to give any information or to make any representations, other than those contained or incorporated by reference in this Prospectus, in connection with the offering made by this Prospectus, and if given or made, such information or representations must not be relied upon as having been authorized by Atlantic Capital, the Company or the Underwriters. This Prospectus does not constitute an offer or a solicitation by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. The delivery of this Prospectus at any time does not imply that the information herein is correct as of any time subsequent to the date of the Prospectus. CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED SECURITIES OFFERED HEREBY. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT PREFERRED SECURITIES AND BID FOR, AND PURCHASE, THE PREFERRED SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." -------------------------- TABLE OF CONTENTS Page ---- Available Information...................................................... 5 Incorporation of Certain Documents by Reference............................ 5 Summary Information........................................................ 6 Selected Financial Information of Atlantic City Electric Company........... 7 Risk Factors............................................................... 9 The Company................................................................ 12 Atlantic Capital........................................................... 12 Use of Proceeds............................................................ 12 Accounting Treatment....................................................... 12 Description of the Preferred Securities.................................... 13 Description of the Guarantee............................................... 22 Description of the Subordinated Debentures................................. 24 Certain United States Federal Income Tax Consequences...................... 32 Validity of the Securities................................................. 36 Underwriting............................................................... 37 Experts.................................................................... 38 4 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Additionally, such material may be accessed at the Commission's website (http://www.sec.gov). Certain securities of the Company are listed on the NYSE, and reports and other information concerning the Company may be inspected and copied at the office of the NYSE. This Prospectus constitutes a part of a Registration Statement filed by the Company and Atlantic Capital with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits certain of the information contained in the Registration Statement in accordance with the rules and regulations of the Commission. Reference is hereby made to the Registration Statement and the related exhibits for further information with respect to the Company, Atlantic Capital and the Preferred Securities. Statements contained herein concerning the provisions of any document are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. No separate financial statements of Atlantic Capital are included herein. The Company considers that such financial statements would not be material to Holders of the Preferred Securities because the Company is a reporting company under the 1934 Act and Atlantic Capital has no independent operations, but exists for the sole purpose of issuing the Trust Securities and holding as trust assets the Subordinated Debentures. It is anticipated that Atlantic Capital will not be subject to the reporting requirements under the 1934 Act. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, filed by the Company with the Commission pursuant to the 1934 Act, are hereby incorporated by reference: 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1997; 2. The Company's Quarterly Report on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998; 3. The Company's Current Reports on Form 8-K dated February 27, 1998, March 3, 1998 and March 5, 1998. Each document filed subsequent to the date of this Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to the termination of the offering made by this Prospectus shall be deemed to be incorporated by reference in this Prospectus and shall be a part hereof from the date of filing of such document. The documents that are incorporated or deemed to be incorporated by reference in this Prospectus are referred to sometimes hereinafter as the "Incorporated Documents." Any statement contained in an Incorporated Document shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed Incorporated Document 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 this Prospectus. The Company hereby undertakes to provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any document referred to above which has been or may be incorporated in this Prospectus by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests for such copies should be directed to: Stephanie M. Scola, Manager of Capital Markets, Atlantic City Electric Company, King Street, P.O. Box 231, Wilmington, Delaware 19899, telephone number (302) 429-3931. 5 SUMMARY INFORMATION The following is a summary of certain information contained herein and should be read in conjunction with such information contained elsewhere in this Prospectus and is subject to and qualified by reference to such information. Capitalized terms used herein have the respective meanings ascribed to them elsewhere in this Prospectus. General The Preferred Securities represent undivided beneficial ownership interests in the assets of Atlantic Capital and will have a preference under certain circumstances with respect to Distributions and amounts payable on liquidation, redemption or otherwise over the Common Securities. The sole assets of Atlantic Capital will be the Subordinated Debentures. The Subordinated Debentures are unsecured subordinated debt securities issued under an Indenture (the "Indenture") between the Company and The Bank of New York, as trustee (the "Debenture Trustee"). Distributions Holders of the Preferred Securities will be entitled to receive 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, 1998, at the per annum rate set forth on the cover page of this prospectus to the persons in whose names the Preferred Securities are registered at the close of business on the relevant record dates. Atlantic Capital will hold Subordinated Debentures in an aggregate principal amount equal to the liquidation amount of the Trust Securities. Atlantic Capital will use interest payments on the Subordinated Debentures to make Distributions on the Preferred Securities. The Subordinated Debentures are unsecured and rank subordinate and junior in right of payment to all Senior Indebtedness of the Company. Option to Extend Interest Payment Period The Company has the right to defer payments of interest on the Subordinated Debentures by extending the interest payment period thereon for Extension Periods of up to 20 consecutive quarters with respect to each deferral period; provided, however, that no Extension Period may extend beyond the maturity of the Subordinated Debentures. If interest payments on the Subordinated Debentures are deferred, Distributions on the Preferred Securities also will be deferred and the Company will not be permitted, to (i) declare or pay dividends or distributions on (other than dividends or distributions paid in shares of Common Stock of the Company) or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, or (ii) make any payment of principal of, interest or premium, if any, on, or repay, repurchase or redeem any indebtedness that is pari passu with the Subordinated Debentures (including other Debt Securities, as defined herein) or make any guarantee payment with respect to such indebtedness. During an Extension Period, interest on the Subordinated Debentures will continue to accrue and, as a result, Distributions on the Preferred Securities will accumulate at the per annum rate set forth on the cover page of this Prospectus (to the extent permitted by applicable law, compounded quarterly), and Holders of Preferred Securities will be required to accrue interest income for United States federal income tax purposes in the form of OID in advance of receipt of cash related to such interest income. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may elect another Extension Period subject to the requirements set forth above. Redemption The Preferred Securities are subject to mandatory redemption upon repayment of the Subordinated Debentures at maturity or upon their earlier redemption. The Subordinated Debentures are redeemable, at the option of the Company, in whole or in part, on or after ________________, 2003, or, in whole but not in part, upon the occurrence of a Special Event and in certain other circumstances. See "Description of the Preferred Securities -- Redemption and -- Special Event Redemption or Distribution" and "Description of the Subordinated Debentures -- Optional Redemption." No sinking fund will be established for the benefit of the Preferred Securities. 6 Special Event Redemption or Distribution Upon the occurrence and during the continuation of a Special Event, the Company has the option to (i) redeem the Subordinated Debentures, in whole but not in part, and therefore cause a mandatory redemption of all of the Trust Securities at the Redemption Price within 90 days following the occurrence of such Special Event or (ii) cause the termination of Atlantic Capital, subject, in the case of a Tax Event (as defined under "Description of the Preferred Securities -- Special Event Redemption or Distribution"), to receipt of a No Recognition Opinion (as defined under "Description of the Preferred Securities - - - Special Event Redemption or Distribution") and in connection therewith, after the satisfaction of all amounts due to creditors of Atlantic Capital, if any, cause the Subordinated Debentures to be distributed to the Holders of the Trust Securities on a pro rata basis. If the Subordinated Debentures are distributed to the Holders of the Preferred Securities, the Company will use its best efforts to have the Subordinated Debentures listed on the NYSE or on such other exchange as the Preferred Securities are then listed. See "Description of the Preferred Securities -- Special Event Redemption or Distribution." The Guarantee The payment of Distributions and payments on the liquidation of Atlantic Capital or the redemption of Preferred Securities are guaranteed by the Company to the extent that Atlantic Capital has sufficient funds available therefor. See "Description of the Guarantee." Listing Application has been made to list the Preferred Securities on the NYSE. Trading of the Preferred Securities on the NYSE is expected to commence within a 30-day period after the date of this Prospectus. Use of Proceeds The proceeds to be received by Atlantic Capital from the sale of the Preferred Securities will be used to purchase Subordinated Debentures of the Company. The Company expects to use the proceeds of such purchase to purchase from Conectiv shares of preferred stock tendered in connection with Conectiv's Offer to Purchase commenced September 10, 1998. To the extent the proceeds are not immediately so used, they may be invested temporarily in short-term interest-bearing obligations. See "Use of Proceeds." 7 SELECTED FINANCIAL INFORMATION OF ATLANTIC CITY ELECTRIC COMPANY (Thousands, except per share amounts, ratios and percentages) Presented below is selected audited consolidated financial information for the Company for the years ended December 31, 1993 through 1997 as well as unaudited information for the twelve months ended June 30, 1998. The consolidated financial information is not necessarily indicative of the results for any future period and is qualified in its entirety by the detailed information available in the Company's reports as described under "Incorporation of Certain Documents by Reference."
Twelve Months Year Ended December 31, Ended -------------------------------------------------------- June 30, 1998 1997 1996 1995 1994 1993 ----------------- ----------- ----------- ---------- --------- ----------- (Unaudited) Operating Revenues.................................... $1,078,825 $1,084,890 $989,647 $954,783 $913,226 $865,799 Net Income(1)......................................... 45,276 85,747 75,017 98,752 93,174 109,026 Ratio of Earnings to Fixed Charges(1)................. 2.00 2.83 2.58 3.19 3.07 3.37 Ratio of Earnings to Fixed Charges and Preferred Dividends(2)........................................ 1.84 2.58 2.16 2.43 2.26 2.47
CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of June 30, 1998 and as adjusted to give effect to the consummation of the offering of the Preferred Securities offered hereby. The following data should be read in conjunction with the Company's reports filed with the Commission under the Exchange Act. See "Incorporation of Certain Documents by Reference."
June 30, 1998 ------------------------------------------------- (Unaudited) Actual As Adjusted ------------------------------------------------- Outstanding Ratio Outstanding Ratio --------------- ------- --------------- --------- Long-Term Debt(3).............. $ 849,402 49.6% $ 849,402 48.8% Cumulative Preferred Stock - Subject to Mandatory Redemption................... 23,950 1.4 23,950 1.4 Not Subject to Mandatory Redemption................... 30,000 1.8 30,000(4) 1.7(4) Cumulative Quarterly Preferred Securities......... 70,000 4.1 100,000 5.7 Common Equity................. 738,513 43.1 738,513 42.4 ---------- ----- ---------- ----- Total Capitalization.......... $1,711,865 100.0% $1,741,865 100.0% ========== ===== ========== ===== - ------------------------------------------------------------------------------
(1) Net income for the twelve months ended June 30, 1998 was decreased by $44.6 million ($70.1 million before taxes) due to charges for employee separation programs, termination of certain employee benefit plans, and other Merger- related costs. (2) For the twelve months ended June 30, 1998, excluding $70.1 million of pre- tax charges for employee separation programs termination of certain employee benefit plans, and other Merger-related costs, the ratio of earnings to fixed charges is 2.96 and the ratio of earnings to fixed charges and preferred dividends is 2.73. (3) Includes current portion. (4) Does not reflect shares which may be retired pursuant to Conectiv's Offer to Purchase. See "Use of Proceeds." 8 RISK FACTORS Prospective purchasers of Preferred Securities should review carefully the information contained elsewhere herein and should particularly consider the following risk factors with respect to the Preferred Securities: Subordination of the Guarantee and the Subordinated Debentures The Company's obligations under the Guarantee and the Subordinated Debentures are unsecured and rank subordinate and junior in right of payment to Senior Indebtedness of the Company, except any liabilities that may be made pari passu expressly by their terms. See "Description of the Guarantee -- Status of the Guarantee" and "Description of the Subordinated Debentures -- Subordination." As of June 30, 1998, Senior Indebtedness of the Company aggregated approximately $764,940,000. There are no terms of the Preferred Securities, the Guarantee or the Subordinated Debentures that limit the Company's ability to incur additional indebtedness, including indebtedness that would rank senior to the Guarantee and the Subordinated Debentures. The ability of Atlantic Capital to pay amounts due on the Preferred Securities is solely dependent upon the Company making payments on the Subordinated Debentures as and when required. Option to Extend Interest Payment Period; Tax Consequences The Company has the right to defer payments of interest on the Subordinated Debentures by extending the interest payment period thereon for Extension Periods of up to 20 consecutive quarters with respect to each deferral period; provided that no Extension Period may extend beyond the maturity of the Subordinated Debentures. Prior to the end of an Extension Period, the Company may, and at the end of such Extension Period the Company shall, pay all interest then accrued and unpaid (together with interest thereon at the stated rate borne thereby, compounded quarterly to the extent permitted by applicable law). Upon the termination of any Extension Period and the payment of all amounts then due, including interest on deferred interest payments, the Company may select a new Extension Period, subject to the above requirements. If interest payments on the Subordinated Debentures are deferred, Distributions on the Preferred Securities also will be deferred and the Company will not be permitted, subject to certain exceptions set forth herein, to (i) declare or pay dividends or distributions on (other than dividends or distributions paid in shares of Common Stock of the Company) or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, or (ii) make any payment of principal of, interest or premium, if any, on, or repay, repurchase or redeem any indebtedness that is pari passu with the Subordinated Debentures (including other Debt Securities) or make any guarantee payment with respect to such indebtedness. During an Extension Period, interest on the Subordinated Debentures will continue to accrue and, as a result, Distributions on the Preferred Securities will accumulate at the per annum rate set forth on the cover page of this Prospectus (to the extent permitted by applicable law, compounded quarterly). See "Description of the Preferred Securities -- Distributions" and "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." Should an Extension Period occur, a Holder of Preferred Securities will be required to accrue interest (in the form of original issue discount ("OID")) in income in respect of its pro rata share of the Subordinated Debentures held by Atlantic Capital for United States federal income tax purposes. As a result, a Holder of Preferred Securities will include such interest 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 Atlantic Capital if the Holder disposes of the Preferred Securities prior to the record date for the payment of Distributions. See "Certain United States Federal Income Tax Consequences -- Interest Income and Original Issue Discount." The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Subordinated Debentures. However, should the Company elect to exercise such right in the future, the market price of the Preferred Securities is likely to be adversely affected. A Holder that disposes of its Preferred Securities during an Extension Period, therefore, might not receive the same return on its investment as a Holder that continues to hold its Preferred Securities. In addition, as a result of the existence of the Company's right to defer interest payments, the market price of the Preferred Securities (which represent an undivided beneficial 9 ownership interest in the Subordinated Debentures) may be more volatile than other securities that do not have such rights. Special Event Redemption or Distribution; Adverse Effect of Possible Tax Law Changes Upon the occurrence and during the continuation of a Special Event, the Company has the option to (i) redeem the Subordinated Debentures, in whole but not in part, and therefore cause a mandatory redemption of all of the Trust Securities at the Redemption Price within 90 days following the occurrence of such Special Event or (ii) cause the termination of Atlantic Capital and, in connection therewith, after satisfaction of all amounts due to creditors of Atlantic Capital, if any, cause Subordinated Debentures to be distributed to the Holders of Trust Securities within 90 days following the occurrence of such Special Event. Recently, a petition was filed in the United States Tax Court as a result of a challenge by the Internal Revenue Service ("IRS") of the petitioner's treatment as indebtedness of a loan issued in circumstances with similarities to the issuance of the Subordinated Debentures. If this matter is in fact litigated and the Tax Court were to sustain the IRS's position on this matter, such judicial decision could give rise to a Tax Event, which would permit the Company to cause a redemption of the Preferred Securities as described more fully under "Description of the Preferred Securities--Special Event Redemption or Distribution". Rights Under the Guarantee; Limitation as to Funds Available to Atlantic Capital The Guarantee guarantees to the Holders of the Preferred Securities to the extent not paid by Atlantic Capital, the payment (but not the collection) of (i) any accrued and unpaid Distributions required to be paid on the Preferred Securities, to the extent Atlantic Capital has sufficient funds available therefor, (ii) the Redemption Price with respect to Preferred Securities called for redemption by Atlantic Capital, to the extent the Property Trustee has available in the payment account sufficient funds to make such payment and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of Atlantic Capital (unless the Subordinated Debentures are distributed to Holders of the Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment and (b) the amount of assets of Atlantic remaining available for distribution to Holders of the Preferred Securities in liquidation of Atlantic Capital. If the Company were to default on its obligations under the Subordinated Debentures, Atlantic Capital would lack available funds for the payment of Distributions or amounts payable on redemption of the Preferred Securities or otherwise, and in such event Holders of the Preferred Securities would not be able to rely upon the Guarantee for payment of such amounts. See "Description of the Guarantee" and "Description of the Subordinated Debentures -- Subordination" herein. Limited Voting Rights Holders of Preferred Securities generally will have limited voting rights relating only to the modification of the Preferred Securities and the exercise of remedies upon the occurrence of an Event of Default. Holders of Preferred Securities 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 Administrative Trustees (as defined under "Atlantic Capital") and the Company may amend the Trust Agreement to ensure that Atlantic Capital will be classified for United States federal income tax purposes as a grantor trust without the consent of Holders, even if such action adversely affects the interests of Holders. See "Description of the Preferred Securities -- Voting Rights," "-- Amendments," "-- Removal of Property Trustee" and "-- Co-Trustees and Separate Property Trustees." Trading Characteristics of Preferred Securities Application has been made to list the Preferred Securities on the NYSE. If approved for listing, the Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Subordinated Debentures. 10 Market Prices There can be no assurance as to the market prices for Preferred Securities or Subordinated Debentures that may be distributed in exchange for Preferred Securities upon dissolution or liquidation of Atlantic Capital. Accordingly, the Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Subordinated Debentures that a holder of Preferred Securities may receive on termination and liquidation of Atlantic Capital, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. Because Holders of Preferred Securities may receive Subordinated Debentures upon the occurrence of a Special Event, prospective purchasers of Preferred Securities also are making an investment decision with regard to the Subordinated Debentures and should review carefully all the information regarding the Subordinated Debentures contained herein. As a result of the existence of the Company's right to extend interest payment periods, the market price of the Preferred Securities may be more volatile than the market prices of other securities on which the interest is not subject to such deferral. See "Description of the Preferred Securities--Special Event Redemption or Distribution" and "Description of the Subordinated Debentures." 11 THE COMPANY The Company was incorporated in New Jersey on April 28, 1924. The Company's principal executive offices are located at 800 King Street, P.O. Box 231, Wilmington, Delaware 19899, (302) 429-3011. The Company is an operating utility primarily engaged in the generation, transmission, distribution and sale of electric power to approximately 480,000 customers in the southern part of New Jersey. All of the common stock of the Company is owned by Conectiv, a registered holding company under the Holding Company Act. ATLANTIC CAPITAL Atlantic Capital is a statutory business trust created under Delaware law pursuant to (i) a trust agreement (the "Original Trust Agreement") executed by the Company, as depositor for Atlantic Capital, The Bank of New York, as Property Trustee, The Bank of New York (Delaware) as Delaware Trustee, and an Administrative Trustee, who is an employee of the Company (together with such other Administrative Trustees from time to time appointed by the Company, the "Administrative Trustees") and (ii) the filing of a certificate of trust (the "Certificate of Trust") with the Delaware Secretary of State on September 10, 1998. Such Original Trust Agreement will be amended and restated in its entirety (as so amended and restated, the "Trust Agreement") 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 of 1939, as amended (the "Trust Indenture Act"). Atlantic Capital exists for the exclusive purposes of (i) issuing Trust Securities representing undivided beneficial ownership interests in the assets of Atlantic Capital (ii) holding the Subordinated Debentures as trust assets and (iii) engaging in only those other activities necessary or incidental thereto. All of the Common Securities, which will represent at least 3% of the total capital of Atlantic Capital, will be owned by the Company. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except as described under "Description of the Preferred Securities -- Subordination of the Common Securities." Atlantic Capital has a term of approximately 45 years, but may terminate earlier as provided in the Trust Agreement. Atlantic Capital's business and affairs will be conducted by the Administrative Trustees. The office of the Delaware Trustee is White Clay Center, Newark, Delaware 19711. The principal place of business of Atlantic Capital is c/o Atlantic City Electric Company, 800 King Street, P.O. Box 231, Wilmington, Delaware 19899. USE OF PROCEEDS The proceeds to be received by Atlantic Capital from the sale of the Preferred Securities will be used to purchase Subordinated Debentures of the Company. The Company expects to use the proceeds from the sale of the Subordinated Debentures to purchase from Conectiv the shares of its Preferred Stock tendered in connection with Conectiv's Offer to Purchase commenced September 10, 1998 (the "Offer to Purchase"). If 100% of such shares of Preferred Stock are tendered in connection with the Offer to Purchase, the funding requirement with respect to such tender would be $6,283,200 for the 4% Preferred Stock ($100 par value), $6,012,000 for the 4.10% Preferred Stock ($100 par value), $1,329,000 for the 4.35% Preferred Stock ($100 par value), $3,189,600 for the 4.35% 2nd Series Preferred Stock ($100 par value), $4,837,500 for the 4.75% Preferred Stock ($100 par value) and $5,000,000 for the 5% Preferred Stock ($100 par value). The Company expects that less than 100% of such shares will be tendered in connection with the Offer to Purchase. To the extent the proceeds are not immediately so used, they may be invested temporarily in short-term interest-bearing obligations. ACCOUNTING TREATMENT For financial reporting purposes, Atlantic Capital will be treated as a subsidiary of the Company and, accordingly, the accounts of Atlantic Capital will be included in the consolidated financial statements of the Company. The Preferred Securities will be included in the consolidated balance sheets of the Company and appropriate disclosures about the Preferred Securities, the Guarantee and the Subordinated Debentures will be included in the notes to the consolidated financial statements of the Company. For financial reporting purposes, 12 dividend distributions on the Preferred Securities will be recorded in the consolidated statements of income of the Company. DESCRIPTION OF THE PREFERRED SECURITIES The following summaries of certain provisions of the Preferred Securities and the Trust Agreement do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the Trust Agreement, including the definitions therein of certain terms, and the Trust Indenture Act. Wherever particular sections or defined terms of the Trust Agreement are referred to, such sections or defined terms are incorporated herein by reference. The Trust Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. General The Preferred Securities and the Common Securities will be created pursuant to the terms of the Trust Agreement. The Preferred Securities represent undivided beneficial ownership interests in the assets of Atlantic Capital and will have a preference under certain circumstances with respect to Distributions and amounts payable on liquidation, redemption or otherwise over the Common Securities. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except as described under "-- Subordination of Common Securities." (Section 4.03). The Subordinated Debentures will be owned by Atlantic Capital and held by the Property Trustee in trust for the benefit of the Holders of the Trust Securities. (Section 2.09). The Subordinated Debentures and the Guarantee, together with the obligations of the Company with respect to the Preferred Securities under the Indenture and the Trust Agreement, constitute a full and unconditional guarantee of the Preferred Securities by the Company. Distributions The Distributions payable on the Preferred Securities will be fixed at the rate per annum of the stated liquidation amount thereof set forth on the cover page of this Prospectus. The term "Distributions" as used herein includes any additional Distributions payable on overdue Distributions, unless otherwise stated. The amount of Distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a full month, on the basis of the actual number of days elapsed. (Section 4.01(b)). Distributions on the Preferred Securities will be cumulative, will accrue from and including the date of initial issuance thereof, and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1998, except as otherwise described below. Such Distributions will accrue to, and including, the first Distribution payment date (as defined below), and for each subsequent Distribution payment date will accrue from, and excluding, the last Distribution payment date through which Distributions have been paid or duly provided for. In the event that any date on which Distributions are otherwise payable on the Preferred Securities is not a Business Day, payment of the Distribution payable on such date will be made on the next succeeding Business Day, 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 otherwise payable in accordance with the foregoing, a "Distribution payment date"). (Section 4.01(a)). "Business Day" is used herein to mean any day other than (i) a Saturday or a 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 and (iii) a day on which the Corporate Trust Office of the Property Trustee or the Debenture Trustee is closed for business. (Section 1.01) The Company has the right under the Indenture to defer interest payments on the Subordinated Debentures at any time or from time to time by extending the interest payment period thereon for Extension Periods up to 20 consecutive quarters but not extending beyond the maturity of the Subordinated Debentures, with the consequence that quarterly Distributions on the Preferred Securities would be deferred (but interest on the Subordinated Debentures would continue to accrue and, as a result, Distributions on the Preferred Securities will accumulate at 13 the rate per annum set forth on the cover page of this Prospectus, compounded quarterly) by Atlantic Capital during any such Extension Period. (Section 4.01(b)). In the event that the Company exercises this right, during the Extension Period the Company may not (i) declare or pay dividends or distributions (other than dividends or distributions in Common Stock of the Company) on, or redeem, purchase, acquire, or make a liquidation payment with respect to any of its capital stock, or (ii) make any payment of principal of, interest or premium, if any, on, or repay, repurchase or redeem any indebtedness that is pari passu with the Subordinated Debentures (including other Debt Securities) or make any guarantee payment with respect to such indebtedness (other than payments made pursuant to any Guarantee). See "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." Distributions on the Preferred Securities will be payable to the Holders thereof as they appear on the register of Atlantic Capital on the relevant record dates, each of which, will be 15 days prior to the relevant Distribution payment date. Subject to any applicable laws and regulations and the Trust Agreement, each such payment will be made as described under "-- Book-Entry Only Issuance -- The Depository Trust Company." (Section 4.01(d)). Redemption Upon the repayment of the Subordinated Debentures, whether at maturity or upon earlier redemption as provided in the Indenture, the proceeds from such repayment shall be applied by the Property Trustee to redeem a Like Amount (as defined herein) of Trust Securities, upon not less than 30 nor more than 60 days' notice, at the Redemption Price. (Section 4.02). See "Description of the Subordinated Debentures -- Optional Redemption." Special Event Redemption or Distribution Upon the occurrence and during the continuation of a Tax Event or an Investment Company Event (each, as defined below, a "Special Event"), the Company has the option to (i) redeem the Subordinated Debentures in whole, but not in part, and therefore cause a mandatory redemption of all of the Trust Securities at the Redemption Price within 90 days following the occurrence of such Special Event, or (ii) cause the termination of Atlantic Capital and in connection therewith, after satisfaction of all amounts due to creditors of Atlantic Capital, if any, cause the Subordinated Debentures to be distributed to the Holders of the Trust Securities within 90 days following the occurrence of such Special Event; provided that in the case of the occurrence of a Tax Event, as a condition to any such termination and distribution, the Administrative Trustees shall have received an opinion of nationally recognized independent tax counsel experienced in such matters, which opinion may rely on any then applicable published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the termination of the Trust and the distribution of the Subordinated Debentures (a "No Recognition Opinion"). See "Certain United States Federal Income Tax Consequences -- Distribution of Subordinated Debentures or Cash upon Liquidation of Atlantic Capital." If the Company does not elect either option (i) or (ii) above, the Preferred Securities will remain outstanding and, in the event a Tax Event has occurred and is continuing, under the Indenture, the Company, as borrower, will be obligated to pay any taxes, duties, assessments or other governmental charges (other than United States withholding taxes) to which Atlantic Capital has become subject. "Like Amount" means, as the context requires, (i) with respect to a redemption of Trust Securities, Trust Securities having a liquidation amount equal to the principal amount of Subordinated Debentures to be contemporaneously redeemed and (ii) with respect to a distribution of Subordinated Debentures to Holders of Trust Securities in connection with a liquidation of Atlantic Capital, Subordinated Debentures having a principal amount equal to the liquidation amount of the Trust Securities with respect to which such Subordinated Debentures are to be distributed. (Section 1.01) "Tax Event" means the receipt by Atlantic Capital of an opinion of counsel (which may be counsel to the Company or an affiliate but not an employee thereof and which must be acceptable to the Property Trustee) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any administrative pronouncement or action or judicial decision 14 interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of issuance of the Preferred Securities, there is more than an insubstantial risk that at such time or within 90 days of the date thereof (i) Atlantic Capital is, or will be, subject to United States federal income tax with respect to income received or accrued on the Subordinated Debentures, (ii) interest payable by the Company on the Subordinated Debentures, is not, or will not be, fully deductible by the Company for United States federal income tax purposes, or (iii) Atlantic Capital is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges. (Section 1.01) "Investment Company Event" means 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 to the effect that Atlantic Capital is or will be considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which change in law becomes effective on or after the date of original issuance of the Preferred Securities. (Section 1.01). On the date fixed for the distribution of Subordinated Debentures upon termination of Atlantic Capital (i) the Trust Securities no longer will be deemed to be outstanding and (ii) all rights of the Holders thereof will cease, except the right to receive Subordinated Debentures upon surrender of the certificates representing their Trust Securities. (Section 9.04). If the Subordinated Debentures are distributed to the Holders of Preferred Securities, the Company will use its best efforts to list the Subordinated Debentures on the NYSE or on such other exchange on which the Preferred Securities then are listed. Redemption Procedures Preferred Securities redeemed on each Redemption Date (as defined below) shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Subordinated Debentures. Redemptions of the Preferred Securities shall be made and the Redemption Price shall be deemed payable on each date selected for redemption (the "Redemption Date") only if Atlantic Capital has funds immediately available for the payment of such Redemption Price. (Section 4.02(c)). See also "-- Subordination of Common Securities." If Atlantic Capital shall give a notice of redemption in respect of Preferred Securities, then, on or before the Redemption Date, the Property Trustee will deposit irrevocably with the paying agent for such Preferred Securities funds sufficient to pay the applicable Redemption Price and will give such paying agent irrevocable instructions to pay the Redemption Price to the Holders thereof upon surrender of their certificates evidencing such Preferred Securities. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Preferred Securities called for redemption shall be payable to the Holders of such Preferred Securities on the relevant record dates for the related Distribution payment dates. If notice of redemption shall have been given and funds deposited as required, then on the Redemption Date, all rights of Holders of such Preferred Securities so called for redemption will cease, except the right of the Holders of such Preferred Securities to receive the Redemption Price, but without interest thereon, and such Preferred Securities will cease to be outstanding. In the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the amount 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). In the event that payment of the Redemption Price in respect of Preferred Securities called for redemption is not paid either by Atlantic Capital or by the Company pursuant to the Guarantee, Distributions on such Preferred Securities will continue to accrue at the then applicable rate, from the original Redemption Date to the date of payment. (Section 4.02(d)). If less than all the Trust Securities are to be redeemed on a Redemption Date, then the aggregate liquidation amount of such securities to be redeemed shall be allocated on a pro rata basis to the Common Securities and the Preferred Securities based upon the relative liquidation amounts of such classes. The particular Preferred Securities 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 Preferred Securities not previously called for redemption which may provide for the selection for redemption of portions equal to $25 or integral multiples thereof of the liquidation amount of 15 Preferred Securities of a denomination greater than $25. The Property Trustee shall notify the Registrar promptly 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 the 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 4.02(e)). Subordination of Common Securities Payment of Distributions on, and the Redemption Price of, the Trust Securities, shall be made pro rata based on the liquidation amount of the Trust Securities; provided that if on any Distribution payment date or Redemption Date any Event of Default resulting from an Event of Default under the Indenture (a "Debenture Event of Default") shall have occurred and be continuing, no payment of any Distribution 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 accrued and unpaid Distributions on all 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 Preferred Securities, shall have been made or provided for. (Section 4.03(a)). In the case of an Event of Default resulting from a Debenture Event of Default under the Indenture, the Company as Holder of the Common Securities will be deemed to have waived any such Event of Default until the effect of all such Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until all such Events of Default have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities, and only Holders of Preferred Securities will have the right to direct the Property Trustee to act. (Section 4.03(b)). Liquidation Distribution upon Termination Pursuant to the Trust Agreement, Atlantic Capital shall terminate and shall be liquidated by the Property Trustee on December 31, 2043 or, if earlier, on the first to occur of: (i) the bankruptcy, dissolution or liquidation of the Company; (ii) the redemption of all of the Preferred Securities, (iii) the termination and liquidation of Atlantic Capital upon the occurrence of a Special Event and, in the case of a Tax Event, receipt by the Administrative Trustees of a No Recognition Opinion, and (iv) the entrance by a court of competent jurisdiction of an order for judicial termination of Atlantic Capital. (Sections 9.01 and 9.02). On December 31, 2043 or if an early termination occurs as described in clause (i), (iii) or (iv) above, Atlantic Capital shall be liquidated by the Property Trustee by distributing to each Holder of Preferred Securities and Common Securities a Like Amount of Subordinated Debentures, 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 Atlantic Capital available for distribution to Holders after adequate provision, has been made for the satisfaction of all amounts due to creditors, if any, an amount equal to the aggregate liquidation amount of the Trust Securities plus accumulated 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 Atlantic Capital has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by Atlantic Capital on the Trust Securities shall be paid on a pro rata basis, except that if a Debenture Event of Default has occurred and is continuing, or if a Debenture Event of Default has not occurred solely by reason of a requirement that time lapse or notice be given, the Liquidation Distribution with respect to the Preferred Securities shall be paid in full prior to making any Liquidation Distribution with respect to the Common Securities. (Sections 9.04(a) and (e)). Events of Default; Notice Any one of the following events constitutes an Event of Default under the Trust Agreement: 16 (i) the occurrence of a Debenture Event of Default (see "Description of the Subordinated Debentures -- Events of Default"); or (ii) default by Atlantic Capital or the Property Trustee 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 by Atlantic Capital or the Property Trustee in the payment of any Redemption Price of any Trust 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 Trustees in the Trust Agreement (other than a covenant or warranty a default in the performance of which or the breach of which is specifically 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 Property Trustee by the Holders of Preferred Securities having at least 25% of the total liquidation amount 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 thereunder; or (v) the occurrence of certain events of bankruptcy or insolvency with respect to Atlantic Capital or the Property Trustee if a successor Property Trustee has not been appointed within 90 days thereof. (Section 1.01). Within five Business Days after the occurrence of any Event of Default, the Property Trustee shall transmit to the Holders of Trust Securities, the Administrative Trustees and the Company notice of such Event of Default known to the Property Trustee, unless such Event of Default shall have been cured or waived. (Section 8.02(a)). The Company and the Administrative Trustees are required to file annually with the Property Trustee such documents, reports, compliance certificates and information as may be required by Section 314 of the Trust Indenture Act, including a certificate as to whether or not they are in compliance with all of the conditions and covenants applicable to them under the Trust Agreement (Section 8.15). Voting Rights Holders of Trust Securities shall be entitled to one vote for each $25 in liquidation amount represented by their Trust Securities in respect of any matter as to which such Holders of Trust Securities are entitled to vote. Except as described below and under "-- Amendments," and under "Description of the Guarantee -- Amendments and Assignment" and as otherwise required by law and the Trust Agreement, the Holders of the Preferred Securities will have no voting rights. (Section 6.01(a)). In the event that the Company elects to defer payments of interest on the Subordinated Debentures as described under "-- Distributions," the Holders of the Preferred Securities do not have the right to appoint a special representative or trustee or otherwise act to protect their interests. So long as any Subordinated Debentures are held by the Property Trustee, the Property Trustee the Delaware Trustee and the Administrative Trustees (collectively, the "Trustees" and individually, a "Trustee") 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 the Subordinated Debentures, (ii) waive any past default which is waivable under Section 813 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or the Subordinated Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of Preferred Securities having at least 66 2/3% of the liquidation amount of the outstanding Preferred Securities; provided that where a consent under the Indenture would require the consent of each Holder of Subordinated Debentures affected thereby, no such consent shall be given by the Trustees without the prior consent of each Holder of Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Preferred Securities. If the Property Trustee fails to enforce its rights under the Subordinated Debentures or the Trust Agreement, any Holder of Preferred Securities may institute a legal proceeding directly against the Company to enforce the Property Trustee's rights 17 under the Subordinated Debentures or the Trust Agreement, to the fullest extent permitted by law, without first instituting any legal proceeding against the Property Trustee or any other person or entity. (Section 6.01(a) and (b)). The Property Trustee shall notify all Holders of the Preferred Securities of any notice of Event of Default received from the Debenture Trustee. Notwithstanding the foregoing, a Holder of Preferred Securities may institute a proceeding for enforcement of payment to such Holder directly of principal of or interest on the Subordinated Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder on or after the due dates specified in the Subordinated Debentures. Amendments The Trust Agreement may be amended from time to time by a majority of the Administrative Trustees, the Property Trustee, the Delaware Trustee and the Company, without the consent of any Holders of Trust Securities, (i) to cure any ambiguity, correct or supplement any provision therein which may be inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising under the Trust Agreement, which shall not be inconsistent with the other provisions of the Trust Agreement, provided that any such amendment shall not adversely affect in any material respect the interests of any Holder of Trust Securities, (ii) to modify, eliminate or add to any provisions of the Trust Agreement to such extent as shall be necessary to ensure that Atlantic Capital will not be classified for United States federal income tax purposes other than as a "grantor trust" at any time that any Trust Securities are outstanding or to ensure Atlantic Capital's exemption from the status of an "investment company" under the 1940 Act, or (iii) to effect the acceptance of a successor Trustee appointment. In the case of clause (i), any amendments of the Trust Agreement shall become effective when notice thereof is given to the Holders of Trust Securities (Section 10.02(a)). Except as provided below, any provision of the Trust Agreement may be amended by a majority of the Administrative Trustees, the Property Trustee, the Delaware Trustee and the Company with (i) the consent of Holders of Trust Securities representing not less than a majority of the liquidation amount 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 Atlantic Capital's status as a grantor trust for United States federal income tax purposes or affect Atlantic Capital's exemption from status of an "investment company" under the 1940 Act. (Section 10.02(b)). Without the consent of each affected Holder of Trust Securities, the Trust Agreement may not be amended to (i) change the amount or timing of any Distributions with respect to the Trust Securities or otherwise adversely affect the amount of any Distributions required to be made in respect of the Trust Securities as of a specified date, (ii) restrict the right of a Holder of Trust Securities to institute suit for the enforcement of any such payment on or after such date or (iii) change the requirement that each affected Holder consent to amendments in respect of clauses (i) or (ii) above. (Section 10.02(c)). Removal of Property Trustee Unless an Event of Default under the Indenture shall have occurred and be continuing, a Trustee may be removed at any time by the Company, as the Holder of the Common Securities. If an Event of Default under the Indenture has occurred and is continuing, the Property Trustee and the Delaware Trustee may be removed at such time by act of the Holders of Preferred Securities having a majority of the liquidation amount of the outstanding Preferred Securities. In no event will the Holders of the Preferred Securities 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 a Trustee and no appointment of a successor trustee shall be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the Trust Agreement. (Sections 8.10 and 8.11). Co-Trustees and Separate Property Trustee Unless an Event of Default under the Indenture 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 18 of the Trust Property (as defined in the Trust Agreement) may at the time be located, the Company and the Property Trustee shall have power to appoint, and upon the written request of the Property Trustee, the Company shall for such purpose join with the Property Trustee 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 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. If the Company does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case an Event of Default under the Indenture has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. (Section 8.09(a)). Mergers, Consolidations, Amalgamations or Replacements Atlantic Capital 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. Atlantic Capital may, at the request of the Company, with the consent of the Administrative Trustees and without the consent of the holders of the Preferred Securities, 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 Atlantic Capital 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 Company expressly appoints a trustee of such successor entity possessing substantially the same powers and duties as the Property Trustee as the holder of the Subordinated Debentures, (iii) the Successor Securities are listed or traded, or any Successor Securities will be listed or traded upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, 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 Atlantic Capital, (vii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer, or lease, the Company has received an opinion from independent counsel to Atlantic Capital 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 Preferred Securities (including any Successor Securities) in any material respect and (b) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither Atlantic Capital nor such successor entity will be required to register as an investment company under the Investment Company Act and (viii) the Company 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. Notwithstanding the foregoing, Atlantic Capital shall not, except with the consent of holders of 100% in aggregate liquidation amount of the outstanding 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 Atlantic Capital or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. (Section 9.05). Book-Entry Only Issuance -- The Depository Trust Company The Depository Trust Company ("DTC") will act as securities depositary for all of the Preferred Securities. The Preferred Securities initially will be issued only as fully-registered securities registered in the name of Cede & Co. ("DTC's nominee"). One or more fully-registered global Preferred Securities certificates, representing the aggregate number of Preferred Securities, will be issued and will be deposited with DTC. 19 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 1934 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 also is available to others, such as securities brokers and dealers, banks and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a Direct Participant ("Indirect Participants"). The rules applicable to DTC and its Direct Participants and Indirect Participants are on file with the Commission. Purchases of Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Security (the "Beneficial Owner") is in turn to be recorded on the 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 Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities is discontinued. To facilitate subsequent transfers, all the Preferred Securities deposited by Direct Participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of Preferred Securities with DTC and their registration in the name of Cede & Co. will effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements that may be in effect from time to time. Redemption notices shall be sent to Cede & Co. as the registered Holder of Preferred Securities. The Preferred Securities to be redeemed shall be selected by DTC on a pro rata basis in accordance with DTC's customary procedures. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to Atlantic Capital as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). The Company and Atlantic Capital believe that the arrangements among DTC, Direct and Indirect Participants, and Beneficial Owners will enable the Beneficial Owners to exercise rights equivalent in substance to the rights that can be exercised directly by a holder of a beneficial interest in Atlantic Capital. Payment of Distributions on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant Distribution 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, 20 as is the case with securities held for the account of customers in bearer form or registered in "street name," and such payments will be the responsibility of such Participant and not of DTC, the Property Trustee, Atlantic Capital or the Company, subject to any statutory or regulatory requirements to the contrary that may be in effect from time to time. Payment of Distributions to DTC is the responsibility of Atlantic Capital, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Participants. Except as provided herein, a Beneficial Owner will not be entitled to receive physical delivery of Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under the Preferred Securities. DTC may discontinue providing its services as securities depositary with respect to the Preferred Securities at any time by giving reasonable notice to Atlantic Capital and the Company. Under such circumstances, in the event that a successor securities depositary should not be obtained, Preferred Securities certificates would be required to be printed and delivered. Additionally, the Administrative Trustees (with the consent of the Company) may decide to discontinue use of the system of book-entry transfers through DTC (or any successor depositary) with respect to the Preferred Securities. In that event, certificates for the Preferred Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company and Atlantic Capital believe to be reliable, but neither the Company nor Atlantic Capital takes responsibility for the accuracy thereof. Form, Exchange, and Transfer The following provisions shall apply to the Preferred Securities only in the event that the Preferred Securities are no longer held in book-entry only form. Preferred Securities will be issuable only in fully registered form, each having a liquidation amount of $25 and any integral multiple thereof. Preferred Securities will be exchangeable for other Preferred Securities, of any authorized denomination and of like tenor and aggregate liquidation amount. Preferred Securities may be presented for exchange as provided above or for registration of transfer (duly endorsed or accompanied by a duly executed instrument of transfer) at the office of the Transfer Agent designated for such purpose. Initially, The Bank of New York will act as Registrar and Transfer Agent for the Preferred Securities. (Section 5.03(b)). No service charge will be made for any registration of transfer or exchange of Preferred Securities, but Atlantic Capital may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 5.03(d)). Such transfer or exchange will be effected upon the Transfer Agent being satisfied with the documents of title and identity of the person making the request. The Administrative Trustees may at any time designate additional Transfer Agents or rescind the designation of any Transfer Agent or approve a change in the office through which any Transfer Agent acts. Atlantic Capital will not be required to (i) issue, register the transfer of, or exchange any Preferred Securities during a period beginning at the opening of business 15 calendar days before the day of mailing of a notice of redemption of any Preferred Securities called for redemption and ending at the close of business on the day of such mailing or (ii) register the transfer of or exchange any Preferred Securities so selected for redemption, in whole or in part, except the unredeemed portion of any such Preferred Securities being redeemed in part. (Section 5.03(c)). Concerning the Property Trustee The Company maintains deposit accounts and conducts other banking transactions with the Property Trustee in the ordinary course of their businesses. In addition, the Property Trustee acts as indenture trustee under the Mortgage and Deed of Trust dated as of January 15, 1937 pursuant to which the Company's First Mortgage Bonds are issued, under the Junior Subordinated Indenture dated as of October 1, 1996 pursuant to which the Company's 8.25% Junior Subordinated Deferrable Interest Debentures were issued and under the Indenture dated as of March 1, 21 1997 pursuant to which the Company's Unsecured Medium Term Notes are issued. The Property Trustee also acts as the Guarantee Trustee and the Debenture Trustee. Governing Law The Preferred Securities will be governed by and construed in accordance with the internal laws of the State of Delaware. Miscellaneous Application has been made to list the Preferred Securities on the NYSE. The Administrative Trustees are authorized and directed to conduct the affairs of Atlantic Capital and to operate Atlantic Capital so that Atlantic Capital will not be deemed to be an "investment company" required to be registered under the 1940 Act or taxed as a corporation for United States federal income tax purposes and so that the Subordinated Debentures will be treated as indebtedness of the Company for United States federal income tax purposes. In this connection, the Administrative Trustees and the Company are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or the Trust Agreement, that the Administrative Trustees and the Company 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 Preferred Securities. Holders of the Preferred Securities have no preemptive or similar rights. DESCRIPTION OF THE GUARANTEE The following summary of certain provisions of the Guarantee does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Guarantee, including the definitions therein of certain terms, and the Trust Indenture Act. Whenever particular Sections or defined terms of the Guarantee are referred to, such Sections or defined terms are incorporated herein by reference. The Guarantee is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. General The Guarantee will be qualified as an indenture under the Trust Indenture Act. The Bank of New York will act as indenture trustee under the Guarantee for the purpose of compliance with the Trust Indenture Act (the "Guarantee Trustee") and will hold the Guarantee for the benefit of the Holders of the Preferred Securities. The Company will agree fully and unconditionally to the extent set forth herein, to pay the Guarantee Payments (as defined below) in full to the Holders of the Preferred Securities (except to the extent paid by or on behalf of Atlantic Capital), as and when due, regardless of any defense, right of set-off or counterclaim that the Company may have or assert. The following payments with respect to the Preferred Securities, to the extent not paid by or on behalf of Atlantic Capital (the "Guarantee Payments"), will be subject to the Guarantee (without duplication): (i) any accumulated and unpaid Distributions required to be paid on the Preferred Securities, but only to the extent the Property Trustee has available in the payment account sufficient funds to make such payment, (ii) the Redemption Price with respect to any Preferred Securities called for redemption by Atlantic Capital, but only to the extent the Property Trustee has available in the payment account sufficient funds to make such payment and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of Atlantic Capital, the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid Distributions on the Preferred Securities to the date of payment and (b) the amount of assets of Atlantic Capital remaining available for distribution to Holders of Preferred Securities in liquidation of Atlantic Capital. 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 Preferred Securities or by causing Atlantic Capital to pay such amounts to such Holders. (Section 5.01). 22 The Guarantee will be a guarantee with respect to the Preferred Securities issued by Atlantic Capital from the time of issuance of the Preferred Securities, but will not apply to (i) any payment of Distributions if and to the extent that Atlantic Capital does not have funds available to make such payments, or (ii) collection of payment. If the Company does not make interest payments on the Subordinated Debentures held by Atlantic Capital, Atlantic Capital will not have funds available to pay Distributions on the Preferred Securities. The Guarantee will rank subordinate and junior in right of payment to Senior Indebtedness of the Company (except those made pari passu by their terms). See "Status of the Guarantee." The Subordinated Debentures and the Guarantee, together with the obligations of the Company with respect to the Preferred Securities under the Indenture, the Trust Agreement and the Guarantee, constitute a full and unconditional guarantee of the Preferred Securities by the Company. 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 and unconditional guarantee by the Company of the Preferred Securities. Amendments and Assignment Except with respect to any changes that do not materially adversely affect the rights of Holders of Preferred Securities (in which case no vote will be required), the terms of the Guarantee may be changed only with the prior approval of the Holders of Preferred Securities having at least 66 2/3% of the liquidation amount of the outstanding Preferred Securities. (Section 8.02). All guarantees and 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 Preferred Securities then outstanding. (Section 8.01). Events of Default An event of default under the Guarantee will occur upon the failure of the Company to perform any of its payment obligations thereunder. The Holders of Trust Securities having a majority of the liquidation amount of the Trust 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 the Guarantee or exercising of any trust or power conferred upon the Guarantee Trustee under the Guarantee. Any Holder of Trust Securities may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without first instituting a legal proceeding against Atlantic Capital, the Guarantee Trustee or any other person or entity. (Section 5.04). The Company, as Guarantor, will be required to provide to the Guarantee Trustee an annual statement as to the performance by the Company of certain of its obligations under the Guarantee and as to any default in such performance and an officer's certificate as to the Company's compliance with all conditions under the Guarantee. (Section 2.04). Information Concerning the Guarantee Trustee The Guarantee Trustee, prior to the occurrence of a default by the Company in performance of the Guarantee, has undertaken to perform only such duties as are specifically set forth in the Guarantee and, after default with respect to the Guarantee, must exercise the same degree of care as a prudent individual would exercise 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 Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. (Section 3.01). See "Description of the Preferred Securities -- Concerning the Property Trustee." Termination of the Guarantee The Guarantee will terminate and be of no further force and effect upon full payment of the Redemption Price of all Preferred Securities, the distribution of Subordinated Debentures to Holders of Preferred Securities in exchange for all of the Preferred Securities or full payment of the amounts payable upon liquidation of Atlantic Capital. The Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any 23 Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or the Guarantee. (Section 7.01). 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 Senior Indebtedness of the Company to the same extent as the Subordinated Debentures. (Section 6.01). The Trust Agreement provides that each Holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee. 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). Governing Law The Guarantee will be governed by and construed in accordance with the laws of the State of New York. DESCRIPTION OF THE SUBORDINATED DEBENTURES The following summary of the Subordinated Debentures and certain provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definition therein of certain terms and the Trust Indenture Act. Whenever particular sections or defined terms in the Indenture are referred to herein, such sections or defined terms are incorporated herein by reference. The Indenture is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. General The Indenture provides for the issuance of subordinated debentures (including the Subordinated Debentures), notes or other evidence of indebtedness by the Company (each a "Debt Security") in an unlimited amount from time to time. The Subordinated Debentures constitute a separate series under the Indenture. The Subordinated Debentures will be limited in aggregate principal amount to the sum of the aggregate liquidation amount of the Trust Securities. The Subordinated Debentures are unsecured, subordinated obligations of the Company which rank junior to all of the Company's Senior Indebtedness. The Subordinated Debentures will bear interest at the same rate, payable at the same times, as the Distributions payable on the Trust Securities, and will have a maturity and redemption provisions correlative to those of the Trust Securities. The entire outstanding principal amount of the Subordinated Debentures will become due and payable, together with any accrued and unpaid interest thereon, on ____________, 2028. The amounts payable as principal and interest on the Subordinated Debentures will be sufficient to provide for payment of Distributions payable on the Trust Securities. If Subordinated Debentures are distributed to Holders of Preferred Securities in a termination of Atlantic Capital, such Subordinated Debentures will be issued in fully-registered certificated form in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments of principal and interest on Subordinated Debentures will be payable, the transfer of Subordinated Debentures will be registrable, and Subordinated Debentures will be exchangeable for Subordinated Debentures of other denominations of a like aggregate principal amount, at the corporate trust office of the Debenture Trustee in New York, New York; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto and that the payment in full of principal with respect to 24 any Subordinated Debenture will be made only upon surrender of such Subordinated Debenture to the Debenture Trustee. Optional Redemption On or after ________________, 2003, the Company will have the option, at any time and from time to time, to redeem the Subordinated Debentures, in whole or in part, at a redemption price equal to 100% of the principal amount of the Subordinated Debentures being redeemed, together with any accrued but unpaid interest to the Redemption Date. If a Special Event shall occur and be continuing, the Company shall have the option to redeem the Subordinated Debentures, in whole but not in part, at a redemption price equal to 100% of the principal amount of Subordinated Debentures then outstanding plus any accrued and unpaid interest to the Redemption Date. The Subordinated Debentures will be subject to optional redemption in whole but not in part upon the termination and liquidation of Atlantic Capital pursuant to an order for the dissolution, termination or liquidation of Atlantic Capital entered by a court of competent jurisdiction. For so long as Atlantic Capital is the Holder of all the outstanding Subordinated Debentures, the proceeds of any such redemption will be used by Atlantic Capital to redeem Trust Securities in accordance with their terms. The Company may not redeem less than all the Subordinated Debentures unless all accrued and unpaid interest has been paid in full on all outstanding Subordinated Debentures for all quarterly interest periods terminating on or prior to the date of redemption. Any optional redemption of Subordinated Debentures shall be made upon not less than 30 nor more than 60 days' notice from the Debenture Trustee to the Holders of Subordinated Debentures, as provided in the Indenture. Interest The Subordinated Debentures shall bear interest at the rate per annum set forth on the cover page of this Prospectus. Such interest is payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1998. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a full month, on the basis of the actual number of days elapsed (Section 310). In the event that any date on which interest is payable on the Subordinated Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day, 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 (Section 113). Option to Extend Interest Payment Period The Company has the right under the Indenture to extend the interest payment period from time to time on the Subordinated Debentures for an Extension Period of up to 20 consecutive quarters during which period interest will be compounded quarterly, provided that no such Extension Period shall extend beyond the stated maturity of the Subordinated Debentures. At the end of an Extension Period, the Company must pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Subordinated Debentures compounded quarterly, to the extent permitted by applicable law). However, during any such Extension Period, the Company shall not (i) declare or pay any dividend or distribution (other than a dividend or distribution in Common Stock of the Company) on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock or (ii) make any payment of principal of, interest or premium, if any, on, or repay, repurchase or redeem any indebtedness that is pari passu with the Subordinated Debentures (including other Debt Securities), or make any guarantee payments with respect to such indebtedness. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period provided, 25 however, that such Extension Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters at any one time or extend beyond the maturity date of the Subordinated Debentures. Any Extension Period with respect to payment of interest on the Subordinated Debentures, other Debt Securities or on any similar securities will apply to all such securities and will also apply to Distributions with respect to the Preferred Securities and all other securities with terms substantially the same as the Preferred Securities. Upon the termination of any such Extension Period and the payment of all amounts then due, the Company may select 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 will give Atlantic Capital and the Debenture Trustee notice of its election of an Extension Period prior to the earlier of (i) one Business Day prior to the record date for the distribution which would occur but for such election or (ii) the date the Company is required to give notice to the NYSE or other applicable self- regulatory organization of the record date and will cause Atlantic Capital to send notice of such election to the Holders of Preferred Securities. Payment of Expenses In the Indenture the Company, as issuer of Subordinated Debentures, has agreed to pay all debts and obligations (other than with respect to the Trust Securities) and all costs, liabilities and expenses of Atlantic Capital (including, but not limited to, all costs, liabilities and expenses relating to the organization of Atlantic Capital, the fees and expenses of the Property Trustee, the Delaware Trustee and the Administrative Trustees and all costs, liabilities and expenses relating to the operation of Atlantic Capital (other than with respect to payments due to the holders of the securities of a Trust pursuant to the terms of such securities)) and to pay any and all taxes, duties, assessments or other governmental charges of whatever nature (other than United States withholding taxes) imposed by the United States or any other taxing authority, so that the net amounts received and retained by Atlantic Capital after paying such fees, costs, expenses, liabilities, debts and obligations will be equal to the amounts Atlantic Capital would have received and retained had no such fees, costs, expenses, liabilities, debts and obligations been incurred by or imposed on Atlantic Capital. The foregoing obligations of the Company are for the benefit of, and shall be enforceable by, any person to whom such fees, costs, expenses, liabilities, debts and obligations are owed (each a "Creditor") whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of the Company directly against the Company, and the Company irrevocably waives any right or remedy to require that any such Creditor take any action against Atlantic Capital or any other person before proceeding against the Company. The Company shall execute such additional agreements as may be necessary to give full effect to the foregoing. (Section 312). Defeasance The principal amount of any series of Debt Securities issued under the Indenture will be deemed to have been paid for purposes of the Indenture and the entire indebtedness of the Company in respect thereof will be deemed to have been satisfied and discharged, if there shall have been irrevocably deposited with the Debenture Trustee or any paying agent, in trust: (i) money in an amount which will be sufficient, or (ii) in the case of a deposit made prior to the maturity of the Subordinated Debentures, Government Obligations (as defined below), which do not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the interest on which when due, without any regard to reinvestment thereof, will provide moneys which, together with the money, if any, deposited with or held by the Debenture Trustee, will be sufficient, or (iii) a combination of (i) and (ii) which will be sufficient, to pay when due the principal of and premium, if any, and interest, if any, due and to become due on the Debt Securities of such series that are outstanding; provided that if such deposit shall have been made prior to the maturity of such Debt Securities, the Company shall have delivered to the Debenture Trustee, among other things, an opinion of counsel to the effect that the holders of such Debt Securities will not recognize income, gain or loss for federal income tax purposes as a result of the satisfaction and discharge of the Company's indebtedness in respect of such Debt Securities, 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. For this purpose, "Government Obligations" include direct obligations of, or obligations unconditionally guaranteed by, the United States of America entitled to the benefit of the full faith and credit thereof and certificates, depositary receipts or other instruments which evidence a direct ownership interest in such obligations or in any specific interest or principal payments due in respect thereof. (Section 701). 26 Subordination The Subordinated Debentures will be subordinate and junior in right of payment to all Senior Indebtedness of the Company to the extent provided in the Indenture. No payment of principal of (including redemption and sinking fund payments), or interest on, the Subordinated Debentures may be made (i) upon the occurrence of certain events of bankruptcy, insolvency or reorganization, (ii) if any Senior Indebtedness is not paid when due, (iii) if any other default has occurred pursuant to which the Holders of Senior Indebtedness have accelerated the maturity thereof and with respect to (ii) and (iii), such default has not been cured or waived, or (iv) if the maturity of any series of Debt Securities has been accelerated, because of an event of default with respect thereto, which remains uncured. Upon any payment or distribution of assets of the Company to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, and interest due or to become due on, all Senior Indebtedness must be paid in full before the Holders of the Subordinated Debentures are entitled to receive or retain any payment thereon. (Section 1502). Subject to the prior payment of all Senior Indebtedness, the rights of the Holders of the Subordinated Debentures will be subrogated to the rights of the Holders of Senior Indebtedness to receive payments or distributions applicable to Senior Indebtedness until all amounts owing on the Subordinated Debentures are paid in full. (Section 1504). The term "Senior Indebtedness" is defined in the Indenture to mean all obligations (other than non-recourse obligations and the indebtedness issued under the Indenture) of, or guaranteed or assumed by, the Company for borrowed money, including both senior and subordinated indebtedness for borrowed money (other than the Debt Securities and $72,164,950 principal amount of 8.25% Junior Subordinated Deferrable Interest Debentures of the Company issued under its Junior Subordinated Indenture dated as of October 1, 1996 with The Bank of New York, Trustee), or for the payment of money relating to any lease which is capitalized on the consolidated balance sheet of the Company and its subsidiaries in accordance with generally accepted accounting principles as in effect from time to time, or evidenced by bonds, debentures, notes or other similar instruments (other than trade accounts payable in the ordinary course of business), and in each case, amendments, renewals, extensions, modifications and refundings of any such indebtedness or obligations, whether existing as of the date of the Indenture or subsequently incurred by the Company unless, in the case of any particular indebtedness, renewal, extension or refunding, the instrument creating or evidencing the same or the assumption or guarantee of the same expressly provides that such indebtedness, renewal, extension or refunding is not superior in right of payment to or is pari passu with the Subordinated Debentures; provided that the Company's obligations under any Guarantee shall not be deemed to be Senior Indebtedness. (Section 101). Consolidation, Merger, and Sale of Assets Under the terms of the Indenture, the Company may not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any entity, unless (i) the corporation formed by such consolidation or into which the Company is merged or the entity which acquires by conveyance or transfer, or which leases, the property and assets of the Company substantially as an entirety shall be a entity organized and validly existing under the laws of any domestic jurisdiction and such entity expressly assumes the Company's obligations on all Debt Securities and under the Indenture, (ii) immediately after giving effect to the 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 occurred and be continuing, and (iii) the Company shall have delivered to the Debenture Trustee certificates and opinions required by the Indenture. (Section 1101). Events of Default Each of the following will constitute an Event of Default under the Indenture with respect to the Debt Securities of any series: (i) failure to pay any interest on the Debt Securities of such series within 30 days after the same becomes due and payable, provided that deferral of payment during an Extension Period will not constitute an Event of Default; (ii) failure to pay principal or premium, if any, on the Debt Securities of such series when due and payable; (iii) failure to perform, or breach of, any other covenant or warranty of the Company in the Indenture (other than a covenant or warranty of the Company in the Indenture solely for the benefit of one or more series of Debt 27 Securities other than such series) for 60 days after written notice to the Company by the Debenture Trustee, or to the Company and the Debenture Trustee by the Holders of at least 10% in principal amount of the Debt Securities of such series outstanding under the Indenture as provided in the Indenture; (iv) the entry by a court having jurisdiction in the premises of (a) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (b) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition by one or more persons other than the Company seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official for the Company or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief or any such other decree or order shall have remained unstayed and in effect for a period of 90 consecutive days; and (v) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in a case or other similar proceeding or to the commencement of any bankruptcy or insolvency case or proceeding against it under any applicable federal or state law or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by 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, or the authorization of such action by the Company's board of directors. (Section 801). An Event of Default with respect to the Debt Securities of a particular series may not necessarily constitute an Event of Default with respect to Debt Securities of any other series issued under the Indenture. If an Event of Default due to the default in payment of principal of or interest on any series of Debt Securities or due to the default in the performance or breach of any other covenant or warranty of the Company applicable to the Debt Securities of such series but not applicable to all series occurs and is continuing, then either the Debenture Trustee or the Holders of 25% in principal amount of the outstanding Debt Securities of such series may declare the principal of all of the Debt Securities of such series and interest accrued thereon to be due and payable immediately (subject to the subordination provisions of the Indenture). If an Event of Default due to the default in the performance of any other covenants or agreements in the Indenture applicable to all outstanding Debt Securities or due to certain events of bankruptcy, insolvency or reorganization of the Company has occurred and is continuing, either the Debenture Trustee or the Holders of not less than 25% in principal amount of all outstanding Debt Securities, considered as one class, and not the Holders of the Debt Securities of any one of such series may make such declaration of acceleration (subject to the subordination provisions of the Indenture). If, in the event of an Event of Default, the Debenture Trustee fails, or the Holders of not less than 25% of the aggregate principal amount of the then outstanding Debt Securities of such series fail, to declare the principal due and payable immediately, the holders of at least 25% in aggregate liquidation amount of the related series of Preferred Securities shall have such right. Except as set forth above, the existence of an Event of Default does not entitle the holders of Preferred Securities to accelerate the maturity thereof or declare amounts due and payable. At any time after the declaration of acceleration with respect to the Debt Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained, the Event or Events of Default giving rise to such declaration of acceleration will, without further act, be deemed to have been waived, and such declaration and its consequences will, without further act, be deemed to have been rescinded and annulled, if (i) the Company has paid or deposited with the Debenture Trustee a sum sufficient to pay (a) all overdue interest on all Debt Securities of such series; 28 (b) the principal of and premium, if any, on any Debt Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Debt Securities; (c) interest upon overdue interest at the rate or rates prescribed therefor in such Debt Securities, to the extent that payment of such interest is lawful; and (d) all amounts due to the Debenture Trustee under the Indenture; and (ii) any other Event or Events of Default with respect to Debt Securities of such series, other than the nonpayment of the principal of the Debt Securities of such series which has become due solely by such declaration of acceleration, have been cured or waived as provided in the Indenture. (Section 802). Subject to the provisions of the Indenture relating to the duties of the Debenture Trustee in case an Event of Default shall occur and be continuing, the Debenture Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders of the Subordinated Debentures, unless such Holders shall have offered to the Debenture Trustee reasonable indemnity. (Section 903). If an Event of Default has occurred and is continuing in respect of a series of Debt Securities, subject to such provisions for the indemnification of the Debenture Trustee, the Holders of a majority in principal amount of the outstanding Debt Securities of such series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee, with respect to the Debt Securities of such series; provided that if an Event of Default occurs and is continuing with respect to more than one series of Debt Securities, the Holders of a majority of the aggregate principal amount of the outstanding Debt Securities of all such series, considered as one class, will have the right to make such direction, and not the Holders of the Debt Securities of any one of such series; and provided, further, that such direction will not be in conflict with any rule of law or with the Indenture. (Section 812). No Holder of Debt Securities of any series will have any right to institute any proceeding with respect to the Indenture, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless (i) such Holder has previously given to the Debenture Trustee written notice of a continuing Event of Default with respect to the Debt Securities of such series, (ii) the Holders of not less than a majority in aggregate principal amount of the outstanding Debt Securities of all series in respect of which an Event of Default shall have occurred and be continuing, considered as one class, have made written request to the Debenture Trustee, and such Holder or Holders have offered reasonable indemnity to the Debenture Trustee to institute such proceeding in respect of such Event of Default in its own name as trustee and (iii) the Debenture Trustee has failed to institute any proceeding, and has not received from the Holders of a majority of the aggregate principal amount of the outstanding Debt Securities of such series a direction inconsistent with such request, within 60 days after such notice, request and offer. (Section 807). However, such limitations do not apply to a suit instituted by a Holder of a Debt Security for the enforcement of payment of the principal of or any premium or interest on such Debt Security on or after the applicable due date specified in such Debt Security. (Section 808). The Company will be required to furnish to the Debenture Trustee annually a statement by an appropriate officer as to such officer's knowledge of the Company's compliance with all conditions and covenants under the Indenture, such compliance to be determined without regard to any period of grace or requirement of notice under the Indenture. (Section 606). Enforcement of Certain Rights by Holders of Preferred Securities If an Event of Default has occurred and is continuing, then the Holders of Preferred Securities would rely on the enforcement by the Property Trustee or the Debenture Trustee, acting for the benefit of the Property Trustee, of its rights as a holder of the Subordinated Debentures 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 principal of or interest on the Subordinated Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the Redemption Date), then a Holder of Preferred Securities may directly institute 29 a proceeding against the Company, without first proceeding against Atlantic Capital or the Property Trustee, for enforcement of payment to such Holder of the principal of or interest on the Subordinated Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such Holder after the respective due dates specified in the Subordinated Debentures. In connection with such an enforcement proceeding, the Company will be subrogated to the rights of such Holder of Preferred Securities with respect to payments on the Preferred Securities to the extent of any payment made by the Company to such Holder of Preferred Securities in such proceeding. The Holders of the Preferred Securities would not be able to exercise directly against the Company any rights other than those set forth in the preceding paragraph available to the holders of the Subordinated Debentures unless the Property Trustee or the Debenture Trustee, acting for the benefit of the Property Trustee, fails to do so for 60 days. In such event, to the fullest extent permitted by law, the holders of at least 25% of the aggregate liquidation amount of the outstanding Preferred Securities would have the right to directly institute proceedings for enforcement of such rights. Modification and Waiver Without the consent of any Holder of Debt Securities, the Company and the Debenture Trustee may enter into one or more supplemental indentures for any of the following purposes: (i) to evidence the assumption by any permitted successor to the Company of the covenants of the Company in the Indenture and in the Debt Securities; or (ii) to add one or more covenants of the Company or other provisions for the benefit of the Holders of outstanding Debt Securities or to surrender any right or power conferred upon the Company by the Indenture; or (iii) to add any additional Events of Default with respect to outstanding Debt Securities; or (iv) to change or eliminate any provision of the Indenture or to add any new provision to the Indenture, provided that if such change, elimination or addition will affect adversely the interests of the Holders of Debt Securities of any series in any material respect, such change, elimination or addition will become effective with respect to such series only (a) when the consent of the Holders of Debt Securities of such series has been obtained in accordance with the Indenture, or (b) when no Debt Securities of such series remain outstanding under the Indenture; or (v) to provide collateral security for all but not part of the Debt Securities; (vi) to establish the form or terms of Debt Securities of any other series as permitted by the Indenture; or (vii) to provide for the authentication and delivery of bearer securities and coupons appertaining thereto representing interest, if any, thereon and for the procedures for the registration, exchange and replacement thereof and for the giving of notice to, and the solicitation of the vote or consent of, the Holders thereof, and for any and all other matters incidental thereto; or (viii) to evidence and provide for the acceptance of appointment of a successor Debenture Trustee under the Indenture with respect to the Debt Securities of one or more series and to add to or change any of the provisions of the Indenture as shall be necessary to provide for or to facilitate the administration of the trusts under the Indenture by more than one trustee; or (ix) to provide for the procedures required to permit the utilization of a noncertificated system of registration for the Debt Securities of all or any series; or (x) to change any place where (a) the principal of and premium, if any, and interest, if any, on all or any series of Debt Securities shall be payable, (b) all or any series of Debt Securities may be surrendered for registration of transfer or exchange and (c) notices and demands to or upon the Company in respect of Debt Securities and the Indenture may be served; or (xi) to cure any ambiguity or inconsistency or to add or change any other provisions with respect to matters and questions arising under the Indenture, provided such changes or additions shall not adversely affect the interests of the Holders of Debt Securities of any series in any material respect. (Section 1201). The Holders of at least a majority of the aggregate principal amount of the outstanding Debt Securities of all series may waive compliance by the Company with certain restrictive provisions of the Indenture. (Section 607). The Holders of not less than a majority in principal amount of the outstanding Debt Securities of any series may waive any past default under the Indenture with respect to such series, except a default in the payment of principal, premium, or interest and certain covenants and provisions of the Indenture that cannot be modified or be amended without the consent of the Holder of each outstanding Debt Security of such series affected. (Section 813). Without limiting the generality of the foregoing, if the Trust Indenture Act is amended after the date of the Indenture in such a way as to require changes to the Indenture or the incorporation therein of additional provisions or so as to permit changes to, or the elimination of, provisions which, at the date of the Indenture or at any time 30 thereafter, were required by the Trust Indenture Act to be contained in the Indenture, the Indenture will be deemed to have been amended so as to conform to such amendment of the Trust Indenture Act or to effect such changes, additions or elimination, and the Company and the Debenture Trustee may, without the consent of any Holders, enter into one or more supplemental indentures to evidence or effect such amendment. (Section 1201). Except as provided above, the consent of the Holders of not less than a majority of the aggregate principal amount of the outstanding Debt Securities of all series, considered as one class, is required for the purpose of adding any provisions to, or changing in any manner, or eliminating any of the provisions of, the Indenture or modifying in any manner the rights of the Holders of such Debt Securities under the Indenture pursuant to one or more supplemental indentures; provided that if less than all of the series of outstanding Debt Securities are affected directly by a proposed supplemental indenture, then the consent only of the Holders of a majority of the aggregate principal amount of outstanding Debt Securities of all series so directly affected, considered as one class, will be required; and provided further, that no such amendment or modification may (i) change the stated maturity of the principal of, or any installment of principal of or interest on, any Debt Security, or reduce the principal amount thereof or the rate of interest thereon (or the amount of any installment of interest thereon) or change the method of calculating such rate or reduce any premium payable upon the redemption thereof, or change the coin or currency (or other property) in which any Debt Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity of any Debt Security (or, in the case of redemption, on or after the Redemption Date) without, in any such case, the consent of the Holder of such Debt Security, (ii) reduce the percentage in principal amount of the outstanding Debt Security of any series, (or, if applicable, in liquidation amount of Preferred Securities) the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with any provision of the Indenture or any default thereunder and its consequences, or reduce the requirements for quorum or voting, without, in any such case, the consent of the Holder of each outstanding Debt Security of such series, or (iii) modify certain of the provisions of the Indenture relating to supplemental indentures, waivers of certain covenants and waivers of past defaults with respect to the Debt Security of any series, without the consent of the Holder of each outstanding Debt Security affected thereby. A supplemental indenture that changes or eliminates any covenant or other provision of the Indenture which has expressly been included solely for the benefit of one or more particular series of Debt Securities, or modifies the rights of the Holders of Debt Securities of such series with respect to such covenant or other provision, will be deemed not to affect the rights under the Indenture of the Holders of the Debt Securities of any other series. (Section 1202). The Indenture provides that in determining whether the Holders of the requisite principal amount of the outstanding Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, or whether a quorum is present at the meeting of the Holders of Debt Securities, Debt Securities owned by the Company or any other obligor upon the Debt Securities or any affiliate of the Company or of such other obligor (unless the Company, such affiliate or such obligor owns all Debt Securities outstanding under the Indenture, determined without regard to this provision) shall be disregarded and deemed not to be outstanding. (Section 101). If the Company shall solicit from Holders any request, demand, authorization, direction, notice, consent, election, waiver or other act, the Company may, at its option, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other such act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the outstanding Debt Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Debt Securities shall be computed as of the record date. Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of a Holder shall bind every future Holder of the same Debt Security and the Holder of every Debt 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 Debenture Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Debt Security. (Section 104). 31 Resignation of Debenture Trustee The Debenture Trustee may resign at any time by giving written notice thereof to the Company or may be removed at any time with respect to the Debt Securities of any series by the Holders of a majority of the principal amount of the outstanding Debt Securities of such series. No resignation or removal of the Debenture Trustee and no appointment of a successor trustee will become effective until the acceptance of appointment by a successor trustee in accordance with the requirements of the Indenture. So long as no Event of Default or event which, after notice or lapse of time, or both, would become an Event of Default has occurred and is continuing and except with respect to a Debenture Trustee appointed by the Holders, if the Company has delivered to the Debenture Trustee a resolution of its board of directors appointing a successor trustee and such successor has accepted such appointment in accordance with the terms of the Indenture, the Debenture Trustee will be deemed to have resigned and the successor will be deemed to have been appointed as trustee in accordance with the Indenture. (Section 910). Governing Law The Indenture and the Debt Securities will be governed by, and construed in accordance with, the laws of the State of New York. Concerning the Debenture Trustee The Debenture Trustee under the Indenture is The Bank of New York. In addition, The Bank of New York acts as Property Trustee under the Trust Agreement and as Guarantee Trustee under the Guarantee. See "Description of the Preferred Securities -- Concerning the Property Trustee." CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following summary describes the material United States federal income tax consequences that may be relevant to the purchase, ownership and disposition of the Preferred Securities and where noted constitutes the opinion of Simpson Thacher & Bartlett, special United States federal income tax counsel to the Company and Atlantic Capital ("Tax Counsel"). Unless otherwise stated, this summary deals only with Preferred Securities held as capital assets by United States Persons (defined below) who purchase the Preferred Securities upon original issuance at their original offering price. As used herein, a "United States Person" means (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or (iv) any trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States Persons have the authority to control all the substantial decisions of such trust. The tax treatment of a holder may vary depending on his, her or its particular situation. This summary does not address all the tax consequences that may be relevant to a particular holder or to holders who may be subject to special tax treatment, such as banks, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors, persons holding Preferred Securities as part of a hedging, conversion or constructive sale transaction or a straddle or foreign investors. In addition, this summary does not include any description of any alternative minimum tax consequences or the tax laws of any state, local or foreign government that may be applicable to a holder of Preferred Securities. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. The authorities on which this summary is based are subject to various interpretations and the opinions of Tax Counsel are not binding on the Internal Revenue Service ("IRS") or the courts, either of which could take a contrary position. Moreover, no rulings have been or will be sought by the Company from the IRS with respect to the transactions described herein. Accordingly, there can be no assurance that the IRS will not challenge the opinions expressed herein or that a court would not sustain such a challenge. Nevertheless, Tax Counsel has advised that it is of the view that, if challenged, the opinions expressed herein would be sustained by a court with jurisdiction in a properly presented case. 32 HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS SEE "DESCRIPTION OF THE PREFERRED SECURITIES SPECIAL EVENT REDEMPTION OR DISTRIBUTION." Classification of Atlantic Capital In connection with the issuance of the Preferred Securities, Tax Counsel is of the opinion that under current law and assuming full compliance with the terms of the Trust Agreement and other documents, and based upon certain facts and assumptions contained in such opinion, Atlantic Capital will be classified as a grantor trust for United States federal income tax purposes and not as an association taxable as a corporation. Accordingly, for United States federal income tax purposes, each beneficial owner (a "holder") of Preferred Securities generally will be treated as owning an undivided beneficial interest in the Subordinated Debentures and, thus, will be required to include in its gross income its pro rata share of the interest income or original issue discount that is paid or accrued on the Subordinated Debentures. See " Interest Income and Original Issue Discount." Classification of the Subordinated Debentures The Company, Atlantic Capital and the holders of the Preferred Securities (by acceptance of a beneficial interest in a Preferred Security) will agree to treat the Subordinated Debentures as indebtedness for all United States tax purposes. Recently, a petition was filed in the United States Tax Court as a result of a challenge by the IRS of the petitioner's treatment as indebtedness of a loan issued in circumstances with similarities to the issuance of the Subordinated Debentures. Nevertheless, in connection with the issuance of the Subordinated Debentures, Tax Counsel is of the opinion that under current law, and based on certain representations, facts and assumptions set forth in such opinion, the Subordinated Debentures will be classified as indebtedness for United States federal income tax purposes. Interest Income and Original Issue Discount It is anticipated that the Subordinated Debentures will not be issued with an issue price that is less than their stated redemption price at maturity. In such case, under applicable Treasury regulations, the Subordinated Debentures will not be considered to have been issued with OID within the meaning of section 1273(a) of the Code. Accordingly, except as set forth below, stated interest on the Subordinated Debentures generally will be taxable to a holder as ordinary income at the time it is paid or accrued in accordance with such holder's regular method of tax accounting. If, however, the Company exercises its right to defer payments of interest on the Subordinated Debentures, the Subordinated Debentures will become OID instruments at such time and all holders will be required to accrue the stated interest on the Subordinated Debentures on a daily economic accrual basis (using the constant-yield-to-maturity method of accrual described in section 1272 of the Code) during the Extension Period even though the Company will not pay such interest until the end of the Extension Period, and even though some holders may use the cash method of tax accounting. Moreover, thereafter the Subordinated Debentures will be taxed as OID instruments for as long as they remain outstanding. Thus, even after the end of the Extension Period, all holders would be required to continue to include the stated interest (and any "de minimis OID") on the Subordinated Debentures (and any "de minimis OID") in income on a daily economic accrual basis, regardless of their method of tax accounting and in advance of receipt of the cash attributable to such interest income. Under the OID economic accrual rules, a holder would accrue an amount of interest income each year that approximates the stated interest payments called for under the terms of the Subordinated Debentures, and actual cash payments of interest on the Subordinated Debentures would not be reported separately as taxable income. Any amount of OID included in a holder's gross income (whether or not during an Extension Period) with respect to a Preferred Security will increase 33 such holder's tax basis in such Preferred Security, and the amount of distributions received by a holder in respect of such accrued OID will reduce the tax basis of such Preferred Security. The Treasury regulations described above have not yet been addressed in any rulings or other interpretations by the IRS, and it is possible that the IRS could take a contrary position. For example, if the IRS were to assert successfully that the stated interest on the Subordinated Debentures was OID regardless of whether the Company exercises its option to defer payments of interest on such Subordinated Debentures, all holders of Preferred Securities would be required to include such stated interest in income on a daily economic accrual basis as described above. Corporate holders of Preferred Securities will not be entitled to a dividends-received deduction with respect to any income recognized by such holders with respect to the Preferred Securities. Distribution of Subordinated Debentures or Cash upon Liquidation of Atlantic Capital As described under the caption "Description of the Preferred Securities" Subordinated Debentures may be distributed to holders in exchange for the Preferred Securities and in liquidation of Atlantic Capital. Provided Atlantic Capital is classified as a grantor trust, such a distribution would generally be non-taxable, and would result in the holder receiving directly its pro rata share of the Subordinated Debentures previously held indirectly through Atlantic Capital, with a holding period and aggregate tax basis equal to the holding period and aggregate tax basis such holder had in its Preferred Securities before such distribution. If, however, a Tax Event occurs which results in Atlantic Capital being treated as an association taxable as a corporation, the distribution would constitute a taxable event to holders of Preferred Securities and the Company could, at its option, redeem the Subordinated Debentures and distribute the resulting cash in liquidation of Atlantic Capital. A holder would accrue interest in respect of the Subordinated Debentures received from Atlantic Capital in the manner described above under " Interest Income and Original Issue Discount." Under certain circumstances described herein (see "Description of Preferred Securities"), the Subordinated Debentures may be redeemed for cash, with the proceeds of such redemption distributed to holders in redemption of their Preferred Securities. Such a redemption would constitute a taxable disposition of the redeemed Preferred Securities for United States federal income tax purposes, and a holder would recognize gain or loss as if it sold such redeemed Preferred Securities for cash. See " Sales of Preferred Securities." Sales of Preferred Securities A holder that sells Preferred Securities will recognize gain or loss equal to the difference between the amount realized by the holder on the sale or redemption of the Preferred Securities (except for an amount equal to any accrued but unpaid interest on such holder's allocable share of the Subordinated Debentures that such holder has not included in income previously, which will be taxable as such) and the holder's adjusted tax basis in the Preferred Securities sold or redeemed. Such gain or loss generally will be a capital gain or loss and generally will be a long-term capital gain or loss if the Preferred Securities have been held for more than one year. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. Holders should consult their own tax advisors regarding the capital gains rates applicable to them. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. Non-United States Holders As used herein, the term "Non-United States Holder" means any person that is not a United States Person. As discussed above, the Preferred Securities will be treated as evidence of an indirect beneficial ownership interest in the Subordinated Debentures. See " Classification of Atlantic Capital." Thus, under present United States federal income tax law, and subject to the discussion below concerning backup withholding: 34 (a) no withholding of United States federal income tax will be required with respect to the payment by the Company or any paying agent of principal or interest (which for purposes of this discussion includes any OID) on the Preferred Securities (or the Subordinated Debentures) to a Non-United States Holder, provided (i) that the beneficial owner of the Preferred Securities ("Beneficial Owner") does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote within the meaning of section 871(h)(3) of the Code and the regulations thereunder, (ii) the Beneficial Owner is not a controlled foreign corporation that is related to the Company through stock ownership, (iii) the Beneficial Owner is not a bank whose receipt of interest on the Subordinated Debentures is described in section 881(c)(3)(A) of the Code and (iv) the Beneficial Owner satisfies the statement requirement (described generally below) set forth in section 871(h) and section 881(c) of the Code and the regulations thereunder; and (b) no withholding of United States federal income tax will be required with respect to any gain realized by a Non-United States Holder upon the sale or other disposition of the Preferred Securities (or the Subordinated Debentures). To satisfy the requirement referred to in (a)(iv) above, the Beneficial Owner, or a financial institution holding the Preferred Securities on behalf of such owner, must provide, in accordance with specified procedures, to Atlantic Capital or its paying agent, a statement to the effect that the Beneficial Owner is not a United States Person. These requirements will be met if (1) the Beneficial Owner provides his name and address, and certifies, under penalties of perjury, that it is not a United States Person (which certification may be made on an IRS Form W-8 (or successor form)) or (2) a financial institution holding the Preferred Securities on behalf of the Beneficial Owner certifies, under penalties of perjury, that such statement has been received by it and furnishes a paying agent with a copy thereof. Under final Treasury regulations ("Final Regulations"), the statement requirement referred to in (a)(iv) above may also be satisfied with other documentary evidence for interest paid after December 31, 1999 with respect to an offshore account or through certain foreign intermediaries. If a Non-United States Holder cannot satisfy the requirements of the "portfolio interest" exception described in (a) above, payments of premium, if any, and interest (including any OID) made to such Non-United States Holder will be subject to a 30% United States withholding tax unless the Beneficial Owner provides the Company or its paying agent, as the case may be, with a properly executed (1) IRS Form 1001 (or successor form) claiming an exemption from, or a reduction of, such withholding tax under the benefit of an applicable tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid on the Preferred Securities (or the Subordinated Debentures) is not subject to such withholding tax because it is effectively connected with the Beneficial Owner's conduct of a trade or business in the United States. Under the Final Regulations, Non-United States Holders will generally be required to provide IRS Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although alternative documentation may be applicable in certain situations. If a Non-United States Holder is engaged in a trade or business in the United States and interest on the Preferred Securities (or Subordinated Debentures) is effectively connected with the conduct of such trade or business, the Non-United States Holder, although exempt from the withholding tax discussed above, will be subject to United States federal income tax on such interest on a net income basis in the same manner as if it were a United States Person. In addition, if such Non-United States Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% (or lesser rate under an applicable tax treaty) of its effectively connected earnings and profits for the taxable year, subject to adjustments. For this purpose, such interest would be included in such foreign corporation's earnings and profits. Any gain realized upon the sale or other disposition of the Preferred Securities (or the Subordinated Debentures) generally will not be subject to United States federal income tax unless (i) such gain is effectively connected with a trade or business in the United States of the Non-United States Holder, (ii) in the case of a Non-United States Holder who is an individual, such individual is present in the United States for 183 days or more in the taxable year of such sale, exchange or retirement, and certain other conditions are met, or (iii) in the case of any gain representing accrued interest on the Subordinated Debentures, the requirements described above are not satisfied. 35 Information Reporting and Backup Withholding Income on the Preferred Securities held of record by United States Persons (other than corporations and other exempt holders) will be reported annually to such holders and to the IRS. Such income will be reported to holders on Forms 1099, which should be mailed to the holders of record prior by January 31 following each calendar year. "Backup withholding" at a rate of 31% generally will apply to payments of interest to non-exempt United States Persons unless the holder 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. In general, no information reporting or backup withholding will be required with respect to payments made by Atlantic Capital or any paying agent to Non- United States Holders if a statement described in (a)(iv) under "Non-United States Holders" has been received and the payor does not have actual knowledge that the beneficial owner is a United States Person. In addition, backup withholding and information reporting may apply to the proceeds from disposition of Preferred Securities (or Subordinated Debentures) within the United States or conducted through certain United States related financial intermediaries unless the statement described in (a)(iv) under "Non- United States Holders" has been received (and the payor does not have actual knowledge that the beneficial owner is a United States Person) or the holder otherwise establishes an exemption. Any amounts withheld from a holder of the Preferred Securities under the backup withholding rules generally will be allowed as a refund or a credit against such holder's United States federal income tax liability, provided the required information is furnished to the IRS. VALIDITY OF THE SECURITIES Certain matters of Delaware law relating to the validity of the Preferred Securities, the enforceability of the Trust Agreement and the formation of Atlantic Capital are being passed upon by Richards, Layton & Finger, Special Delaware counsel for the Company and Atlantic Capital. The validity of the Guarantee and the Subordinated Debentures will be passed upon for the Company by Simpson Thacher & Bartlett, Counsel for the Company, and for the Underwriters by Thelen Reid & Priest LLP. Simpson Thacher & Bartlett and Thelen Reid & Priest LLP may rely as to matters of all laws, other than New York and federal laws, upon the opinion of Pamela D. Joseph, Counsel for the Company. From time to time, Thelen Reid & Priest LLP has represented the Company with respect to matters unrelated to the Preferred Securities. R. Franklin Balotti, a director for the Company, is a member of the law firm of Richards, Layton & Finger, the Special Delaware counsel. However, Mr. Balotti is not directly involved with the transactions described herein, other than in his role as a director for the Company. Certain matters relating to United States federal income tax considerations will be passed upon for the Company and Atlantic Capital by Simpson Thacher & Bartlett. UNDERWRITING Under the terms and subject to the conditions contained in the Underwriting Agreement dated the date hereof, each of the Underwriters named below for whom Morgan Stanley & Co. Incorporated, Legg Mason Wood Walker, Inc.and Wheat First Union are acting as representatives (the "Representatives") has severally agreed to purchase, and Atlantic Capital has agreed to sell to each of the Underwriters, severally, the respective number of Preferred Securities set opposite its name below: 36 Number of Underwriters Preferred Securities ------------ -------------------- Morgan Stanley & Co. Incorporated.. Legg Mason Wood Walker, Inc........ Wheat First Union.................. ----------- Total........................... =========== The Underwriting Agreement provides that the several obligations of the Underwriters to pay for and accept delivery of the Preferred Securities are subject to the approval of certain legal matters by their counsel and to certain other conditions. In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Preferred Securities offered hereby if any of the Preferred Securities are purchased. In the event of default by an Underwriter, the Underwriting Agreement provides that, in certain circumstances, the purchase commitments of the nondefaulting Underwriters may be increased or Underwriting Agreement may be terminated. The Underwriters initially propose to offer all or part of the Preferred Securities directly to the public at the price to public set forth on the cover page of this Prospectus, and all or part to certain dealers at a price that represents a concession not in excess of $ per Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Preferred Security to certain other dealers. After the initial offering of the Preferred Securities, the offering price and other selling terms may from time to time be varied by the Representatives. Because the proceeds of the sale of the Preferred Securities will ultimately be used to purchase the Subordinated Debentures, the Underwriting Agreement provides that the Company will pay to the Underwriters as compensation for their services, $ per Preferred Security (or $ in the aggregate); provided that such compensation will be $ per Preferred Security sold to certain institutions. Prior to this offering, there has been no public market for the Preferred Securities. Application has been made to list the Preferred Securities on the NYSE. Listing is contingent upon meeting the requirements of the NYSE, including those relating to distribution. In order to meet one such requirement, the Underwriters have undertaken to sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial holders. Trading of the Preferred Securities on the NYSE is expected to commence within a 30-day period after the date of this Prospectus. The Underwriters have advised Atlantic Capital that they intend to make a market in the Preferred Securities prior to the commencement of trading on the NYSE. The Underwriters will have no obligation to make a market in the Preferred Securities, however, and may cease market making activities, if commenced, at any time. The Company and Atlantic Capital have agreed that, during a period of thirty days from the date of this Prospectus, neither will offer, sell, contract to sell or otherwise dispose of any securities of the Company or Atlantic Capital that are substantially similar to the Preferred Securities, or that are convertible into or exchangeable for, or otherwise represent a right to receive, any such securities, except in this offering or with the prior written consent of the Underwriters. Atlantic Capital and the Company have agreed to indemnify the Underwriters against or contribute to payments that the Underwriters may be required to make in respect of, certain liabilities, including liabilities under the 1933 Act. In connection with the offering of the Preferred Securities, the Underwriters and any selling group members and their respective affiliates may engage in transactions that stabilize, maintain or otherwise affect the market price of the Preferred Securities. Specifically, the Underwriters may overallot by selling more Preferred Securities than they are committed to purchase from Atlantic Capital. In such a case, to cover all or part of the short position, the Underwriters may purchase Preferred Securities in the open market following completion of the initial offering of 37 the Preferred Securities. The Underwriters also may engage in stabilizing transactions in which they bid for, and purchase, Preferred Securities at a level above that which might otherwise prevail in the open market. Neither the Company nor any Underwriter makes any representation or prediction as to the direction or magnitude of any offer that the transactions described above may have on the price of the Preferred Securities. The Underwriters are not required to engage in any of the foregoing transactions and, if commenced, such transactions may be discontinued at anytime without notice. Certain of the Underwriters or their affiliates have provided from time to time, and expect to provide in the future, investment or financial services to the Company and its affiliates, for which such Underwriters or their affiliates have received or will receive customary fees and commissions. EXPERTS The consolidated financial statements incorporated by reference in this Prospectus from the Company's Annual Report on Form 10-K for the year ended December 31, 1997, 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. 38 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth the expenses payable by the Company in connection with the issuance and distribution of the securities to be registered. Filing fee - Securities and Exchange Commission................... $ 8,850 Filing fee - New York Stock Exchange.............................. 17,700 Trustees' Fees, including counsel................................. 25,000 Company Counsel Fees.............................................. 145,000 Auditors' fees.................................................... 30,000 Rating agencies' fees............................................. 35,000 Printing, including Registration Statements prospectuses, 30,000 exhibits, etc.................................................... Blue Sky fees and expenses........................................ 50,000 Miscellaneous..................................................... 15,000 -------- Total expenses.................................................... $356,550 ======== Item 15. Indemnification of Directors and Officers. Directors and officers of the Company are entitled to be indemnified against expenses and liabilities incurred by them under certain circumstances pursuant to the By-Laws of the Company and pursuant to the New Jersey Business Corporation Act. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to officers, directors and controlling persons of the Company pursuant to the By-Laws of the Company or the New Jersey statutes or otherwise, the Company understands that it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy as expressed in the Act and, therefore, unenforceable. In the event that a claim for such indemnification (other than for the payment by the Company of expenses incurred or paid by a director or officer or controlling persons in the successful defense of any action, suit or proceeding) is asserted against the Company by a director or officer or controlling persons with respect to liabilities under the Act, in connection with the securities offered pursuant to this Registration Statement, the Company will, unless in the opinion of counsel for the Company the matter has theretofore been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question whether or not such indemnification by it is against public policy as expressed in the Act and, therefore, unenforceable and will be governed by the final adjudication of such issue. The Company has insurance policies under which its directors and officers are insured against certain liabilities that may be incurred by them in their capacities as such. II-1 Item 16. Exhibits Exhibit Number Description of Exhibits - ------- ----------------------- 1 - Form of Underwriting Agreement relating to the Preferred Securities. 4-A - Trust Agreement relating to the Preferred Securities. 4-B - Form of Amended and Restated Trust Agreement relating to the Preferred Securities. 4-C - Form of Indenture relating to the Subordinated Debentures. 4-D - Form of Guarantee Agreement. 4-E - Form of Officer's Certificate establishing Subordinated Debentures (including the form of Subordinated Debentures as Exhibit A). 4-F - Form of Preferred Securities (Exhibit C to Exhibit 4-B). 5-A - Opinion of Simpson Thacher & Bartlett, relating to the legality of the Subordinated Debentures. 5-B - Opinion and Consent of Richards, Layton & Finger, Special Delaware Counsel to the Company and Atlantic Capital. 8 - Opinion of Simpson Thacher & Bartlett, as to certain United States federal income tax matters. 12-A - Computation of Ratio of Earnings to Fixed Charges of the Company (filed with Form 10-Q for the quarter ended June 30, 1998).* 12-B - Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends of the Company (filed with Form 10-Q for the quarter ended June 30, 1998).* 23-A - Consent of Deloitte & Touche LLP 23-B - Consents of Simpson Thacher & Bartlett and Richards, Layton & Finger are included in their respective opinions filed as Exhibits 5-A, 5-B and 8, respectively. 25-A - Statement of Eligibility and Qualification on Form T-1 of The Bank of New York relating to Amended and Restated Trust Agreement. 25-B - Statement of Eligibility and Qualification on Form T-1 of The Bank of New York relating to Indenture. 25-C - Statement of Eligibility and Qualification on Form T-1 of The Bank of New York relating to Guarantee Agreement. - ----------------------- * Incorporated by reference pursuant to Rule 411. II-2 Item 17. Undertakings. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, as amended (the "1933 Act"), each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered hereby, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (2) For purposes of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the 1933 Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (3) For the purpose of determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (4) Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wilmington, State of Delaware, on September 15, 1998. ATLANTIC CITY ELECTRIC COMPANY (Registrant) By /s/ Barbara S. Graham -------------------------------------- (Barbara S. Graham, Senior Vice President and Chief Financial Officer) Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated. Signature Title Date --------- ----- ---- /s/ Howard E. Cosgrove Chairman of the Board, September 15, 1998 - ------------------------ Chief Executive Officer (Howard E. Cosgrove) and Director /s/ Barbara S. Graham Senior Vice President, September 15, 1998 - ------------------------ Chief Financial Officer (Barbara S. Graham) and Director /s/ James P. Lavin Controller and September 15, 1998 - ------------------------ Chief Accounting Officer (James P. Lavin) II-4 Signature Title Date --------- ----- ---- /s/ Barry R. Elson Director September 15, 1998 - --------------------------------- (Barry R. Elson) /s/ Meredith I. Harlacher, Jr. Director September 15, 1998 - --------------------------------- (Meredith I. Harlacher, Jr.) /s/ Thomas S. Shaw Director September 15, 1998 - --------------------------------- (Thomas S. Shaw) II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wilmington, State of Delaware, on September 15, 1998. Atlantic Capital II By: Atlantic City Electric Company, as Depositor By: /s/ Barbara S. Graham -------------------------------------------------- II-6 EXHIBIT INDEX Exhibit Number Description of Exhibits - ------- ----------------------- 1 - Form of Underwriting Agreement relating to the Preferred Securities. 4-A - Trust Agreement relating to the Preferred Securities. 4-B - Form of Amended and Restated Trust Agreement relating to the Preferred Securities. 4-C - Form of Indenture relating to the Subordinated Debentures. 4-D - Form of Guarantee Agreement. 4-E - Form of Officer's Certificate establishing Subordinated Debentures (including the form of Subordinated Debentures as Exhibit A). 4-F - Form of Preferred Securities (Exhibit C to Exhibit 4-B). 5-A - Opinion of Simpson Thacher & Bartlett, relating to the legality of the Subordinated Debentures. 5-B - Opinion and Consent of Richards, Layton & Finger, Special Delaware Counsel to the Company and Atlantic Capital. 8 - Opinion of Simpson Thacher & Bartlett, as to certain United States federal income tax matters. 12-A - Computation of Ratio of Earnings to Fixed Charges of the Company (filed with Form 10-Q for the quarter ended June 30, 1998).* 12-B - Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends of the Company (filed with Form 10-Q for the quarter ended June 30, 1998).* 23-A - Consent of Deloitte & Touche LLP. 23-B - Consents of Simpson Thacher & Bartlett and Richards, Layton & Finger are included in their respective opinions filed as Exhibits 5-A, 5-B and 8, respectively. 25-A - Statement of Eligibility and Qualification on Form T-1 of The Bank of New York relating to Amended and Restated Trust Agreement. 25-B - Statement of Eligibility and Qualification on Form T-1 of The Bank of New York relating to Indenture. 25-C - Statement of Eligibility and Qualification on Form T-1 of The Bank of New York relating to Guarantee Agreement. - ----------------------- * Incorporated by reference pursuant to Rule 411. II-7 EX-1 2 FORM OF UNDERWRITING AGREEMENT Exhibit 1 ATLANTIC CAPITAL II Cumulative Trust Preferred Capital Securities (Liquidation Amount $25.00 per Preferred Security) UNDERWRITING AGREEMENT ---------------------- October , 1998 To the Representative named in Schedule I hereto of the Underwriters named in Schedule II hereto Ladies and Gentlemen: The undersigned, Atlantic Capital II (the "Trust"), a statutory business trust created under the Business Trust Act (the "Delaware Act") of the state of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. (S)(S) 3801 et -- seq.) and Atlantic City Electric Company, a New Jersey corporation (the - ---- "Company"), hereby confirm their agreement with each of the Underwriters hereinafter named as follows: The term "Underwriters" as used herein shall be deemed to mean the firm or corporation or the several firms or corporations named in Schedule II hereto and any underwriter substituted as provided in Section 3 and the term "Underwriter" shall be deemed to mean one of such Underwriters. If the firm or firms listed in Schedule I hereto (the "Representative") are the same as the firm or firms listed in Schedule II hereto, then the terms "Underwriters" and "Representative", as used herein, shall each be deemed to refer to such firm or firms. The Representative represents that it has been authorized by the Under writers to execute this Agreement on their behalf and to act for them in the manner herein provided. All obligations of the Underwriters hereunder are several and not joint. If more than one firm is named in Schedule I hereto, any action under or in respect of this Agreement may be taken by such firms jointly as the Representative or by one of the firms acting on behalf of the Representative and such action will be binding upon all the Underwriters. 1. Description of Securities. The Trust and the Company, as depositor of ------------------------- the Trust and as guarantor, propose, subject to the terms and conditions stated herein, that the Trust issue and sell to the Underwriters the Cumulative Trust Preferred Capital Securities specified above (each a "Security" and collectively the "Securities") representing undivided preferred beneficial interests in the assets of the Trust in the amount specified in Schedule 1 hereto. The Securities are guaranteed on a subordinated basis by the Company as to the payment of distributions, and as to payments on liquidation or redemption, to the extent set forth in a Guarantee Agreement (the "Guarantee") between the Company and The Bank of New York, as trustee (the "Guarantee Trustee"). The Trust is to invest the proceeds of the sale of the Securities and its Common Securities (liquidation amount $25 per common security) (the "Common Securities") in the amount specified in Schedule I in the Company's Junior Subordinated Debentures of the Series designated in Schedule I (the "Debentures") to be issued pursuant to an Indenture (the "Indenture") between the Company and The Bank of New York, as trustee (the "Debenture Trustee"). 2. Representations, Warranties and Agreements of the Company. The --------------------------------------------------------- Company represents and warrants to, and agrees with, the several Underwriters that: (a) A registration statement (identified in Schedule I hereto), including a preliminary prospectus, together with amendments thereto, if any, with respect to the Securities, the Debentures and certain obligations of the Company under the Guarantee, the Indenture has been prepared by the Trust and the Company and filed with the Securities and Exchange Commission (the "Commission") in conformity with the rules, regulations and releases of the Commission (the "Rules and Regulations") under the Securities Act of 1933, as amended (the "Act"). Such registration statement has been declared effective by the Commission and the Trust Agreement (hereinafter defined), the Guarantee and the Indenture have been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). Copies of said registration statement, together with all amendments thereto, if any, including the exhibits filed therewith, have heretofore been delivered to the Representative, and copies of any amendments thereto, including the exhibits filed therewith, which shall be subsequently filed will be so delivered to the Representative. As used in this Agreement, the term "Registration Statement" means said registration statement, including the exhibits, financial statements and all documents incorporated therein by reference, as amended to the date hereof, and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act and deemed by virtue of Rule 430A under the Act to be part of the registration statement at the time it was declared effective. As used in the Agreement, the term "Prospectus" means the prospectus in the form included in the Registration Statement completed to reflect the terms of the offering, proposed to be filed on or about the date hereof with the Commission pursuant to Rule 424(b), including all documents incorporated in such prospectus by reference (the "Incorporated Documents"). In the event of any amendment to the Registration Statement after the date hereof, the term "Registration Statement" also shall mean such Registration Statement as so amended. In the event of any supplement to the Prospectus, after the date of the filing with the Commission of the Prospectus pursuant to Rule 424(b), the term "Prospectus" also shall mean such Prospectus as so amended or supplemented. Any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing of any document under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), deemed to be incorporated therein after the date hereof and prior to the termination of the offering of the Securities by the Underwriters. 2 (b) No stop order suspending the effectiveness of the Registration Statement, nor any order preventing or suspending use of the Prospectus nor any order directed to the adequacy or accuracy of any Incorporated Document has been issued by the Commission, and no proceeding for any such purpose has been initiated or is pending or, to the knowledge of the Company, is contemplated by the Commission. (c) On the date of this Agreement and at all times subsequent hereto up to and at the Closing Date (as defined in Section 3), (i) the Registration Statement and the Prospectus do and will, contain all statements and information which are required to be included therein by the Act and the Rules and Regulations and will conform, in all material respects, to the requirements of the Act and the Rules and Regulations; (ii) the Registration Statement does not and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) the Prospectus does not and will not include any untrue statement of a material fact or omit to state any 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; provided, however, that the Company makes no representations or warranties as to information contained in or omitted from the Registration Statement or the Prospectus, in reliance upon and in conformity with written information furnished to the Company by any Underwriter expressly for use in the preparation thereof. There are no contracts or documents of the Company or of any Subsidiary (as defined below) of the Company which are required to be filed as exhibits to the Registration Statement by the Act or by the Rules and Regulations which have not been filed as required. (d) The Company has filed timely all reports and all definitive proxy and information statements required to be filed by the Company with the Commission pursuant to the Exchange Act and the rules and regulations of the Commission thereunder. Each of the Incorporated Documents, when it and any amendment thereto was filed with the Commission, complied as to form in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder, and any Incorporated Document and any amendment thereto, when filed with the Commission will comply as to form in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder; and none of such documents includes or will include any untrue statement of a material fact or omits or will omit to state any 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. (e) The Trust has been duly created and is validly existing as a statutory business trust in good standing under the Delaware Act with the power and authority (trust and other) to own property and conduct its business as described in the Registration Statement and Prospectus, and has conducted and will conduct no business other than the transactions contemplated by this Agreement and described in 3 the Prospectus; the Trust is not a party to or bound by any agreement or instrument other than this Agreement, the trust agreement (as amended and restated from time to time, the "Trust Agreement") between the Company and the trustees named therein (the "Trustees") 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. (f) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of New Jersey, with all corporate authority, including franchises, necessary to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus; the Company is duly qualified to do business as a foreign corporation in good standing in Pennsylvania, being the only jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, with all corporate authority, including franchises necessary to own or lease its properties and conduct its business as described in the Registration Statement and Prospectus. (g) The performance of this Agreement and the consummation of the transactions contemplated by this Agreement and described in the Prospectus and the fulfillment of the terms hereof will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Trust or the Company is a party or by which either of them is bound or to which any of their property is subject, or the Trust Agreement or the Company's Restated Certificate and Articles of Incorporation, as amended, or By-Laws, as amended, or any order, rule or regulation of any court or other governmental body applicable to the Trust or the Company or any of their property. (h) The Company has full power and lawful authority to authorize, issue and sell or exchange the Debentures and to enter into the Indenture and the Guarantee as described in the Prospectus; has taken all corporate action necessary therefor; and has obtained every consent, approval, authorization or other order of any regulatory body which is required therefor, except as may be required under state securities laws; and such consents, approvals, authorizations or other orders are not subject to appeal. (i) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in or contemplated by the Registration Statement and the Prospectus: (1) neither the Company nor the Trust have incurred any material liabilities or obligations, direct or contingent, or have entered into any material transaction, not in the ordinary course of business; (2) there has not been any material change in the capital stock or long-term debt of the Company or any material adverse change, or development involving a prospective 4 material adverse change, in the condition, financial or otherwise, or in the earnings, business, net worth or results of operations of the Trust or the Company; (3) no material loss or damage (whether or not insured) to the property of the Company has been sustained; and (4) no legal or governmental proceeding, domestic or foreign, materially affecting the Trust or the Company, or the transactions contemplated by this Agreement and described in the Prospectus, has been instituted or, to the knowledge of the Trust or the Company, threatened. (j) The financial statements set forth in or incorporated by reference into the Registration Statement and the Prospectus fairly present the financial condition of the Company and the results of its operations as of the dates and for the periods therein specified; and said financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles which have been consistently applied throughout the periods involved. (k) Deloitte & Touche LLP, which has reported on certain financial statements filed with the Commission and incorporated by reference into the Registration Statement and the Prospectus, are independent certified public accountants as required by the Act and the Rules and Regulations. (l) Except as set forth in or contemplated by the Registration Statement and the Prospectus, there is not pending any action, suit or other proceeding to which the Trust or the Company is a party or of which any property of either of them is the subject, before or by any court or other governmental body, which might result in any material adverse change in the condition, business or prospects of the Trust or the Company, or might materially adversely affect the properties or assets of the Trust or the Company; and no such action, suit or proceeding is known by the Trust or the Company to be threatened or contemplated. (m) The Securities have been duly and validly authorized by the Trust, and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable undivided beneficial interests in the assets of the Trust and will conform to the description thereof contained in the Registration Statement and the Prospectus; the issuance of the Securities is not subject to preemptive or other similar rights. (n) The Common Securities have been duly and validly authorized by the Trust, and, when issued and delivered to the Company by the Trust against payment therefor as provided in the Prospectus, will be duly and validly issued and fully paid and non-assessable undivided beneficial interests in the assets of the Trust and will conform to the description thereof contained in the Registration Statement and Prospectus; the issuance of the Common Securities is not subject to preemptive or other similar rights; on the Closing Date, all of the issued and outstanding Common Securities of the Trust will be directly owned by the Company, free and clear of all 5 liens, encumbrances, equities or claims; and the Common Securities and the Securities are the only interests authorized to be issued by the Trust; (o) Neither the Trust nor the Company is or, after giving effect to the offering and sale of the Securities, will 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"); and (p) The Company (i) is in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals are disclosed in the financial statements set forth in or incorporated by reference into the Registration Statement and Prospectus or would not, singly or in the aggregate, have a material adverse effect on the Company. (q) In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that, other than as disclosed in the financial statements set forth in or incorporated by reference into the Registration Statement and Prospectus, such associated costs and liabilities would not, singly or in the aggregate, have a material adverse effect on the Company. 3. Sale, Purchase, and Delivery of Securities; Substitution of ----------------------------------------------------------- Underwriters. On the basis of the representations, warranties and agreements - ------------ herein contained, and subject to the terms and conditions herein set forth, the Trust and the Company agree that the Trust will sell to each of the Underwriters, and each Underwriter agrees, severally and not jointly, to purchase from the Trust, the respective principal amount of Securities set forth opposite the name of such Underwriter in Schedule II hereto at the purchase price set forth in Schedule I hereto. As compensation to the Underwriters for their commitments hereunder, and in view of the fact that the proceeds from the sale of the Securities will be used by the Trust to purchase the Debentures, the Company on the Closing Date will pay by wire transfer of 6 immediately available funds to the Representative, for the accounts of the several Underwriters, an amount per Security set forth in Schedule I hereto for the Securities to be delivered by the Trust hereunder on the Closing Date. Payment for and delivery of the Securities (the "Closing") shall be made at the place, time and date specified in Schedule I hereto or at such other time and date as the Representative, the Trust and the Company may agree in writing, such time and date for payment being herein referred to as the "Closing Date". The Securities to be purchased by each Underwriter hereunder will be represented by one global Security 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. The Trust will deliver the Securities to the Representative, for the account of each Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of immediately available funds to an account or accounts designated in writing by the Trust, by causing DTC to credit the Securities to the account of the Representative at DTC. The Trust will cause the certificates representing the Securities to be made available to the Representative for checking at least twenty-four hours prior to the Closing Date. Time shall be of the essence, and delivery at the time determined as set forth above is a further condition of the obligation of each Underwriter, the Trust and the Company. It is understood that the several Underwriters propose to offer the Securities for sale as set forth in the Prospectus. In the event of default by one or more Underwriters in respect of their obligations under this Agreement to take up and pay for the Securities pursuant to this Section, and if the aggregate of such defaults shall not exceed 10% of the Securities, the remaining Underwriters shall be obligated severally (in proportion to their respective commitments hereunder or in such other proportion as may be agreed upon by the Representative) to purchase the Securities which such defaulting Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or Underwriters shall for any reason permitted under this Agreement cancel their obligations to take up and pay for the Securities pursuant to this Section, or in the event of a default by one or more Underwriters in respect of their obligations under this Agreement to take up and pay for the Securities pursuant to this Section, and if the aggregate of such cancellations or defaults shall exceed 10% of the aggregate principal amount of the Securities, the remaining Underwriters shall have the right to take up and pay for (in such proportion as may be agreed upon by the Representative) the Securities, which the canceling or defaulting Underwriter or Underwriters agreed but failed to purchase. If such remaining Underwriters do not, at the Closing Date, take up and pay for the aggregate principal amount of the Securities which the canceling or defaulting Underwriter or Underwriters failed to purchase, the time for delivery of the Securities shall be extended for twenty-four hours, and the several Underwriters shall have the privilege of substituting within such twenty-four hours another underwriter or underwriters satisfactory to the Company. If no such underwriter or underwriters shall have been substituted as aforesaid, prior to the termination of such extended time for delivery, the time for delivery of the 7 Securities shall be extended for a further twenty-four hours, during which the Trust and the Company shall have the privilege of finding another underwriter or underwriters, satisfactory to the Representative, to purchase the aggregate principal amount of the Securities which the canceling or defaulting Underwriter or Underwriters failed to purchase. If it shall be arranged for the remaining Underwriters or substituted underwriters to take up the Securities of the canceling or defaulting Underwriter or Underwriters as provided in this Section, (i) the Representative or the Company shall have the right to postpone the time of delivery of the Securities, for a period of not more than five full business days, in order to effect whatever changes that such arrangements may make necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Trust and the Company agree promptly to file any amendment to the Registration Statement or any supplement to the Prospectus which such arrangements may make necessary, and (ii) the Securities to be purchased by the remaining Underwriters or substituted underwriters shall be taken as the basis of their respective underwriting obligations for all purposes of this Agreement. If, in the event of a default by one or more Underwriters, the remaining Underwriters shall not take up and pay for all of the Securities agreed to be purchased by the defaulting Underwriters or substitute another underwriter or underwriters as aforesaid and the Trust and the Company shall not find another underwriter or underwriters for such Securities, as aforesaid, then this Agreement may be terminated by the Trust and the Company by giving prompt notice to the remaining Underwriters. If the Trust and the Company shall not so elect to terminate this Agreement, they shall have the right to require such remaining Underwriters, irrespective of the default as aforesaid, to purchase the aggregate principal amount of the Securities which they have agreed to purchase hereunder. In such event the Trust and the Company shall, within twenty-four hours after such second twenty-four hour period, give notice thereof in writing or by facsimile transmission to such remaining Underwriters and thereupon the time for delivery of the Securities may be postponed for a period of not more than five full business 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 Trust and the Company agree promptly to file any amendment to the Registration Statement or any supplement to the Prospectus which may thereby be made necessary. In the absence of such notice from the Trust and the Company, this Agreement shall terminate without further action on the part of the Trust, the Company or the Underwriters. In the event of any such termination, the Trust and the Company shall not be under any liability to any Underwriter (except to the extent provided in Sections 4(e) and 7 hereof) nor shall any Underwriter (other than an Underwriter who shall have failed to purchase Securities otherwise than for some reason permitted under this Agreement) be under any liability to the Trust and the Company (except to the extent provided in Section 7 hereof). 8 Any action taken by the non-defaulting Underwriters or by the Trust or the Company under this Section shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 4. Covenants of the Company. The Trust and the Company, jointly and ------------------------ severally, further covenant and agree with the several Underwriters that: (a) The Trust and the Company shall comply with the provisions of, and make all requisite filings with the Commission pursuant to, Rule 424(b) and notify the Representative promptly of all such filings. Neither the Trust nor the Company will at any time file any amendment to the Registration Statement or supplement to the Prospectus of which the Representative shall not previously have been advised and furnished with a copy or to which the Representative or Thelen Reid & Priest LLP, counsel for the several Underwriters, shall have reasonably and promptly objected in writing or which is not in compliance with the Act or the Rules and Regulations. The Trust and the Company will prepare and file with the Commission, promptly upon the Representative's request, any amendment to the Registration Statement or supplement to the Prospectus which, in the opinion of counsel for the several Underwriters and counsel for the Company, may be necessary or advisable in connection with the offering of the Securities by the Underwriters. The Company will file timely all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to the Exchange Act and the rules and regulations of the Commission thereunder subsequent to the date hereof and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Securities. (b) The Trust and the Company will notify the Representative promptly and confirm in writing (i) the issuance of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of the Prospectus or any order directed to the adequacy or accuracy of any Incorporated Document or of the initiation of any proceedings for any such purpose and (ii) the receipt of any comments from the Commission in respect of the Registration Statement or the Prospectus, or requesting additional information or the amendment or supplementation of the Registration Statement or the Prospectus. If the Commission shall issue a stop order or any order preventing or suspending the use of the Prospectus or any order directed to the adequacy or accuracy of any Incorporated Document at any time, or shall initiate any proceedings for any such purpose, the Trust and the Company will make every reasonable effort to prevent the issuance of such order and, if issued, to obtain the lifting thereof. (c) Within the time during which a prospectus relating to the Securities is required to be delivered under the Act, the Company will comply so far as it is able with all requirements imposed upon it by the Act, as now and hereafter amended, and by the Rules and Regulations, as from time to time in force, so far as necessary to 9 permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof; and if during such period any event occurs as a result of which the Prospectus would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if during such period it is necessary to amend or supplement the Prospectus to comply with the Act or the Rules and Regulations or to file under the Exchange Act or the rules and regulations of the Commission thereunder any document incorporated by reference into the Prospectus in order to comply with the Act, the Rules and Regulations, the Exchange Act or the rules and regulations of the Commission thereunder, the Trust and the Company will promptly notify the Representative and will amend or supplement the Prospectus or file such document (in form satisfactory to counsel for the Underwriters and counsel for the Trust and the Company and at the expense of the Company) so as to correct such statement or omission or effect such compliance. (d) The Trust and the Company will cooperate with the Underwriters in qualifying and registering the Securities for sale under the securities laws and legal investment laws of such jurisdictions as the Representative may designate, and in continuing such qualifications in effect so long as required for the distribution of the Securities; provided, however, that neither the Trust nor the Company shall be obligated to file any general consent to service of process or to submit to any requirements which it deems unduly burdensome. The Trust and the Company will advise the Representative promptly of any order or communication of any public authority addressed to it suspending or threatening to suspend qualification of the Securities for sale in any jurisdiction. (e) Whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, the Company will pay, or reimburse the Underwriters on demand for, all reasonable costs and expenses incident to the performance of the Company's obligations under this Agreement, including all expenses incident to the authorization of the Securities and their issue and delivery by the Trust, all expenses incident to listing the Securities on any stock exchange, any necessary stamp taxes in connection with the foregoing, the reasonable fees and expenses of the Company's counsel and accountants and Special Counsel to the Company and the Trust, the costs and expenses incident to the preparation and filing under the Act of the Registration Statement (including all exhibits and amendments thereto), the Prospectus and this Agreement, all fees and disbursements (including reasonable fees and disbursements of counsel) incurred by the Trust, the Company or the Underwriters in connection with the qualification of the Securities for sale under state securities laws and the preparation of Blue Sky Memoranda and Legal In vestment Surveys, the cost of furnishing to the Underwriters copies of Blue Sky Memoranda and Legal Investment Surveys, the Registration Statement and the Prospectus, and each amended or supplemented Registration Statement or Prospectus and each Prospectus prepared to permit compliance with Section 10(a)(3) of the Act and the cost of preparing copies of this 10 Agreement, the Trust Agreement, the Indenture, the Guarantee and the Expense Agreement, any fees charged by securities ratings services for rating the Securities, the cost and charges of any transfer agent or registrar, the cost and charges of qualifying the Securities with DTC, the fees and expenses of the Trustees, the Debenture Trustee and the Guarantee Trustee and any agent thereof and the fees and disbursements of their counsel. The Company shall not, however, be required to pay for any of the Representative's expenses or those of any of the other Underwriters, other than as hereinabove set forth and the costs of preparing copies of the legal opinion referred to in subparagraph (f) of Section 5 hereof, the Underwriters' Questionnaires and the Agreement Among Underwriters; provided, however, that, if this Agreement shall not be consummated because it is (i) terminated by the Representative pursuant to Section 5 or Section 6 hereof, (ii) terminated pursuant to Section 3 hereof, or (iii) terminated by reason of any failure, refusal or inability on the part of the Trust or the Company to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on its part to be performed, unless such failure, refusal or inability be due to the default or omission of the Underwriters, then and in any such case, the Company shall reimburse the several Underwriters (but not defaulting Underwriters in the event of termination pursuant to Section 3 hereof) for all out-of- pocket expenses (including reasonable fees and disbursements of counsel for the several Underwriters) reasonably incurred in connection with investigating, marketing and proposing to market the Securities or in contemplation of performing their obligations hereunder, but the Company shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits or commissions from the sale by them of the Securities. (f) The Trust will apply the proceeds from the sale of the Securities, and the Company will apply the proceeds from the sale of the Debentures, in each case substantially as set forth under the caption "Use of Proceeds" in the Prospectus. (g) The Trust and the Company will deliver to the Representative, as promptly as practicable, a signed copy of the Registration Statement and all amendments thereto including all exhibits filed therewith and signed consents, certificates and opinions of accountants and of any other persons named in the Registration Statement as having prepared, certified or reviewed any part thereof, and will deliver to the Representative such number of unsigned copies of the Registration Statement, without exhibits, and of all amendments thereto, as the Representative may reasonably request. The Trust and the Company will deliver to or upon the order of the Representative, from time to time, as many copies of the Prospectus (excluding Incorporated Documents) as the Representative may reasonably request. (h) The Company will make generally available to its security holders and deliver to the Representative as soon as it is practicable to do so, an earnings statement (which need not be audited) covering a period of at least twelve months beginning not later than the first day of the month next succeeding the month in which 11 occurred the effective date of the Registration Statement (as defined in Rule 158 under the Act), which shall satisfy the requirements of Section 11(a) of the Act. (i) For a period of five years from the Closing Date, the Company will deliver to the Representative and, upon request, to each of the other Underwriters (i) as soon as available, a copy of each report of the Company mailed to security holders or filed with the Commission and (ii) from time to time such other information concerning the Company as the Representative shall reasonably request. If at any time, the Company shall have a majority-owned subsidiary or subsidiaries which is or are "significant" within the meaning of Regulation S-X of the Commission, the financial statements contained in the documents referred to in (i) shall be furnished in consolidated form, if such consolidation is required under such Regulation S-X, for the Company and such subsidiary or subsidiaries. (j) During the period beginning on the date hereof and continuing through [ ], neither the Trust nor the Company will offer, sell or otherwise alienate, without the Representative's prior consent, any other Securities of the Trust or the Company as the case may be, that are substantially similar to the Securities (including any guarantee of such Securities) or any securities that are convertible into or exchangeable for, or that represent the right to receive, any such substantially similar securities of either the Trust or the Company. (k) The Trust and the Company will use best efforts to effect the listing of the Securities on the New York Stock Exchange. 5. Conditions of Underwriters' Obligations. The obligations of the --------------------------------------- several Underwriters to purchase and pay for the Securities, as provided herein, shall be subject to the accuracy, as of the date hereof and as of the Closing Date (as if made on such Date), of the representations and warranties of the Trust and Company herein, to the accuracy of statements of the Trustees and Company officers made in certificates delivered pursuant to the provisions hereof, to the performance by the Trust and the Company of their obligations hereunder and to the following additional conditions: (a) No stop order suspending the effectiveness of the Registration Statement, or order preventing or suspending the use of the Prospectus, shall have been issued; no order of the Commission directed to the adequacy or accuracy of any Incorporated Document shall be in effect; and no proceedings for any such purpose shall have been instituted or be pending or, to the knowledge of the Trust, the Company or the Representative, shall be contemplated or threatened by the Commission; any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of Thelen Reid & Priest LLP, counsel for the several Underwriters; no amendment to the Registration Statement or Prospectus shall have been filed hereafter to which the Representative or Thelen Reid & Priest LLP, counsel 12 for the several Underwriters, shall have reasonably and promptly objected in writing after having received reasonable notice and a copy thereof; there shall be in full force and effect on the date of this Agreement appropriate orders of the New Jersey Board of Public Utilities permitting the transactions contemplated by this Agreement and described in the Prospectus substantially in accordance with the terms and conditions set forth herein and therein; such order shall contain no condition inconsistent with the provisions hereof or unacceptable to the Representative and shall be issued under circumstances that in the Representative's reasonable judgment are appropriate for the protection of the Underwriters; and on or prior to the Closing Date, such order shall not have been rescinded, modified or stayed, or the right of the Company to operate thereunder restrained, or be subject to any litigation or proceeding pending, or to the knowledge of the Representative, the Trust or the Company, threatened; and there shall not have occurred any decrease in the ratings of any of the securities of the Company or of the Securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the 1933 Act Regulations) and such organization shall not have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the securities of the Company or of the Securities. (b) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in or contemplated by the Prospectus, there shall not have been any change in the capital stock, short-term debt or long-term debt of the Company, or any adverse change or any development involving a prospective adverse change in the condition, financial or otherwise, or in the earnings, business, net worth or results of operations of the Trust or the Company, all or any of which, in the Representative's reasonable judgment, materially impairs the investment quality of the Securities; and no Underwriter shall have disclosed in writing to the Company on or prior to the Closing Date that the Registration Statement or Prospectus contained an untrue statement of fact which, in the opinion of Thelen Reid & Priest LLP, counsel for the Underwriters, is material, or omits to state a fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) The authorization and issuance of the Securities, the Guarantee, the Debentures, the Registration Statement, the Prospectus and all corporate proceedings and other legal matters incident thereto shall be satisfactory in all material respects to Thelen Reid & Priest LLP, and the Trust and the Company shall have furnished to Thelen Reid & Priest LLP such documents as they reasonably may request to enable them to be satisfied with respect to the matters referred to in this subparagraph and to furnish to the Representative an opinion, dated as of the Closing Date, as required by subparagraph (f) of this Section 5. (d) On the Closing Date, the Representative shall have received the favorable opinions of (a) Peter F. Clark, General Counsel of the Company, (b) Simpson, Thacher 13 & Bartlett, Counsel for the Company, and (c) Richards, Layton & Finger, P.A., Special Delaware Counsel for the Company and the Trust, each dated as of such date, in substantially the forms attached hereto as Exhibits A, B and C hereto. (e) On the Closing Date, the Representative shall have received the favorable opinion of Thelen Reid & Priest LLP, counsel for the several Underwriters, dated as of such date, satisfactory in form, scope and substance to the Representative with respect to the sufficiency of all corporate proceedings and other legal matters relating to the Securities, the form of the Registration Statement and the Prospectus, and as to the execution and authorization of this Agreement and the transactions contemplated hereby as the Representative may reasonably require, and the Company shall have furnished to such counsel such documents as they may have requested for the purpose of enabling them to pass upon such matters. In rendering such opinion, Thelen Reid & Priest LLP may rely as to certain matters of Delaware law relating to the Trust, the Securities and the Trust Agreement upon the opinion of Richards, Layton & Finger, P.A., Special Delaware Counsel for the Trust and the Company, which shall be delivered in accordance with Section 5(d) hereto, and as to matters governed by New Jersey law upon the opinion of [ ]. (f) On the Closing Date, the Representative shall have received the letter of PricewaterhouseCoopers L.L.P., dated as of such date, to the effect set forth in Schedule III annexed hereto and with respect to such other matters as to which the Representative shall have inquired. (g) On the Closing Date, the Representative shall have received the letter of Deloitte & Touche LLP, dated as of such date, to the effect set forth in Schedule IV annexed hereto and with respect to such other matters as to which the Representative shall have inquired. (h) On the Closing Date, the Representative shall have received certificates, dated as of such date, of the President or a Vice President or the principal accounting officer of the Company and a Trustee, on behalf of the Trust, respectively, to the effect that, to the best of his or her knowledge based on a reasonable investigation: (i) the representations and warranties of the Trust or the Company, as the case may be, in this Agreement are true and correct, as though made on and as of the Closing Date, and the Trust or the Company, as the case may be, has complied with all the agreements and satisfied all the conditions required by this Agreement to be performed or satisfied by the Trust or the Company, as the case may be, on or prior to the Closing Date; and (ii) he or she has examined the Registration Statement and the Prospectus, and, in his or her opinion, the Registration Statement, when it became effective and at all times subsequent thereto up to and including the Closing Date, did 14 not and does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, when the Prospectus Supplement was filed with the Commission and at all times subsequent thereto up to and including the Closing Date, did not and does not include any untrue statement of a material fact or omit to state any 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, and, since the effective date of the Registration Statement, there has occurred no event required to be set forth in an amended Registration Statement or a supplemented Prospectus which had not been so set forth. All the opinions, letters, certificates and documents mentioned above or elsewhere in this Agreement will be in compliance with the provisions hereof only if they are reasonably satisfactory to Thelen Reid & Priest LLP. The Company will furnish the Representative with such conformed copies of such opinions, letters, certificates and documents as the Representative may reasonably request. If any condition to the Underwriters' obligations hereunder to be satisfied on or prior to the Closing Date is not so satisfied, the Representative may terminate this Agreement without liability on the part of any Underwriter or the Company, except for the expenses to be paid or reimbursed by the Company pursuant to Section 4(e) and except for any liability under Section 7 hereof. 6. Termination of Agreement. (a) The Representative, by notice to ------------------------ the Company, may terminate this Agreement, at any time after the date of this Agreement and on or prior to the Closing Date, if during such period (i) trading on the New York Stock Exchange or the American Stock Exchange shall have been wholly suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York Stock Exchange or the American Stock Exchange, by the New York Stock Exchange or the American Stock Exchange or by order of the Commission or any other governmental authority having jurisdiction, or trading of the Company's securities on any exchange or in any over-the-counter market shall have been suspended, or (ii) a banking moratorium shall have been declared by Federal or New York authorities, or (iii) an outbreak of hostilities or an escalation thereof, a declaration of war by Congress, another substantial calamity or crisis or another event or occurrence of a similar character which, in the Representative's reasonable judgment, makes it impracticable or inadvisable to proceed with the completion of the sale of and payment for the Securities, or to enforce contracts for the sale of the Securities shall have occurred, or (iv) the Trust or the Company shall have sustained a substantial loss by fire, flood, accident or other calamity which in the Representative's reasonable judgment renders it inadvisable to consummate the sale of the Securities to, and the delivery of the Securities by, the several Underwriters, regardless of whether or not such loss shall have been insured. This Agreement may also be terminated at any time prior to the Closing Date if, in the reasonable judgment of the Representative, the subject matter of any amendment or supplement to the Registration 15 Statement or the Prospectus renders it either inadvisable to proceed with such offering or inadvisable to proceed with the delivery of the Securities to be purchased hereunder. (b) In the event of the termination pursuant to this Section, the Company shall not be under any liability to any Underwriter, except for the expenses to be paid by it pursuant to the provisions of Section 4(e) and except for any liability under Section 7, nor shall any Underwriter be under any liability to the Company, except for any liability under Section 7. (c) If the Representative elects to terminate this Agreement as provided in this Section, the Company shall be notified promptly by the Representative by telephone, confirmed in writing. 7. Indemnification. (a) The Trust and the Company, jointly and --------------- severally, will indemnify and hold harmless each Underwriter and each person, if any, who controls such Underwriter within the meaning of the Act against any losses, claims, damages or liabilities, joint or several, to which such Underwriter or such controlling person may become subject, under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of any material fact contained in the Registration Statement, any preliminary prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein 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; and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person in connection with investigation or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that neither the Trust nor the Company will be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or allegedly untrue statement or omission or alleged omission made in the Registration Statement, any preliminary prospectus, or the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by any Underwriter specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Trust or the Company may otherwise have. (b) Each Underwriter will indemnify and hold harmless the Trust and the Company, each of their directors, each of their officers who has signed the Registration Statement, and each person, if any, who controls the Trust or the Company within the meaning of the Act, against any losses, claims, damages or liabilities, joint or several, to which the Trust or the Company or any such director, officer or controlling person may become subject, under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of any material fact contained in the Registration 16 Statement, any preliminary prospectus, or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein 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, in each case to the extent, but only to the extent, that such untrue statement or allegedly untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Trust or the Company by such Underwriter specifically for use in the preparation thereof; and will reimburse the Trust and the Company for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section. In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party, similarly notified, (except in the circumstances set forth in clause (i) and (ii) of this sentence) to assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless, (i) the employment of additional counsel has been authorized in writing by the indemnifying party in connection with defending such action, or (ii) representation of both the indemnifying party and the indemnified party by the same counsel is inappropriate by applicable standards of professional conduct for attorneys in the jurisdiction where suit is instituted due to actual or potential conflicting interests between them (it being understood that the indemnifying party shall not be liable for the expense of more than one separate counsel (in addition to local counsel) representing the indemnified parties in such action). No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) No indemnity by the Trust or the Company hereunder shall apply in respect of (i) any preliminary prospectus furnished to a person to whom any of the Securities are sold unless a copy of the Prospectus is furnished by an Underwriter or securities dealer to 17 such person at or prior to the furnishing of the written confirmation of such sale or mailed to such person with such confirmation or (ii) any preliminary prospectus or Prospectus used by an Underwriter or securities dealer after the same has been superseded by an amended or supplemented preliminary prospectus or Prospectus supplied by the Trust or the Company to the Representative for the use of the Underwriters and securities dealers. As used in this Section 9, the terms "preliminary prospectus" and "Prospectus" do not include any documents incorporated by reference thereto. (e) If the indemnification provided for in subparagraph (a) or (b) above should not be available to an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to therein, then the indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and such indemnified party on the other from the offering of the Securities, and also the relative fault of the indemnifying party on the one hand and such indemnified party on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities and expenses, as well as any other relevant equitable considerations. The relative benefits received by the Trust, the Company and the Underwriters shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Trust and the Company bears to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Trust, the Company and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Trust, the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (f) The parties hereto agree that it would not be just and equitable if contribution were to be determined by pro rata allocation (even if the Underwriters were to be treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim (which shall be limited as provided in subparagraph (c) above if the indemnifying party shall have assumed the defense of any such action in accordance with the provisions thereof). No person guilty of fraudulent misrepresentation shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (g) The Company agrees to indemnify and hold harmless the Trust from and against any and all losses, claims, damages and liabilities whatsoever, as due from the Trust under this Section. 18 8. Representations and Indemnities to Survive. All representations ------------------------------------------ and warranties of the Trust and the Company contained herein and in the certificate or certificates delivered pursuant to Section 5(h) and the indemnity agreements contained in Section 7 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Trust and the Company or any officer, director or controlling person, and shall survive delivery of and payment for the Securities and, in the case of the indemnity agreements contained in Section 7, any termination of this Agreement. 9. Notices. All communications hereunder shall be in writing and if ------- sent to the Underwriters shall be mailed, delivered or transmitted by facsimile and confirmed to the Representative at the address set forth in Schedule I hereto, or if sent to the Trust or the Company shall be mailed, delivered or transmitted by facsimile and confirmed to it, c/o Senior Vice President, Treasurer and Chief Financial Officer, 800 King Street, P.O. Box 231, Wilmington, Delaware 19899, facsimile no. (302) 429-3367. Any such address may be changed from time to time by notice as aforesaid. 10. Parties. This Agreement shall inure to the benefit of and be ------- binding upon the several Underwriters, the Trust and the Company and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person or corporation, other than the parties hereto, their respective successors and assigns and the controlling persons, officers and directors referred to in Section 7, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto, their respective successors and assigns and said controlling persons, officers and directors, and for the benefit of no other person or corporation. No purchaser of any of the Securities through or from any Underwriter shall be construed a successor or assign by reason merely of such purchase. 11. Underwriters Not Agents of the Company. Nothing herein contained -------------------------------------- shall constitute the Underwriters, or any of them, agents or representatives of the Trust or the Company, or authorize them to act for or on behalf of the Trust or the Company in any capacity. 12. Controlling Law. Although the place of performance of certain --------------- obligations under this Agreement is stated to be outside of New York, it is the express intention of the parties hereto that this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to choice of laws principles. 19 If the foregoing correctly sets forth the understanding among the Trust, the Company and the Underwriters, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among the Trust, the Company and the Underwriters severally. Very truly yours, ATLANTIC CAPITAL II By ----------------------------------- Title: Administrative Trustee ATLANTIC CITY ELECTRIC COMPANY By ----------------------------------- Title: Senior Vice President, Treasurer and Chief Financial Officer ACCEPTED as of the date first above written, as Underwriters and as Representatives of the other Underwriters named in Schedule II. MORGAN STANLEY & CO. INCORPORATED WHEAT FIRST UNION LEGG MASON WOOD WALKER, INC. By: MORGAN STANLEY & CO. INCORPORATED By: ----------------------------- Title: Principal 20 SCHEDULE I ---------- Underwriting Agreement dated October , 1998 Registration Statement No. 333-________ and 333-________ Representatives and Address: MORGAN STANLEY & CO. INCORPORATED WHEAT FIRST UNION LEGG MASON WOOD WALKER, INC. c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Securities: Designation: Cumulative Trust Preferred Capital Securities (Liquidation Amount $25.00 per Preferred Security) Amount of Securities: $____________ Amount of Common Securities: $____________ Purchase Price per Preferred Security: $__________ Public Offering Price per Preferred Security: $__________ Underwriters' Compensation per Preferred Security: $_______ ($______ per Preferred Security sold to certain institutions) Closing Date, Time and Location: October , 1998 9:00 a.m. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 21 SCHEDULE II ----------- Underwriter Number of Securities ----------- -------------------- MORGAN STANLEY & CO. INCORPORATED .................... WHEAT FIRST UNION .................................... LEGG MASON WOOD WALKER, INC. ......................... --------------- Total ............................................. =============== 22 SCHEDULE III ------------ (i) They are independent public accountants with the meaning of the Act and the applicable published rules and regulations thereunder; (ii) On the basis of procedures performed specified by the American Institute of Public Accountants for a review of interim financial information as described in SAS No. 71 (but not an examination in accordance with generally accepted auditing standards) on the unaudited interim consolidated financial statements of the Company as set forth in the Company's Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus, if any, a reading of the latest available unaudited interim consolidated financial statements, if any, of the Company subsequent to the financial statements incorporated by reference in the Prospectus and the minutes of meetings of the Board of Directors and stockholders of the Company and inquiries of officers and other employees of the Company responsible for accounting matters and other specified procedures, nothing has come to their attention which causes them to believe that (A) the unaudited consolidated financial statements incorporated by reference in the Prospectus, if any, do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act as it applies to Form 10- Q and the related published rules and regulations thereunder or that any material modifications should be made to such unaudited consolidated financial statements for them to be in conformity with generally accepted accounting principles; (B) the unaudited interim consolidated financial statements, if any, for periods subsequent to the financial statements incorporated by reference in the Prospectus are not fairly stated on a basis substantially consistent with that of the audited consolidated financial statements; (C) at a specified date not more than three days prior to the date of such letter, there was any change in the capital stock of the Companies or in their long-term debt, any increase in their short-term debt or any decrease in their consolidated net assets, in each case as compared with amounts shown in their most recent unaudited interim consolidated balance sheet incorporated by reference in the Prospectus; or (D) for the period from the date of the most recent audited or unaudited consolidated financial statements incorporated by reference in the Prospectus to a subsequent date not more than three days prior to the date of such letter, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated operating revenues, operating income, net income earnings applicable to common stock and earnings per average share of common stock of the Company; except in all instances for changes or decreases which the Prospectus discloses have occurred or may occur or which (i) are described in such letter and (ii) as so described, are determined by the Representative in its discretion, not to be material; and (iii) They have compared the dollar amounts (or percentages derived from such dollar amounts), ratios and other financial information as agreed upon contained in (A) the Prospectus, (B) the Company's latest Annual Report on Form 10-K incorporated by reference -2- into the Prospectus, and (C) the Company's latest Quarterly Report on Form 10-Q incorporated by reference into the Prospectus (in each case to the extent that such dollar amounts, percentages, ratios and other financial information are derived from the general accounting records of the Company subject to the internal controls of the Company's accounting system, or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter, and have found such dollar amounts, percentages, ratios and other financial information to be in agreement with such results except as otherwise specified in such letter. SCHEDULE IV ----------- (i) They are independent public accountants with the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements of the Company ("Company") examined by them and incorporated by reference in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the published rules and regulations thereunder; (iii) They have compared the dollar amounts (or percentages derived from such dollar amounts), ratios and other financial information as agreed upon contained in the Company's latest Annual Report on Form 10-K incorporated by reference into the Prospectus (in each case to the extent that such dollar amounts, percentages, ratios and other financial information are derived from the general accounting records of the Company subject to the internal controls of the Company's accounting system, or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter, and have found such dollar amounts, percentages, ratios and other financial information to be in agreement with such results except as otherwise specified in such letter. EX-4.(A) 3 TRUST AGREEMENT Exhibit 4-A TRUST AGREEMENT OF ATLANTIC CAPITAL II This TRUST AGREEMENT of Atlantic Capital II (the "Trust"), dated as of September 10, 1998, among (i) Atlantic City Electric Company, a New Jersey corporation (the "Depositor"), (ii) The Bank of New York (Delaware), a Delaware banking corporation, not in its individual capacity but solely as trustee of the Trust, (iii) Louis M. Walters, an individual employed by the Depositor, not in his individual capacity but solely as administrative trustee of the Trust and (iv) The Bank of New York, a New York banking corporation, not in its individual capacity but solely as trustee of the Trust (each of such trustees in (ii) and (iii) a "Trustee" and collectively, the "Trustees"). The Depositor and the Trustees hereby agree as follows: 1. The Trust created hereby shall be known as "Atlantic Capital II", in which name the Trustees, 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 Trustees the sum of $10. The Trustees hereby acknowledge receipt of such amount in trust from the Depositor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they 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. (S) 3801 et seq. (the "Business Trust Act"), and ------- -- --- that this document constitutes the governing instrument of the Trust. The Trustees hereby are authorized and directed to execute and file a certificate of trust with the Secretary of State of the State of Delaware in accordance with the provisions of the Business Trust Act. 3. The Depositor and the Trustees will enter into an Amended and Restated Trust Agreement, satisfactory to each such party and substantially in the form to be included as an exhibit to the 1933 Act Registration Statement referred to 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 Trustees shall not have any duty or obligation hereunder or with respect of 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 Trustees hereby authorize and direct the Depositor (i) to file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) a Registration Statement on Form S-3 (the "1933 Act Registration Statement"), including any pre-effective or post-effective amendments to the 1933 Act Registration Statement, 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(b) of the Securities Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange (the "Exchange") and execute on behalf of the Trust a listing application 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 the Exchange and (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 shall be necessary or desirable to register the Preferred Securities under the securities or blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or desirable. In the event that any filing referred to above is required by the rules and regulations of the Commission, the Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by one or more of the Trustees, each of the Trustees, in its or his capacity as Trustee of the Trust, is hereby authorized and, to the extent so required, directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that The Bank of New York (Delaware) in its capacity as a Trustee of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the Exchange or state securities or blue sky laws. In connection with the filings referred to above, the Depositor and Louis M. Walters, as administrative trustee, solely in his capacity as a Trustee of the Trust, hereby constitutes and appoints Louis M. Walters and Stephanie M. Scola, each of them, as its or his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the Depositor or such Trustee or in the Depositor's or such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to any such filings (including the 1933 Act Registration Statement and the 1934 Act Registration Statement) and to file the same, with all exhibits thereto and other documents in connection therewith, with the Commission, the Exchange and administrators of state securities or blue sky laws, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Depositor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their respective substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Trust Agreement may be executed in one or more counterparts. 6. The number of Trustees initially shall be two (2) 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 be either 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 Trustees may resign upon thirty days prior written notice to 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). -2- 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 Louis M. Walters, not in his individual capacity but solely as Administrative Trustee By: ----------------------------------- Name: Title: THE BANK OF NEW YORK (DELAWARE) not in its individual capacity but solely as Trustee By: ----------------------------------- Name: Title: THE BANK OF NEW YORK not in its individual capacity but solely as Trustee By: ---------------------------------- Name: Title: -3- EX-4.(B) 4 FORM OF AMENDED AND RESTATED TRUST AGREEMENT Exhibit 4-B ================================================================================ AMENDED AND RESTATED TRUST AGREEMENT among ATLANTIC CITY ELECTRIC COMPANY, as Depositor and THE BANK OF NEW YORK, as Property Trustee, and THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee Louis M. Walters and Stephanie M. Scola, as Trustees and the several Holders Dated as of October 1, 1998 ATLANTIC CAPITAL II ================================================================================ Atlantic Capital II Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939: Trust Indenture Trust Agreement Act Section Section - --------------- ----------------- Section 310(a)(1) ....................................... 8.07 (a)(2) ....................................... 8.07 (a)(3) ....................................... 8.09 (a)(4) ....................................... Not Applicable (b) ....................................... 8.08 Section 311(a) ....................................... 8.13 (b) ....................................... 8.13 Section 312(a) ....................................... 5.07 (b) ....................................... 5.07 (c) ....................................... 5.07 Section 313(a) ....................................... 8.14(a) (a)(4) ....................................... 8.14(b) (b) ....................................... 8.14(b) (c) ....................................... 8.14(a) (d) ....................................... 8.14(a), 8.14(b) Section 314(a) ....................................... 8.15 (a)(4) ....................................... Not Applicable (c) ....................................... 8.16 (d) ....................................... Not Applicable (e) ....................................... 1.01 Section 315(a) ....................................... 8.01 (b) ....................................... 8.02 (c) ....................................... 8.01(a) (d) ....................................... 8.01, 8.03 (e) ....................................... Not Applicable Section 316(a) ....................................... Not Applicable (a)(1)(A) ....................................... Not Applicable (a)(1)(B) ....................................... Not Applicable (a)(2) ....................................... Not Applicable (b) ....................................... Not Applicable (c) ....................................... Not Applicable Section 317(a)(1) ....................................... Not Applicable (a)(2) ....................................... Not Applicable (b) ....................................... 5.09 Section 318(a) ....................................... 10.09 - ----------------------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Trust Agreement. TABLE OF CONTENTS ----------------- ARTICLE I. Defined Terms Section 1.01. Definitions................................................... 1 ARTICLE II. Establishment of the Trust; Issuance of Trust Securities; Rights of Securityholders Section 2.01. Name.......................................................... 10 Section 2.02. Office of the Delaware Trustee; Principal Place of Business .. 10 Section 2.03. Initial Contribution of Trust Property; Initial Ownership; Organizational Expenses ............................................. 10 Section 2.04. Issuance of the Preferred Securities ......................... 10 Section 2.05. Subscription and Purchase of Debentures; Issuance of the Common Securities ................................................... 10 Section 2.06. Declaration of Trust; Appointment of Additional Administrative Trustees ............................................. 11 Section 2.07. Authorization to Enter into Certain Transactions ............. 11 Section 2.08. Assets of Trust .............................................. 14 Section 2.09. Title to Trust Property ...................................... 14 Section 2.10. Rights of Securityholders .................................... 15 ARTICLE III. Payment Account Section 3.01. Payment Account .............................................. 15 ARTICLE IV. Distributions; Redemption Section 4.01. Distributions ................................................ 15 Section 4.02. Redemption ................................................... 16 Section 4.03. Subordination of Common Securities ........................... 18 Section 4.04. Payment Procedures ........................................... 18 Section 4.05. Tax Returns and Reports ...................................... 18 Section 4.06. Payments under Subordinated Indenture ........................ 18 ARTICLE V. Trust Securities Certificates Section 5.01. The Trust Securities Certificates ............................ 19 Section 5.02. Ownership of Common Securities by Depositor .................. 19 Section 5.03. Registration of Transfer and Exchange of Preferred Securities Certificates ............................................. 19 i Page ---- Section 5.04. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates ........................................................ 20 Section 5.05. Cancellation by Registrar. ................................... 21 Section 5.06. Persons Deemed Securityholders ............................... 21 Section 5.07. Lists of Holders. ............................................ 21 Section 5.08. Maintenance of Office or Agency .............................. 21 Section 5.09. Appointment of Paying Agent .................................. 21 Section 5.10. Book-Entry System ............................................ 22 ARTICLE VI. Acts of Securityholders; Meetings; Voting Section 6.01. Limitations on Voting Rights ................................. 23 Section 6.02. Notice of Meetings ........................................... 23 Section 6.03. Meetings of Holders of Preferred Securities .................. 24 Section 6.04. Voting Rights ................................................ 24 Section 6.05. Proxies, etc. ................................................ 24 Section 6.06. Securityholder Action by Written Consent ..................... 24 Section 6.07. Record Date for Voting ....................................... 24 Section 6.08. Acts of Securityholders ...................................... 25 Section 6.09. Inspection of Records ........................................ 26 ARTICLE VII. Representations and Warranties of the Property Trustee and the Delaware Trustee Section 7.01. Property Trustee ............................................. 26 Section 7.02. Delaware Trustee ............................................. 26 ARTICLE VIII. The Trustees Section 8.01. Certain Duties and Responsibilities .......................... 27 Section 8.02. Certain Notices .............................................. 29 Section 8.03. Certain Rights of Property Trustee ........................... 29 Section 8.04. Not Responsible for Recitals or Issuance of Securities ....... 32 Section 8.05. May Hold Securities .......................................... 32 Section 8.06. Compensation; Fees; Indemnity. ............................... 32 Section 8.07. Certain Trustees Required; Eligibility ....................... 33 Section 8.08. Conflicting Interests. ....................................... 33 Section 8.09. Co-Trustees and Separate Trustee ............................. 34 Section 8.10. Resignation and Removal; Appointment of Successor ............ 35 Section 8.11. Acceptance of Appointment by Successor ....................... 36 Section 8.12. Merger, Conversion, Consolidation or Succession to Business .. 37 Section 8.13. Preferential Collection of Claims Against Depositor or Trust . 37 Section 8.14. Reports by Property Trustee .................................. 37 ii Page ---- Section 8.15. Reports to the Property Trustee .............................. 38 Section 8.16. Evidence of Compliance With Conditions Precedent ............. 38 Section 8.17. Number of Trustees. .......................................... 38 Section 8.18. Delegation of Power. ......................................... 38 Section 8.19. Fiduciary Duty ............................................... 38 ARTICLE IX. Termination and Liquidation Section 9.01. Termination Upon Expiration Date ............................. 40 Section 9.02. Early Termination ............................................ 40 Section 9.03. Termination .................................................. 40 Section 9.04. Liquidation .................................................. 40 Section 9.05. Mergers, Consolidations, Amalgamations or Replacements of the Trust ........................................................... 42 ARTICLE X. Miscellaneous Provisions Section 10.01. Limitation of Rights of Securityholders ..................... 43 Section 10.02. Amendment ................................................... 43 Section 10.03. Separability ................................................ 44 Section 10.04. Governing Law ............................................... 45 Section 10.05. Successors .................................................. 45 Section 10.06. Headings .................................................... 45 Section 10.07. Notice and Demand ........................................... 45 Section 10.08. Agreement Not to Petition ................................... 45 Section 10.09. Conflict with Trust Indenture Act ........................... 46 iii AMENDED AND RESTATED TRUST AGREEMENT, dated as of October 1, 1998, among (i) Atlantic City Electric Company, a New Jersey corporation (the "Depositor"), (ii) The Bank of New York, a New York banking corporation duly organized and existing under the laws of New York, as trustee (the "Property Trustee"), (iii) The Bank of New York (Delaware), a Delaware banking corporation duly organized and existing under the laws of Delaware, as Delaware trustee (the "Delaware Trustee"), and (iv) Louis M. Walters and Stephanie M. Scola, each an individual, as trustee, and each of whose address is c/o Atlantic City Electric Company, 800 King Street, Wilmington, Delaware 19899 (each, an "Administrative Trustee" and, collectively, the "Administrative Trustees") (the Property Trustee, the Delaware Trustee and the Administrative Trustees being hereinafter referred to collectively as the "Trustees") and the several Holders, as hereinafter defined. W I T N E S W E T H: - - - - - - - - - - WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and Louis M. Walters, as Administrative 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 September 10, 1998 (the "Original Trust Agreement"), and by the execution by the Delaware Trustee, the Property Trustee and Louis M. Walters, as Administrative Trustee and filing with the Secretary of State of the State of Delaware of the Certificate of Trust, dated , 1998 (the "Certificate of Trust"), a copy of which is attached as Exhibit A; and WHEREAS, the Depositor, the Delaware Trustee and Louis M. Walters, as Administrative 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 acquisition by the Trust from the Depositor of all of the right, title and interest in the Debentures, (ii) the issuance of the Common Securities by the Trust to the Depositor, (iii) the issuance of the Preferred Securities by the Trust and (iv) the appointment of additional Administrative Trustees of the Trust; 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 1.01. Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (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 6.08. "Administrative Trustee" means each of the individuals identified as an "Administrative Trustee" in the preamble to this Trust Agreement, solely in their capacities as Administrative Trustees of the Trust created hereunder and not in their individual capacities, 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. "Bankruptcy Event" means, with respect to any Person: (i) 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 Federal bankruptcy law or any other applicable Federal or State law, or appointing a receiver, liquidator, assignee, trustee sequestrator or other similar official of such Person 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 (ii) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or of 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 Federal bankruptcy law or any other applicable Federal or State law, or the consent by it to the filing of 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 -2- 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. "Bankruptcy Laws" has the meaning specified in Section 10.08. "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 a duly authorized committee thereof and to be in full force and effect on the date of such certification, and delivered to the appropriate Trustee. "Business Day" means a day other than (a) a Saturday or a Sunday, (b) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed and (c) a day on which either the Corporate Trust Office or the Debenture Trustee's principal corporate trust office is closed for business. "Certificate of Trust" has the meaning specified in the preamble to this Trust Agreement. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. "Closing Date" means the date of 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 Exchange Act, 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 ownership 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 B. "Corporate Trust Office" means the principal corporate trust office of the Property Trustee located in New York, New York, which at the date hereof is 101 Barclay Street - 21 West, New York, New York 10286. "Covered Person" means: (a) any officer, director, shareholder, partner, beneficial owner, member, representative, employee or agent of the Trust or the Trust's Affiliates; and (b) any Securityholder. -3- "Debenture Event of Default" means an "Event of Default" as defined in the Subordinated Indenture. "Debenture Issuer" means Atlantic City Electric Company, a New Jersey corporation, in its capacity as issuer of the Debentures. "Debenture Redemption Date" means "Redemption Date" as defined in the Subordinated Indenture. "Debenture Trustee" means Wilmington Trust Company, as trustee under the Subordinated Indenture. "Debentures" means the $30,927,850 aggregate principal amount of the Debenture Issuer's % Junior Subordinated Debentures, Series I, Due , issued pursuant to the Subordinated Indenture. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time -- --- to time. "Delaware Trustee" means the banking corporation identified as the "Delaware Trustee" in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust 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 4.01(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.01. "Early Termination Event" has the meaning specified in Section 9.02. "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): (i) the occurrence of a Debenture Event of Default; or (ii) default by the Trust or the Property Trustee 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 by the Trust or the Property Trustee in the payment of any Redemption Price when it becomes due and payable; or -4- (iv) 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 whose performance or breach is specifically 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 Property Trustee by the Holders of at least 25% in Liquidation Amount 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 (v) the occurrence of a Bankruptcy Event with respect to the Trust or the Property Trustee if a successor Property Trustee has not been appointed within 90 days thereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Expiration Date" means December 31, 2043. "Guarantee" means the Guarantee Agreement executed and delivered by the Depositor and The Bank of New York, a New York banking corporation, 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. "Holder" has the meaning specified in the definition of "Securityholder." "Indemnified Person" means any Trustee, any Affiliate of any Trustee, any officer, director, shareholder, member, partner, employee, representative or agent of any Trustee, or any employee or agent of the Trust or its Affiliates. "Investment Company Act" means the Investment Company Act of 1940, as amended. "Investment Company Event" means 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 to the effect that the Trust is or will be considered an "investment company" that is required to be registered under the Investment Company Act, which change in law becomes effective on or after the date of original issuance of the Preferred Securities. "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, as the context requires, (i) Trust Securities having a Liquidation Amount equal to the principal amount of Debentures at any time to be repaid, whether at stated maturity or upon maturity by earlier acceleration, redemption or otherwise and (ii) Debentures having a principal amount equal to the Liquidation Amount of the Trust Securities with respect to which such Debentures are to be distributed. -5- "Liquidation Amount" means the stated amount of $25 per Trust Security. "Liquidation Date" means the date on which Debentures are to be distributed to Securityholders in connection with a termination and liquidation of the Trust pursuant to Section 9.04(a). "Liquidation Distribution" has the meaning specified in Section 9.04(e). "No Recognition Opinion" means an opinion of nationally recognized independent tax counsel experienced in such matters, which opinion may rely on any then applicable published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the termination of the Trust and distribution of the Debentures. "Officer's Certificate" means a certificate signed by the Chairman of the Board, the President, a Vice President, the Treasurer or an Assistant Treasurer of the Depositor, and delivered to the appropriate Trustee. Any Officer's Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include: (a) a statement that the officer signing the Officer's 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 such officer in rendering the Officer's Certificate; (c) a statement that 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 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, but not an employee of the Trust, the Property Trustee or the Depositor, and who shall be reasonably acceptable to the Property Trustee. Any Opinion of Counsel delivered with respect to compliance with a condition or covenant provided for in this Trust Agreement shall include statements comparable to the statements referred to in the definition of "Officers' Certificate" herein. "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 delivered under this Trust Agreement, except: -6- (i) Preferred Securities theretofore canceled by the Administrative Trustees or delivered to the Administrative Trustees for cancellation; (ii) 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, however, that, if such Preferred Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; and (iii) Preferred Securities in exchange for or in lieu of which other Preferred Securities have been delivered pursuant to this Trust Agreement, including pursuant to Sections 5.03 or 5.04; 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 which 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. "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.09 and initially shall be The Bank of New York. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee at The Bank of New York, or such other banking institution as the Depositor shall select, for the benefit of the Securityholders in which all amounts paid in respect of the Debentures will be held and from which the Paying Agent, pursuant to Section 5.09, shall make payments to the Securityholders in accordance with Sections 4.01 and 4.02. "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 ownership interest in the assets of the Trust designated as a " % Cumulative Trust Preferred Capital Security" having a Liquidation Amount of $25 and having rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. -7- "Preferred Securities Certificate" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit C. "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 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. "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, however, that each Debenture Redemption Date and Maturity (as defined in the Subordinated Indenture) of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Redemption Date of any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions thereon to the Redemption Date. "Registrar" shall mean the registrar for the Preferred Securities appointed by the Trust and shall be initially The Bank of New York. "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 Depository" shall be The Depository Trust Company, or a successor thereto. "Securities Register" shall mean the Securities Register described in Section 5.03. "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. "Subordinated Indenture" means the Indenture, dated as of October 1, 1998, between the Depositor and the Debenture Trustee, as amended or supplemented from time to time. "Tax Event" means the receipt by the Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or as a result of any administrative pronouncement or action or judicial decision interpreting or -8- applying such laws or regulations, which amendment or change is effective or which pronouncement, action 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 at such time or within 90 days of the date thereof (i) the Trust is, or will be, 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 will not be, fully deductible by the Depositor for United States federal income tax purposes, or (iii) the Trust is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Transfer Agent" shall mean one or more transfer agents for the Preferred Securities appointed by the Administrative Trustees on behalf of the Trust and shall be initially The Bank of New York. "Trust" means the Delaware business trust created by the Original Trust Agreement 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 and the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Amended and Restated 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 (i) the Debentures, (ii) any cash on deposit in, or owing to, the Payment Account and (iii) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held by the Property Trustee pursuant to the trusts 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. "Underwriting Agreement" means the Underwriting Agreement, dated as of, 1998, among the Trust, the Depositor and the underwriters named therein. -9- ARTICLE II. Establishment of the Trust; Issuance of Trust Securities; Rights of Securityholders Section 2.01. Name. The Trust created hereby shall be known as "Atlantic Capital II" in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. Section 2.02. Office of the Delaware Trustee; Principal Place of Business. The office 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 at such other address in Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal place of business of the Trust is c/o Atlantic City Electric Company, 800 King Street, Wilmington, Delaware 19899. Section 2.03. Initial Contribution of Trust Property; Initial Ownership; 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. Upon the creation of the Trust by such contribution 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. Pursuant to the Subordinated Indenture, the Debenture Issuer, as borrower, 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 2.04. Issuance of the Preferred Securities. The Depositor and an Administrative Trustee, on behalf of the Trust, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, one of the Administrative Trustees, on behalf of the Trust in accordance with Section 5.01, executed manually and delivered a Preferred Securities Certificate, registered in the name of the nominee of the Securities Depository, evidencing 1,200,000 Preferred Securities having an aggregate Liquidation Amount of $30,000,000, against receipt of the purchase price of such Preferred Securities of $30,000,000, which amount such Administrative Trustee shall promptly deliver to the Property Trustee. Section 2.05. Subscription and Purchase of Debentures; Issuance of the Common Securities. Contemporaneously with the execution and delivery of this Trust Agreement, one of the Administrative Trustees, on behalf of the Trust, shall execute and deliver to the Depositor a Common Securities Certificate, registered in the name of the Depositor, evidencing 37,114 Common Securities having an aggregate Liquidation Amount of $927,850, against receipt of the purchase price of such Common Securities of $927,850. The Administrative Trustees, on behalf of the Trust, shall subscribe to and purchase from the Depositor Debentures, registered in the name of the Property Trustee, in an aggregate principal amount of $30,927,850, and, in satisfaction of the purchase price for such -10- Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $30,927,850, representing the proceeds from the sale of the Trust Securities. Section 2.06. Declaration of Trust; Appointment of Additional Administrative Trustees. The exclusive purposes and functions of the Trust are (i) to issue Trust Securities and invest the proceeds thereof in Debentures, and (ii) to receive payments to be made with respect to the Debentures and disburse such payments in accordance with the terms hereof, and (iii) to engage in those activities necessary 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. 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 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. Section 2.07. 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 2.07 and Article VIII and in accordance with the following provisions (i) and (ii), the 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, the Administrative Trustees, acting singly or jointly, shall have the power, duty 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) without the consent of any Person, the causing of the Trust to enter into and to execute, deliver and perform on behalf of the Trust such agreements or other documents as may be necessary or desirable in connection with the consummation of the Underwriting Agreement; (C) the collection of interest, principal and any other payments made in respect of the Debentures in the Payment Account; (D) 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; (E) the listing of the Preferred Securities upon such securities exchange or exchanges as shall be determined by the Depositor and the registration of the Preferred Securities under the Exchange Act, and the -11- preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (F) the appointment of a Paying Agent, a Transfer Agent and a Registrar in accordance with this Trust Agreement; (G) the registration of transfers of the Trust Securities in accordance with this Trust Agreement; and (H) the taking of any action incidental to the foregoing as the Administrative Trustees may from time to time determine is necessary or advisable to 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). (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: (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) the sending of notices of default and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with the terms of this Trust Agreement; (F) the distribution of the Trust Property in accordance with the terms of this Trust Agreement; (G) 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; and (H) the taking of any ministerial action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to 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). -12- Subject to this Section 2.07(a)(ii), the Property Trustee shall have none of the duties, liabilities, powers or authority of the Administrative Trustees set forth in Section 2.07(a)(i) or the Depositor set forth in Section 2.07(c). The Property Trustee shall have the power and authority to exercise all of the rights, powers and privileges of a holder of Debentures under the Subordinated Indenture and, if an Event of Default occurs and is continuing, the Property Trustee may, for the benefit of Holders of the Trust Securities, in its discretion proceed to protect and enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of this Trust Agreement. (b) 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, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to fail or cease to qualify as a "grantor trust" for United States federal income tax purposes, (iv) incur any indebtedness for borrowed money or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The 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 issuance 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) to prepare for filing by the Trust with the Commission and to execute a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; (ii) to determine the states in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to do any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advise the Trustees of actions they must take on behalf of the Trust, and prepare for execution and filing 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) to prepare for filing by the Trust an application to the New York Stock Exchange, any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities and to 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; -13- (iv) to prepare for filing by the Trust with the Commission and to execute a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; (v) to execute and deliver on behalf of the Trust the Underwriting Agreement and such other agreements as may be necessary or desirable in connection with the consummation thereof; (vi) to select the investment banker or bankers to act as underwriters with respect to the offer and sale by the Trust of Preferred Securities and negotiate the terms of an Underwriting Agreement and pricing agreement providing for such offer; and (vii) to take 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 Investment Company Act of 1940, as amended, or classified other than as 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 10.03, the Depositor and the Administrative Trustees are authorized to take any action, not inconsistent with applicable law or this Trust Agreement, that each of the Depositor and the Administrative Trustees determines in its discretion to be necessary or desirable for such purposes, as long as such action does not materially and adversely affect the interests of the Holders of the Preferred Securities. (e) 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, liabilities or 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 that the Trust have at least one trustee that has its principal place of business in the State of Delaware. The duties of the Delaware Trustee shall be limited to (a) accepting legal process served on the Trust in the State of Delaware and (b) the execution of any certificates required to be filed with the Delaware Secretary of State which the Delaware Trustee is required to execute under Section 3811 of the Delaware Business Trust Act. Section 2.08. Assets of Trust. The assets of the Trust shall consist of the Trust Property. Section 2.09. 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 -14- administered by the Property Trustee for the benefit of the Securityholders in accordance with this Trust Agreement. Section 2.10. Rights of Securityholders. The legal title to the Trust Property is vested exclusively in the Property Trustee (in its capacity as such) in accordance with Section 2.09, and the Securityholders shall not have any right or title therein other than an undivided beneficial ownership 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. By acceptance of a beneficial interest in the Trust Securities, Securityholders agree to treat the Debentures as indebtedness for all United States tax purposes. The Preferred 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 interests in the Trust. ARTICLE III. Payment Account Section 3.01. Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. The Property Trustee and the Paying Agent appointed by the Administrative Trustees shall have exclusive control 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 Holders of Trust Securities and for distribution as herein provided. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal 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 4.01. 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 accumulate from the Closing Date, and, except in the event that the Depositor exercises its right to extend the interest payment period for the Debentures pursuant to Section 311 of the Subordinated Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 1998. If any date on which Distributions are otherwise payable on the -15- 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 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 4.01(a) a "Distribution Date"). (b) Distributions payable on the Trust Securities shall be fixed at a rate of % per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable on December 31, 1998 will be computed on the basis of days in a 360-day year. The amount of Distributions payable for any full quarterly period shall be computed on the basis of twelve 30-day months and a 360-day year and for any period shorter than a full month, on the basis of the actual number of days elapsed. If the interest payment period for the Debentures is extended pursuant to Section 311 of the Subordinated Indenture, then Distributions on the Preferred Securities will be deferred for the period equal to the extension of the interest payment period for the Debentures and additional Distributions on the Trust Securities shall accumulate by the aggregate amount of interest (including, to the extent permitted by law, interest payable on unpaid interest at the percentage rate per annum set forth above, compounded quarterly) that accrues during any such extended interest payment period on the Debentures. (c) Distributions on the Trust Securities shall be made and shall be deemed payable on each Distribution Date only to the extent that the Trust has funds immediately available in the Payment Account for the payment of such Distributions. (d) Distributions on the Trust Securities with respect to a Distribution 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 15 days prior to such Distribution Date. Section 4.02. Redemption. (a) On each Debenture Redemption Date and at Maturity for the Debentures, the Property Trustee 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; -16- (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; (vi) the place or places where such Trust Securities are to be surrendered for payment of the Redemption Price; and (vii) such other matters as the Property Trustee shall deem desirable or appropriate. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be deemed payable on each Redemption Date only if the Trust has funds immediately available in the Payment Account for such payment. (d) If the Property Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, New York time, on the Redemption Date, subject to Section 4.02(c), the Property Trustee shall irrevocably deposit with the Paying Agent funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions to pay the Redemption Price to the Holders thereof upon surrender of their Trust Securities Certificates. Notwithstanding the foregoing, 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 on the 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 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). In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is 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 to the date on which such Redemption Price shall actually be paid. (e) 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 pro rata to the Common Securities and the Preferred Securities. The particular Preferred Securities to be redeemed shall be selected pro rata not more than 60 days prior to the Redemption Date by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption which may provide for the selection for redemption of portions (equal to $25 or integral multiples 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 -17- 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 which has been or is to be redeemed. Section 4.03. Subordination of Common Securities. (a) If on any Distribution Date or Redemption Date any Event of Default resulting from a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution 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 on all Outstanding Preferred Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price, payment in full of such Redemption Price on all Outstanding Preferred Securities, shall have been made or provided for. (b) In the case of the occurrence of an Event of Default resulting from a Debenture Event of Default, the Holder of Common Securities will be deemed to have waived such Event of Default until the effect of all such Events of Default with respect to the Preferred Securities shall have been cured, waived or otherwise eliminated. Until all Events of Default with respect to the Preferred Securities shall have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the Holders of the Preferred Securities, and only the Holders of the Preferred Securities will have the right to direct the Property Trustee to act. Section 4.04. Payment Procedures. Payments 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. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Administrative Trustees and the Holder of the Common Securities. Section 4.05. Tax Returns and Reports. The Administrative Trustees shall prepare (or cause to be prepared), at the Depositor's expense and direction, 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 Internal Revenue Service Form 1041 (or any successor 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 related Internal Revenue Service Form 1099, or any successor form 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, reports and schedules promptly after such filing or furnishing. The Trustees shall comply with United States federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. Section 4.06. Payments under Subordinated Indenture. Any amount payable hereunder to any Holder of Preferred Securities shall be reduced by the amount of 18 any corresponding payment such Holder has directly received pursuant to Section 808 of the Subordinated Indenture. Notwithstanding the provisions hereunder to the contrary, Securityholders acknowledge that any Holder of Preferred Securities that receives payment under Section 808 of the Subordinated Indenture may receive amounts greater than the amount such Holder may be entitled to receive pursuant to the other provisions of this Trust Agreement. ARTICLE V. Trust Securities Certificates Section 5.01. The Trust Securities Certificates. The Trust Securities Certificates shall be issued in denominations of $25 Liquidation Amount and integral multiples thereof. Subject to Section 2.04 relating to the original issuance of the Preferred Securities Certificate registered in the name of the nominee of the Securities Depository, the Trust Securities Certificates shall be executed on behalf of the Trust by 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 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 and 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. Trust Securities Certificates may be typewritten, 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 5.02. Ownership of Common Securities by Depositor. On the Closing Date, the Depositor shall acquire, and thereafter retain, beneficial and record ownership of the Common Securities. Any attempted transfer of the Common Securities (other than a transfer in connection with a merger or consolidation of the Depositor with or into another corporation pursuant to Section 1101 of the Subordinated Indenture) 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." A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a typewritten or definitive Common Securities Certificate. Section 5.03. Registration of Transfer and Exchange of Preferred Securities Certificates. (a) The Registrar shall keep or cause to be kept, at its principal corporate office, a Securities Register in which, subject to such reasonable regulations as it may prescribe, the Registrar shall provide for the registration of Preferred Securities Certificates and the registration of transfers and exchanges of Preferred Securities Certificates as herein provided. -19- (b) Upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.08, the Administrative Trustees, or any one of them, shall execute on behalf of the Trust by manual or facsimile signature and, if executed 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. 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 5.08. (c) 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 Administrative Trustees and a Transfer Agent duly executed by the Holder or such Holder's attorney duly authorized in writing. The Trust shall not be required to (i) issue, register the transfer of, or exchange any Preferred Securities during a period beginning at the opening of business 15 calendar days before the day of mailing of a notice of redemption of any Preferred Securities called for redemption and ending at the close of business on the day of such mailing or (ii) register the transfer of or exchange any Preferred Securities so selected for redemption, in whole or in part, except the unredeemed portion of any such Preferred Securities being redeemed in part. (d) 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 5.04. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (i) 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 (ii) there shall be delivered to the Transfer Agent and the Administrative Trustees such security or indemnity as may be required by them to save each of them and the Depositor 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 such Trust Securities Certificate and, if execution on behalf of the Trust is by facsimile signature, such Certificate shall be countersigned by a Transfer Agent; and the Administrative Trustees, or any one of them, 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 5.04, 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 5.04 shall constitute conclusive evidence of an ownership interest in the Trust, as if originally issued, -20- whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. Section 5.05. Cancellation by Registrar. All Trust Securities Certificates surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Registrar, be delivered to the Registrar and, if not theretofore cancelled, shall promptly be cancelled by the Registrar. No Trust Securities Certificates shall be issued in lieu of or in exchange for any Trust Securities Certificates cancelled as provided in this Section, except as expressly permitted by this Trust Agreement. All cancelled Trust Securities Certificates held by the Registrar shall be disposed of in accordance with customary practices. Section 5.06. Persons Deemed Securityholders. Prior to due presentation of a Preferred Securities Certificate for registration of transfer, the Trustees and the Registrar shall be entitled to treat the Person in whose name any Preferred Securities Certificate shall be registered in the Securities Register as the Holder of such Preferred Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Trustees nor the Registrar shall be bound by any notice to the contrary. Section 5.07. Lists of Holders. Semiannually, not later than January 15 and July 15 in each year, commencing January 15, 1999, and at such other times as the Property Trustee may request in writing, the Administrative Trustees shall furnish or cause to be furnished to the Property Trustee information as to the names and addresses of the Holders, and the Property Trustee shall preserve such information and similar information received by it in any other capacity and afford to the Holders access to information so preserved by it, all to such extent, if any, and in such manner as shall be required by the Trust Indenture Act; provided, however, that no such list need be furnished so long as the Property Trustee shall be the Registrar. Section 5.08. Maintenance of Office or Agency. The Administrative Trustees shall or shall cause the Transfer Agent to maintain, in the Borough of Manhattan, the City of New York, 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 or the Transfer Agent in respect of the Trust Securities Certificates may be served. The Administrative Trustees shall or shall cause the Transfer Agent to give prompt written notice to the Property Trustee and to the Securityholders of any change in any such office or agency. Section 5.09. 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 Administrative Trustees and the Property Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making the Distributions. 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 5.09. The Administrative Trustees or any one of them may revoke such power and remove the Paying Agent if the Administrative Trustees or any one of them determines in its sole -21- discretion that the Paying Agent shall have failed to perform its obligations under this Trust Agreement in any material respect. The Paying Agent may choose any co-paying agent that is acceptable to the Administrative Trustees and the Depositor. The Paying Agent shall be permitted to resign upon 30 days' written notice to the Administrative Trustees and the Depositor. In the event of the removal or resignation of the Paying Agent, the Administrative Trustees shall appoint a successor that is reasonably acceptable to the Property Trustee and the Depositor to act as Paying Agent (which shall be a bank, trust company or an Affiliate of the Depositor). 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 also shall return all other funds in its possession to the Property Trustee. The provisions of Sections 8.01 through 8.06 shall apply to the Paying Agent appointed hereunder, and the 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 Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. Section 5.10. Book-Entry System. (a) The Administrative Trustees, at the direction and expense of the Debenture Issuer, as borrower, may from time to time appoint a Securities Depository or a successor thereto and enter into a letter of representations or other agreement with such Securities Depository to establish procedures with respect to the Preferred Securities. Any Securities Depository shall be a Clearing Agency. (b) The Depositor and the Trustees covenant and agree to meet the requirements of a Securities Depository for the Preferred Securities with respect to required notices and other provisions of the letter of representations or agreement executed with respect to such Preferred Securities. (c) Whenever the beneficial ownership of any Preferred Securities is determined through the books of a Securities Depository, the requirements in this Trust Agreement of holding, delivering or transferring, and making payments in respect of, such Preferred Securities shall be deemed modified with respect to such Preferred Securities to meet the requirements of the Securities Depository with respect to actions of the Trustees, the Depositor and the Paying Agent. Any provisions hereof permitting or requiring delivery of such Preferred Securities shall, while such Preferred Securities are in a book-entry system, be satisfied by the notation on the books of the Securities Depository in accordance with applicable state law. -22- ARTICLE VI. Acts of Securityholders; Meetings; Voting Section 6.01. Limitations on Voting Rights. (a) Except as provided in this Section 6.01, in Section 10.02 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. If the Property Trustee fails to enforce its rights under the Debentures or this Trust Agreement, a Holder of Preferred Securities may institute a legal proceeding directly against the Depositor to enforce the Property Trustee's rights under the Debentures or this Trust Agreement, to the fullest extent permitted by law, without first instituting any legal proceeding against the Property Trustee or any other person. Notwithstanding the foregoing, a Holder of Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder directly of principal of or interest on the Debentures having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such Holder on or after the due dates specified in the Debentures. In connection with any such proceeding, the Depositor will be subrogated to the rights of any Holder of Preferred Securities to the extent of any payment made by the Depositor to such Holder. (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 waivable under Section 813 of the Subordinated 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 Subordinated Indenture or the Debentures, where such consent shall be required, without, in each case, obtaining the prior approval of the Holders of at least 66 2/3% of the aggregate Liquidation Amount of the Outstanding Preferred Securities; provided, however, that where a consent under the Subordinated Indenture would require the consent of each holder of Debentures affected thereby, no such consent shall be given by any 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 Preferred Securities, except pursuant to a subsequent vote of the Preferred Securities. Section 6.02. Notice of Meetings. Notice of all meetings of the Holders of a Preferred Securities, stating the time, place and purpose of the meeting, shall be given by the Administrative Trustees pursuant to Section 10.07 to each Holder of a Preferred Security, 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. -23- Section 6.03. Meetings of Holders of Preferred Securities. (a) 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 Holders of at least 25% of the aggregate Liquidation Amount of the Outstanding Preferred Securities and may, at any time in their discretion, call a meeting of Holders of Preferred Securities to vote on any matters as to which the Holders of Preferred Securities are entitled to vote. (b) Holders of at least 50% of the aggregate Liquidation Amount of the Outstanding Preferred Securities, present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. (c) If a quorum is present at a meeting, an affirmative vote by the Holders of a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities shall constitute the action of the Securityholders, unless this Trust Agreement shall require a greater affirmative vote. Section 6.04. 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 6.05. 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. 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, and the burden of proving invalidity shall rest on the challenger. Section 6.06. Securityholder Action by Written Consent. Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Trust Securities 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 6.07. Record Date for Voting. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, 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 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. -24- Section 6.08. Acts of Securityholders. (a) 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 may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders 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 the Administrative Trustees. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders 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 8.01) conclusive in favor of the Trustees, if made in the manner provided in this Section 6.08. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgements 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 deems sufficient. (c) The ownership of Preferred Securities shall be proved by the Securities Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Trust Security shall bind every future Holder of the same Trust Security and the Holder 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. (e) 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. (f) If any dispute shall arise between or among the Securityholders and the Administrative 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. -25- Section 6.09. Inspection of Records. Subject to Section 5.07 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 7.01. Property Trustee. The Property Trustee hereby represents and warrants for the benefit of the Depositor and the Securityholders that: (i) 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; (ii) 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; (iii) 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; (iv) 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 (v) 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 with respect to any governmental authority or agency under any existing Federal or New York law governing the banking or trust powers of the Property Trustee. Section 7.02. Delaware Trustee. The Delaware Trustee hereby represents and warrants for the benefit of the Depositor and the Securityholders that: -26- (i) 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; (ii) 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; (iii) 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; (iv) the execution, delivery and performance by the Delaware Trustee of this Trust Agreement will not violate, conflict with or constitute a breach of the Delaware Trustee's charter or by-laws; and (v) 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 with respect to any governmental authority or agency under any existing Federal or Delaware law governing the banking or trust powers of the Delaware Trustee. ARTICLE VIII. The Trustees Section 8.01. Certain Duties and Responsibilities. (a) The Property Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform such duties and only such duties as are specifically set forth in this Trust Agreement and no implied covenants or obligations shall be read into this Trust Agreement against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived), the Property Trustee shall exercise such of the rights and powers vesting in it by this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Trust Agreement shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: -27- (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Trust Agreement and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Agreement, and no implied covenants or obligations shall be read into this Trust Agreement against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Trust Agreement; provided, however, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Agreement. (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Trust Agreement; (iv) 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. (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Trust Property 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, exculpations 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 of 1940, as amended; -28- (vi) 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; (vii) 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. Money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Payment Account established by the Property Trustee pursuant to this Trust Agreement and except to the extent otherwise required by law; and (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Administrative Trustees or the 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. (C) all payments made by the Property Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the income and proceeds from the Trust Property and only to the extent that there shall be sufficient income or proceeds from the Trust Property to enable the Property Trustee or Paying Agent to 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 income and proceeds from the Trust Property to the extent 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 8.01(c) 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. (D) Neither the Delaware Trustee nor any Administrative Trustee shall be liable for any act or omission to act hereunder, except for its own gross negligence or wilful misconduct. Section 8.02. Certain Notices. (a) 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 10.08, notice of any Event of Default known to the Property Trustee to the Securityholders, the Administrative Trustees and the Depositor, unless such Event of Default shall have been cured or waived. (b) Within five Business Days after receipt of notice of the Depositor's exercise of its right to defer the payment of interest on the Debentures pursuant to the Subordinated Indenture, an Administrative Trustee shall transmit, in the manner and to the extent provided in Section 10.08, notice of such exercise to the Securityholders and the Property Trustee. Section 8.03. Certain Rights of Property Trustee. Subject to the provisions of Section 8.01 and except as provided by law: -29- (i) 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 reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (ii) if (A) in performing its duties under this Trust Agreement the Property Trustee is required to decide between alternative courses of action or (B) in construing any of the provisions in this Trust Agreement the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (C) 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. 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 wilful 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; (iii) whenever in the administration of this Trust Agreement the Property Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officer's Certificate which, upon receipt of any such requests, shall be promptly delivered by the Depositor or the Administrative Trustees; (iv) the Property Trustee may consult with counsel of its selection 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; (v) 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 reasonable attorneys' fees and expenses) and liabilities which might be incurred by it in complying with such request or direction; -30- (vi) 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 reasonably believed by it to be genuine, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (vii) 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; (viii) 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 powers conferred upon it by this Trust Agreement; (ix) the Property Trustee shall not be charged with knowledge of any default or Event of Default with respect to the Trust Securities unless either (A) a Responsible Officer of the Property Trustee shall have actual knowledge of the default or Event of Default or (B) written notice of such default or Event of Default shall have been given to the Property Trustee by the Depositor, the Administrative Trustees or by any Securityholder; (x) 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; and no permissive or discretionary power or authority available to the Property Trustee shall be construed to be a duty; (xi) no provision of this Trust Agreement shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Property 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 Trust Agreement or adequate indemnity against such risk or liability is not reasonably assured to it; (xii) 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 tax form or securities) (or any rerecording, refiling or reregistration thereof); (xiii) 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; and -31- (xiv) 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 (A) may request instructions from the Securityholders, which instructions may only be given by the Holders of the same Liquidation Amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of this Trust Agreement in respect of such remedies, rights or actions, (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. Section 8.04. 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 Depositor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof or as to the title of the Trust thereto or as to the security afforded thereby or hereby, or as to the validity or genuineness of any securities at any time pledged and deposited with any Trustees hereunder, nor 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 Trust of the proceeds of the sale of the Trust Securities in accordance with Section 2.05. Section 8.05. May Hold Securities. Except as provided in the definition of the term "Outstanding" in Article I, any Trustee or any agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such agent. Section 8.06. Compensation; Fees; Indemnity. (a) Pursuant to the Indenture, the Debenture Issuer, as borrower, agrees: (i) to pay to the Trustees from time to time reasonable compensation for all services rendered by the Trustees hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (ii) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances reasonably 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 (gross negligence, in the case of any Administrative Trustee), bad faith or willful misconduct; and (iii) to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, damage, claims, liability or expense incurred without negligence (gross negligence, in the case of the Delaware Trustee or any Administrative Trustee), bad faith or willful misconduct on its part, arising out of or in connection with the acceptance of the trusts created by, or the administration of, this -32- Trust Agreement, including the reasonable 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. (b) As security for the performance of the obligations of the Depositor Issuer 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. (c) In addition to the rights provided to each Trustee to the provisions of the immediately preceding paragraph of this Section 8.06, when a Trustee incurs expenses or renders services in connection with an Event of Default resulting from a Bankruptcy Event with respect to the Trust, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or State bankruptcy, insolvency or other similar law. (d) The provisions of this Section 8.06 shall survive the termination of this Trust Agreement. Section 8.07. Certain Trustees Required; Eligibility. (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 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 8.07(a), 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 8.07(a), 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 such 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 that otherwise meets the requirements of applicable Delaware law and that shall act through one or more persons authorized to bind such entity. Section 8.08. 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. The Subordinated Indenture and the Guarantee Agreement shall be deemed to be specifically described in this Trust Agreement for the purposes of clause (i) of the first proviso contained -33- in Section 310(b) of the Trust Indenture Act. For purposes of Section 310(b)(1) of the Trust Indenture Act and to the extent permitted thereby, the Property Trustee, shall not be deemed to have a conflicting interest arising from its capacity as indenture trustee under the Junior Subordinated Indenture dated October 1, 1996 relating to the Depositor's 8.25% Junior Subordinated Deferrable Interest Debentures, under the Amended and Restated Trust Agreement dated October 1, 1996, under the Guarantee dated October 1, 1996 and under the Guarantee. Section 8.09. Co-Trustees and Separate Trustee. (a) 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 Property Trustee shall have power to appoint, and upon the written request of the Property Trustee, the Depositor shall for such purpose join with the Property Trustee 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 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 the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section 8.09. 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. (b) 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. (c) 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: (i) 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 designated for such purpose hereunder, shall be exercised, solely by such Trustees. (ii) 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. -34- (iii) The 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 8.09, 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 8.09. (iv) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder. (v) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (vi) 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. (a) No resignation or removal of any Trustee (as the case may be, the "Relevant Trustee") and no appointment of a successor Relevant Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Relevant Trustee in accordance with the requirements of Section 8.11. (b) The Relevant Trustee may resign at any time by giving written notice thereof to the Depositor and the Securityholders. If the instrument of acceptance by a successor Relevant Trustee required by Section 8.11 shall not have been delivered to the resigning Relevant Trustee within 30 days after the giving of such notice of resignation, the resigning Relevant Trustee may petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee. (c) 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 Securityholders of a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities, delivered to such Relevant Trustee (in its individual capacity and on behalf of the Trust). (d) If the Relevant Trustee shall resign, be removed or become incapable of continuing to act as the Relevant Trustee 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 Relevant Trustee, shall promptly appoint a successor Relevant Trustee, and the retiring Relevant Trustee so succeeded shall comply with the -35- requirements of Section 8.11. If the Relevant Trustee shall resign, be removed or become incapable of continuing to act as the Relevant Trustee at a time when a Debenture Event of Default shall have occurred and be continuing, the Preferred Securityholders, by Act of the Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and the Relevant Trustee so succeeded shall comply with the requirements of Section 8.11. If no successor Relevant Trustee shall have been so appointed by the Common Securityholders or the Preferred Securityholders and accepted appointment in the manner required by Section 8.11, any Securityholder who has been a Securityholder 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. (e) A retiring Relevant Trustee shall give notice of each resignation and each removal of such Relevant Trustee and of the appointment of its successor Trustee to all Securityholders in the manner provided in Section 10.08 and shall give notice to the Depositor. Each notice shall include the name and address of the successor Relevant Trustee and in the case of the Property Trustee, the address of its Corporate Trust Office. (f) 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 incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (i) the unanimous act of remaining Administrative Trustees if there are at least two of them or (ii) otherwise by the Depositor (with the successor in each case being an individual who satisfies the eligibility requirements for Administrative Trustees or Delaware Trustee, as the case may be, set forth in Section 8.07). Additionally, notwithstanding the foregoing or any other provision of this Trust Agreement, in the event the Depositor reasonably believes that any Administrative Trustee who is a natural person has become incompetent or incapacitated, the Depositor, by notice to the remaining Trustees, may terminate the status of such Person as an Administrative Trustee (in which case the vacancy so created will be filled in accordance with the preceding sentence). (g) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any successor Property Trustee or Delaware Trustee. Section 8.11. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Trustee shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and (ii) shall add to or change any of the provisions of this Trust Agreements 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 Trustee co-trustees of the same trust and that each such Relevant Trustee shall be trustee of a trust or trusts -36- 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; 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. (b) Upon request of any such successor Relevant Trustee, the retiring Relevant Trustee 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 preceding paragraph. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance the successor Relevant Trustee shall be qualified and eligible under this Article VIII. Section 8.12. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Property Trustee or the Delaware Trustee or any Trustee that is not a natural person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any Person 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 Person shall be otherwise qualified and eligible under this Article VIII, without the execution or filing of any paper, the giving of any notice or the taking of 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 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 shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor). 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 times 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, 1999. (b) A copy of each such report shall, at the time of such transmission to Securityholders, be filed by the Property Trustee with each stock exchange upon which the Preferred Securities are listed, with the Commission and with the Depositor. The Depositor will notify the Property Trustee when any Preferred Securities shall have been listed on any stock exchange. -37- 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, compliance certificates and information as may be required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required thereby. 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 (including any covenants compliance with which constitutes a condition precedent) 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 Officer's Certificate. Any opinion of counsel required to be given pursuant to Section 314(c)(2) of the Trust Indenture Act shall be given in the form of an Opinion of Counsel. Section 8.17. Number of Trustees. (a) The number of Trustees shall be four, provided that the Depositor, by written instrument, may increase or decrease the number of Administrative Trustees so long as there is at least one. (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), the vacancy created thereby 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 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 2.07(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Administrative Trustees shall have power to delegate from time to time to such of their number 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. Section 8.19. Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the -38- Trust or to any other Covered Person, an Indemnified Person acting under this Trust Agreement shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Trust Agreement; provided, however, that an Indemnified Person shall be liable for any loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct, (subject, with respect to the Property Trustee, to Section 8.01). The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein and subject to the provisions of the Trust Indenture Act: (i) whenever a conflict of interest exists or arises between an Indemnified Person and the Trust or any Covered Person; or (ii) whenever this Trust Agreement or any other agreement contemplated herein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Securityholder, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or terms so made, taken or provided by the Indemnified Person shall not constitute a breach of this Trust Agreement or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) Unless otherwise expressly provided herein and subject to the provisions of the Trust Indenture Act, whenever in this Trust Agreement an Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it reasonably desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and, to the extent permitted by applicable law, shall not be subject to any other or different standard imposed by this Trust Agreement or by applicable law. -39- ARTICLE IX. Termination and Liquidation Section 9.01. Termination Upon Expiration Date. The Trust shall automatically terminate on the Expiration Date and the Trust Property shall be distributed in accordance with Section 9.04. Section 9.02. Early Termination. Upon the first to occur of (such first occurrence, an "Early Termination Event"): (i) a Bankruptcy Event in respect of, or the dissolution or liquidation of, the Depositor; (ii) the redemption of all of the Preferred Securities; (iii) the occurrence of a Special Event and the election by the Depositor to terminate that Trust pursuant to Section 9.04(d); (iv) the entrance by a court of competent jurisdiction of an order for judicial termination of the Trust; the Trust shall terminate and the Trustees shall take such action as is required by Section 9.04. Section 9.03. Termination. The respective obligations and responsibilities of the Trust and the Trustees created hereby shall terminate upon the latest to occur of the following: (i) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 9.04, or upon the redemption of all of the Trust Securities pursuant to Section 4.02 or 9.04(d), of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (ii) the payment of all amounts due to creditors of the Trust; (iii) 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 and (iv) the filing of a certificate of cancellation with the Delaware Secretary of State. Section 9.04. Liquidation. (a) On the Expiration Date or earlier if an Early Termination Event specified in clause (i), (iii) or (iv) of Section 9.02 shall occur, subject to Section 9.04(e), after satisfaction of all amounts due to creditors of the Trust, if any, as provided by applicable law, the Trust shall be liquidated by the Property Trustee by distributing to each Securityholder a Like Amount of Debentures. Notice of liquidation shall be given by the Administrative Trustees by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Securityholder at such Holder's address appearing in the Securities Register. All notices of liquidation shall: -40- (i) state the Liquidation Date, which, in the case of an Early Termination Event specified in clause (iii) of Section 9.02 shall be no later than the 90th day following the occurrence of the Special Event; (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 in the case of a Section 9.04(e) liquidation, receive a Liquidation Distribution, as the Administrative Trustees or the Property Trustee shall deem appropriate. (b) In order to effect the 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 appropriate to effect the distribution of Debentures in exchange for the outstanding Trust Securities Certificates. (c) 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 Trust Securities Certificates to the Property Trustee or its agent for exchange, (iii) the Depositor shall use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other stock exchange or other organization as the Preferred Securities are then listed or traded, (iv) any Trust Securities Certificate 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 Certificate until such Trust Securities Certificate shall be so surrendered (and until such Trust Securities Certificates shall be so surrendered, no payments of interest or principal will be made to Holders of such Trust Securities Certificates) and (v) all rights of Securityholders will cease, except the right to receive Debentures and payments of interest and principal received by the Trustee with respect to the Debentures represented by Trust Security Certificates not surrendered for exchange upon surrender of Trust Securities Certificates. (d) If at any time a Special Event shall occur and be continuing, the Depositor may elect to (i) redeem the Debentures in whole but not in part and therefore cause a mandatory redemption of all the Preferred Securities at the Redemption Price within 90 days following the occurrence of such Special Event, or (ii) cause the termination of the Trust; provided, however, that, in the case of a Tax Event, any such termination shall be conditioned upon receipt by the Administrative Trustees of a No Recognition Opinion. -41- (e) In the event that, notwithstanding the other provisions of this Section 9.04, whether because of an order for termination 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 all amounts due to creditors of the Trust, if any, 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 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 or if a Debenture Event of Default has not occurred solely by reason of a requirement that time lapse or notice be given, the Liquidation Distribution with respect to the Preferred Securities shall be paid in full prior to the making of any Liquidation Distribution with respect to the Common Securities. Section 9.05. 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 Person, except pursuant to this Section 9.05. At the request of the Depositor, with the consent of the Administrative Trustees and without the consent of the Property Trustee or the Holders of the Preferred Securities, the Trust may 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, however, 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 substantially 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 or traded upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed, 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 Preferred Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of -42- 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 any successor entity will be required to register as an investment company under the Investment Company Act and (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. Notwithstanding the foregoing, the Trust shall not, except with the consent of Holders of 100% of the aggregate Liquidation Amount of the Outstanding Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other Person or permit any other Person to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States Federal income tax purposes. ARTICLE X. Miscellaneous Provisions Section 10.01. 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 10.02. 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 or therein which may be inconsistent with any other provision herein or therein, 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; provided, however, that such action shall not adversely affect in any material respect the interests of any Securityholder, (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 not be classified for United States federal income tax purposes other than as a "grantor trust" at any time that any Trust Securities are Outstanding or to ensure the Trust's exemption from the status of an "investment company" under the Investment Company Act of 1940, as amended, or (iii) to effect the acceptance of a successor Trustee's appointment. Any amendment of this Trust Agreement pursuant to clause (i) above shall become effective only when notice thereof shall have been given to the Securityholders. -43- (b) Except as provided in Sections 6.01(c) and 10.02(c), any provision of this Trust Agreement may be amended by the Trustees and the Depositor with (i) the approval of the Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Trust Securities and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status as a grantor trust for United States federal income tax purposes or the Trust's exemption from status of an "investment company" under the Investment Company Act of 1940, as amended; provided, however, that, subject to Section 10.02(c), if any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (A) any action that would materially adversely affect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to the Trust Agreement or otherwise, or (B) the dissolution, winding- up or termination of the Trust, other than pursuant to the terms of this Trust Agreement, then such amendment or proposal shall not be effective except with the approval of the Holders of at least 66 2/3% of the aggregate Liquidation Amount of the Outstanding Preferred Securities. (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 6.03 or 6.06), 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, (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date or (iii) change the provisions of this Section 10.02(c). (d) Notwithstanding any other provisions of this Trust Agreement, no Administrative 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 Investment Company Act of 1940, as amended, afforded by Rule 3a-5 thereunder or which would cause the Trust to be classified as other than 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 affected party, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor or any Trustee. (f) In the event there shall be that any amendment to this Trust Agreement, the Administrative Trustees shall promptly provide to the Depositor a copy of such amendment. (g) The Trustees are entitled to receive an Opinion of Counsel as conclusive evidence that any amendment to this Trust Agreement executed pursuant to this Section 10.02 is authorized or permitted by, and conforms to, the terms of this Section 10.02, has been duly authorized by and lawfully executed and delivered on behalf of the other requisite parties, and that it is proper for the Trustees under the provisions of this Section 10.02 to join in the execution thereof. -44- Section 10.03. 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 10.04. 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 (without regard to conflict of laws principles). Section 10.05. Successors. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Trust or the Trustees, including any successor by operation of law. Section 10.06. Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. Section 10.07. Notice and Demand. (a) 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 any Securityholder or the Depositor may be given or served in writing by deposit thereof, postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (i) 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 (ii) in the case of the Common Securityholder or the Depositor, to Atlantic City Electric Company, 800 King Street, Wilmington, Delaware 19899, Attention: Treasurer, facsimile no. (302) 429-3356, with a copy to the Secretary, facsimile no. (302) 429-3367. 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. (b) 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, the Delaware Trustee or the Administrative Trustees shall be given in writing addressed (until another address is published by the Trust) as follows: (i) with respect to the Property Trustee, to The Bank of New York, 101 Barclay Street - 21 West, New York, New York 10286 marked "Attention: Corporate Trust Department" (ii) with respect to the Delaware Trustee, to The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711 and (iii) with respect to the Trust or the Administrative Trustees, at the address above for notice to the Depositor, marked "Attention: Administrative Trustees for Atlantic Capital II". 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. Section 10.08. Agreement Not to Petition. Each of the Trustees and the Depositor agrees 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, it shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, reorganization, -45- arrangement, insolvency, liquidation 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 10.08, the Property Trustee agrees, for the benefit of Securityholders, that 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 Property Trustee or the Trust may assert. The provisions of this Section 10.08 shall survive the termination of this Trust Agreement. Section 10.09. Conflict with Trust Indenture Act. (a) 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, or is otherwise governed by, any of the provisions of the Trust Indenture Act, such other provisions shall control; and if any provision hereof otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall control. (b) The Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. (c) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing interests in the Trust. 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 THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THOSE TERMS AND PROVISIONS SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. -46- IN WITNESS WHEREOF, the parties have caused this Trust Agreement to be duly executed, all as of the day and year first above written. ATLANTIC CITY ELECTRIC COMPANY By: ------------------------------- Title: Senior Vice President and Chief Financial Officer THE BANK OF NEW YORK, as Property Trustee By: ------------------------------- Title: THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee By: ------------------------------- Title: ---------------------------------- Louis M. Walters, solely in his capacity as Administrative Trustee ---------------------------------- Stephanie M. Scola, solely in her capacity as Administrative Trustee -47- EXHIBIT A CERTIFICATE OF TRUST OF ATLANTIC CAPITAL II THIS CERTIFICATE OF TRUST of Atlantic Capital II (the "Trust"), dated as of , 1998, is being duly executed and filed by the undersigned, as trustees, to create a business trust under the Delaware Business Trust Act (12 Del. C. (S) 3801, et seq.). ------- ------ 1. Name. The name of the business trust being created hereby is Atlantic Capital II. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware are as follows: The Bank of New York (Delaware) White Clay Center Route 273 Newark, Delaware 19711 3. Effective Date. This Certificate of Trust shall be effective as of its filing. IN WITNESS WHEREOF, the undersigned, being the only trustees of the Trust, have executed this Certificate of Trust as of the date first above written. THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee not in his (her) individual capacity but solely as Trustee By: --------------------------- ------------------------------------ Name: Title: THE BANK OF NEW YORK, as Property Trustee By: --------------------------- Name: Title: A-1 EXHIBIT B THIS CERTIFICATE IS NOT TRANSFERABLE Certificate Number Number of Common Securities C-[_] Certificate Evidencing Common Securities of ATLANTIC CAPITAL II Common Securities (Liquidation Amount $25 per Common Security) Atlantic Capital II, 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 the number set forth above of common securities of the Trust representing undivided beneficial ownership interests in the assets of the Trust and designated as Common Securities (Liquidation Amount $25 per Common Security) (the "Common Securities"). In accordance with Section 5.02 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 October 1, 1998, as the same may be amended from time to time (the "Trust Agreement"). The Trust will furnish a copy of the Trust Agreement to the holder of this certificate without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the holder of this certificate is bound by the Trust Agreement and is entitled to the benefits thereunder. B-1 IN WITNESS WHEREOF, an Administrative Trustee of the Trust has executed this certificate for and on behalf of the Trust on this day of , 199 . ATLANTIC CAPITAL II By: ----------------------------- not in his (her) individual capacity, but solely as Administrative Trustee B-2 [Clearing Agency Legend] EXHIBIT C Certificate Number Number of Preferred Securities P- CUSIP NO. Certificate Evidencing Preferred Securities of ATLANTIC CAPITAL II % Cumulative Trust Preferred Capital Securities (Liquidation Amount $25 per Preferred Security) Atlantic Capital II, 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 the number set forth above of preferred securities of the Trust representing undivided beneficial ownership interests in the assets of the Trust and designated as % Cumulative Trust Preferred Capital 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 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 October 1, 1998, as the same may be amended from time to time (the "Trust Agreement"). The holder of this certificate is entitled to the benefits and agrees to the subordination provisions and other terms of the Guarantee Agreement of Atlantic City Electric Company, a New Jersey corporation, and The Bank of New York, as guarantee trustee, dated as of October 1, 1998 (the "Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Trust Agreement and the Guarantee to the holder of this certificate without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the holder of this certificate is bound by the Trust Agreement and is entitled to the benefits thereunder. C-1 IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has executed this certificate for and on behalf of the Trust. Dated: ATLANTIC CAPITAL II By: --------------------------------- [ ] not in his (her) individual capacity, but solely as Administrative Trustee C-2 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) of the Preferred Securities represented by this Preferred Securities Certificate and irrevocably appoints - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- attorney to transfer such Preferred Securities Certificate on the books of the Trust. The attorney may substitute another to act for him or her. Date: ----------------------- Signature: --------------------------- (Sign exactly as your name appears on the other side of this Preferred Securities Certificate) Signature: --------------------------- (Sign exactly as your name appears on the other side of this Preferred Securities Certificate) C-3 EX-4.(C) 5 FORM OF INDENTURE Exhibit 4-C __________________________________________ ATLANTIC CITY ELECTRIC COMPANY TO THE BANK OF NEW YORK TRUSTEE _________ INDENTURE (FOR UNSECURED SUBORDINATED DEBT SECURITIES RELATING TO TRUST SECURITIES) DATED AS OF OCTOBER 1, 1998 __________________________________________ ATLANTIC CITY ELECTRIC COMPANY RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE, DATED AS OF OCTOBER 1, 1998
TRUST INDENTURE ACT SECTION INDENTURE SECTION (S)310 (a)(1).................................................................. 909 (a)(2).................................................................. 909 (a)(3).................................................................. 914 (a)(4)........................................................ Not Applicable (b)..................................................................... 908 910 (S)311 (a)..................................................................... 913 (b)..................................................................... 913 (c)..................................................................... 913 (S)312 (a)..................................................................... 1001 (b)..................................................................... 1001 (c)..................................................................... 1001 (S)313 (a)..................................................................... 1002 (b)..................................................................... 1002 (c)..................................................................... 1002 (S)314 (a)..................................................................... 1003 (a)(4).................................................................. 606 (b)........................................................... Not Applicable (c)(1).................................................................. 102 (c)(2).................................................................. 102 (c)(3)........................................................ Not Applicable (d)........................................................... Not Applicable (e)..................................................................... 102 (S)315 (a)..................................................................... 901 903 (b)..................................................................... 902 (c)..................................................................... 901 (d)..................................................................... 901 (e)..................................................................... 814 (S)316 (a)..................................................................... 812 813 (a)(1)(A)............................................................... 802 812 (a)(1)(B)............................................................... 813 (a)(2)........................................................ Not Applicable (b)..................................................................... 808 (S)317 (a)(1).................................................................. 803 (a)(2).................................................................. 804 (b)..................................................................... 603 (S)318 (a)..................................................................... 107
TABLE OF CONTENTS
Page ---- RECITAL OF THE COMPANY....................................................................... 1 ARTICLE ONE Definitions and Other Provisions of General Application......................... 1 SECTION 101. Definitions............................................................... 1 Act................................................................................ 2 Affiliate.......................................................................... 2 Authenticating Agent............................................................... 2 Authorized Officer................................................................. 2 Board of Directors................................................................. 2 Board Resolution................................................................... 2 Business Day....................................................................... 2 Commission......................................................................... 2 Company............................................................................ 3 Company Request" or "Company Order................................................. 3 Corporate Trust Office............................................................. 3 corporation........................................................................ 3 Creditor........................................................................... 3 Defaulted Interest................................................................. 3 Dollar" or " $..................................................................... 3 Event of Default................................................................... 3 Governmental Authority............................................................. 3 Government Obligations............................................................. 3 Guarantee.......................................................................... 3 Holder............................................................................. 4 Indenture.......................................................................... 4 Interest Payment Date.............................................................. 4 Maturity........................................................................... 4 Officer's Certificate.............................................................. 4 Opinion of Counsel................................................................. 4 Outstanding........................................................................ 4 Paying Agent....................................................................... 5 Person............................................................................. 5 Place of Payment................................................................... 5 Predecessor Security............................................................... 5 Preferred Securities............................................................... 5 Property Trustee................................................................... 5 Redemption Date.................................................................... 5 Redemption Price................................................................... 5 Regular Record Date................................................................ 5 Responsible Officer................................................................ 5 Securities......................................................................... 5 Security Register" and "Security Registrar......................................... 5
Note: This table of contents shall not, for any purpose, be deemed to be part of the Indenture. -i-
Page ---- Senior Indebtedness............................................................... 6 Special Record Date............................................................... 6 Stated Maturity................................................................... 6 Trust............................................................................. 6 Trust Agreement................................................................... 6 Trust Indenture Act............................................................... 6 Trustee........................................................................... 6 United States..................................................................... 6 SECTION 102. Compliance Certificates and Opinions..................................... 7 SECTION 103. Form of Documents Delivered to Trustee................................... 7 SECTION 104. Acts of Holders.......................................................... 8 SECTION 105. Notices, etc. to Trustee and Company..................................... 9 SECTION 106. Notice to Holders of Securities; Waiver.................................. 10 SECTION 107. Conflict with Trust Indenture Act........................................ 10 SECTION 108. Effect of Headings and Table of Contents................................. 11 SECTION 109. Successors and Assigns................................................... 11 SECTION 110. Separability Clause...................................................... 11 SECTION 111. Benefits of Indenture.................................................... 11 SECTION 112. Governing Law............................................................ 11 SECTION 113. Legal Holidays........................................................... 11 ARTICLE TWO Security Forms................................................................. 12 SECTION 201. Forms Generally.......................................................... 12 SECTION 202. Form of Trustee's Certificate of Authentication.......................... 12 ARTICLE THREE The Securities............................................................... 13 SECTION 301. Amount Unlimited; Issuable in Series..................................... 13 SECTION 302. Denominations............................................................ 15 SECTION 303. Execution, Authentication, Delivery and Dating........................... 16 SECTION 304. Temporary Securities..................................................... 17 SECTION 305. Registration, Registration of Transfer and Exchange...................... 18 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities......................... 19 SECTION 307. Payment of Interest; Interest Rights Preserved........................... 19 SECTION 308. Persons Deemed Owners.................................................... 20 SECTION 309. Cancellation by Security Registrar....................................... 21 SECTION 310. Computation of Interest.................................................. 21 SECTION 311. Extension of Interest Payment............................................ 21 SECTION 312. Payment of Expenses...................................................... 21 ARTICLE FOUR - Redemption of Securities..................................................... 22 SECTION 401. Applicability of Article................................................. 22 SECTION 402. Election to Redeem; Notice to Trustee.................................... 22 SECTION 403. Selection of Securities to Be Redeemed................................... 22 SECTION 404. Notice of Redemption..................................................... 23 SECTION 405. Securities Payable on Redemption Date.................................... 24 SECTION 406. Securities Redeemed in Part.............................................. 24
Note: This table of contents shall not, for any purpose, be deemed to be part of the Indenture. -ii-
Page ---- ARTICLE FIVE - Sinking Funds................................................................ 24 SECTION 501. Applicability of Article.................................................. 24 SECTION 502. Satisfaction of Sinking Fund Payments with Securities..................... 25 SECTION 503. Redemption of Securities for Sinking Fund................................. 25 ARTICLE SIX - Covenants...................................................................... 26 SECTION 601. Payment of Principal, Premium and Interest................................ 26 SECTION 602. Maintenance of Office or Agency........................................... 26 SECTION 603. Money for Securities Payments to Be Held in Trust......................... 26 SECTION 604. Corporate Existence....................................................... 28 SECTION 605. Maintenance of Properties................................................. 28 SECTION 606. Annual Officer's Certificate as to Compliance............................. 28 SECTION 607. Waiver of Certain Covenants............................................... 28 SECTION 608. Restriction on Payment of Dividends....................................... 28 SECTION 609. Maintenance of Trust Existence............................................ 29 ARTICLE SEVEN - Satisfaction and Discharge.................................................. 29 SECTION 701. Defeasance................................................................ 29 SECTION 702. Satisfaction and Discharge of Indenture................................... 31 SECTION 703. Application of Trust Money................................................ 32 ARTICLE EIGHT - Events of Default; Remedies.................................................. 32 SECTION 801. Events of Default......................................................... 32 SECTION 802. Acceleration of Maturity; Rescission and Annulment........................ 33 SECTION 803. Collection of Indebtedness and Suits for Enforcement by Trustee........... 35 SECTION 804. Trustee May File Proofs of Claim.......................................... 35 SECTION 805. Trustee May Enforce Claims Without Possession of Securities............... 36 SECTION 806. Application of Money Collected............................................ 36 SECTION 807. Limitation on Suits....................................................... 36 SECTION 808. Unconditional Right of Holders to Receive Principal, Premium and Interest..................................................... 37 SECTION 809. Restoration of Rights and Remedies........................................ 37 SECTION 810. Rights and Remedies Cumulative............................................ 37 SECTION 811. Delay or Omission Not Waiver.............................................. 38 SECTION 812. Control by Holders of Securities.......................................... 38 SECTION 813. Waiver of Past Defaults................................................... 38 SECTION 814. Undertaking for Costs..................................................... 39 SECTION 815. Waiver of Stay or Extension Laws.......................................... 39 ARTICLE NINE - The Trustee................................................................... 39 SECTION 901. Certain Duties and Responsibilities....................................... 39 SECTION 902. Notice of Defaults........................................................ 40 SECTION 903. Certain Rights of Trustee................................................. 40 SECTION 904. Not Responsible for Recitals or Issuance of Securities.................... 41 SECTION 905. May Hold Securities....................................................... 42 SECTION 906. Money Held in Trust....................................................... 42
Note: This table of contents shall not, for any purpose, be deemed to be part of the Indenture. -iii-
Page ---- SECTION 907. Compensation and Reimbursement............................................. 42 SECTION 908. Disqualification; Conflicting Interests.................................... 43 SECTION 909. Corporate Trustee Required; Eligibility.................................... 43 SECTION 910. Resignation and Removal; Appointment of Successor.......................... 44 SECTION 911. Acceptance of Appointment by Successor..................................... 45 SECTION 912. Merger, Conversion, Consolidation or Succession to Business................ 46 SECTION 913. Preferential Collection of Claims Against Company.......................... 47 SECTION 914. Co-trustees and Separate Trustees.......................................... 47 SECTION 915. Appointment of Authenticating Agent........................................ 48 ARTICLE TEN - Holders' Lists and Reports by Trustee and Company............................... 50 SECTION 1001. Lists of Holders.......................................................... 50 SECTION 1002. Reports by Trustee........................................................ 50 SECTION 1003. Reports to the Trustee.................................................... 50 ARTICLE ELEVEN - Consolidation, Merger, Conveyance or Other Transfer.......................... 51 SECTION 1101. Company May Consolidate, etc., Only on Certain Terms...................... 51 SECTION 1102. Successor Corporation Substituted......................................... 51 ARTICLE TWELVE - Supplemental Indentures...................................................... 52 SECTION 1201. Supplemental Indentures Without Consent of Holders........................ 52 SECTION 1202. Supplemental Indentures With Consent of Holders........................... 53 SECTION 1203. Execution of Supplemental Indentures...................................... 55 SECTION 1204. Effect of Supplemental Indentures......................................... 55 SECTION 1205. Conformity With Trust Indenture Act....................................... 55 SECTION 1206. Reference in Securities to Supplemental Indentures........................ 55 SECTION 1207. Modification Without Supplemental Indenture............................... 55 ARTICLE THIRTEEN - Meetings of Holders; Action Without Meeting................................ 56 SECTION 1301. Purposes for Which Meetings May Be Called................................. 56 SECTION 1302. Call, Notice and Place of Meetings........................................ 56 SECTION 1303. Persons Entitled to Vote at Meetings...................................... 57 SECTION 1304. Quorum; Action............................................................ 57 SECTION 1305. Attendance at Meetings; Determination of Voting Rights; Conduct and Adjournment of Meetings...................................... 58 SECTION 1306. Counting Votes and Recording Action of Meetings........................... 59 SECTION 1307. Action Without Meeting.................................................... 59 ARTICLE FOURTEEN - Immunity of Incorporators, Stockholders, Officers and Directors............ 59 SECTION 1401. Liability Solely Corporate................................................ 59 ARTICLE FIFTEEN - Subordination of Securities................................................. 60 SECTION 1501. Securities Subordinate to Senior Indebtedness............................. 60 SECTION 1502. Payment Over of Proceeds of Securities.................................... 60 SECTION 1503. Disputes with Holders of Certain Senior Indebtedness...................... 62 SECTION 1504. Subrogation............................................................... 62
Note: This table of contents shall not, for any purpose, be deemed to be part of the Indenture. -iv-
Page ---- SECTION 1505. Obligation of the Company Unconditional................................... 63 SECTION 1506. Priority of Senior Indebtedness Upon Maturity............................. 63 SECTION 1507. Trustee as Holder of Senior Indebtedness.................................. 63 SECTION 1508. Notice to Trustee to Effectuate Subordination............................. 63 SECTION 1509. Modification, Extension, etc. of Senior Indebtedness...................... 64 SECTION 1510. Trustee Has No Fiduciary Duty to Holders of Senior Indebtedness........... 64 SECTION 1511. Paying Agents Other Than the Trustee...................................... 64 SECTION 1512. Rights of Holders of Senior Indebtedness Not Impaired..................... 65 SECTION 1513. Effect of Subordination Provisions; Termination........................... 65 Testimonium................................................................................... 74 Signatures and Seals.......................................................................... 74
Note: This table of contents shall not, for any purpose, be deemed to be part of the Indenture. -v- INDENTURE, dated as of October 1, 1998, between ATLANTIC CITY ELECTRIC COMPANY, a corporation duly organized and existing under the laws of the State of New Jersey (herein called the "Company"), having its principal office at 800 King Street, Wilmington, Delaware 19899, and THE BANK OF NEW YORK, a New York banking corporation, having its principal corporate trust office at 101 Barclay Street - 21 West, New York, New York 10286, as Trustee (herein called the "Trustee"). RECITAL OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured subordinated debentures, notes or other evidences of indebtedness (herein called the "Securities"), in an unlimited aggregate principal amount to be issued in one or more series as contemplated herein; and all acts necessary to make this Indenture a valid agreement of the Company have been performed. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires, capitalized terms used herein shall have the meanings assigned to them in Article One of this Indenture. 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 ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (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 terms used herein without definition which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date of such computation or, at the election of the Company from time to time, at the date of the execution and delivery of this Indenture; provided, however, that in determining generally accepted accounting principles applicable to the Company, the Company shall, to the extent required, conform to any order, rule or regulation of any admini strative agency, regulatory authority or other governmental body having jurisdiction over the Company; and (d) 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 Nine, are defined in that Article. "ACT", when used with respect to any Holder of a Security, has the meaning specified in Section 104. "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 through one or more intermediaries, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "AUTHENTICATING AGENT" means any Person (other than the Company or an Affiliate of the Company) authorized by the Trustee pursuant to Section 915 to act on behalf of the Trustee to authenticate one or more series of Securities. "AUTHORIZED OFFICER" means the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, or any other officer or agent of the Company duly authorized by the Board of Directors to act in respect of matters relating to this Indenture. "BOARD OF DIRECTORS" means either the board of directors of the Company or any committee thereof duly authorized to act in respect of matters relating to this Indenture. "BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "BUSINESS DAY", when used with respect to a Place of Payment or any other particular location specified in the Securities or this Indenture, means any day, other than a Saturday or Sunday, which is not a day on which banking institutions or trust companies in such Place of Payment or other location are generally authorized or required by law, regulation or executive order to remain closed, except as may be otherwise specified as contemplated by Section 301. "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 date of execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body, if any, performing such duties at such time. -2- "COMPANY" means the Person named as the "Company" in the first paragraph of this Indenture 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 REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by an Authorized Officer and delivered to the Trustee. "CORPORATE TRUST OFFICE" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution and delivery of this Indenture is located at 101 Barclay Street - 21 West, New York, New York 10286. "CORPORATION" means a corporation, association, company, joint stock company or business trust. "CREDITOR" has the meaning specified in Section 312. "DEFAULTED INTEREST" has the meaning specified in Section 307. "DOLLAR" or "$" means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts. "EVENT OF DEFAULT" has the meaning specified in Section 801. "GOVERNMENTAL AUTHORITY" means the government of the United States or of any State or Territory thereof or of the District of Columbia or of any county, municipality or other political subdivision of any of the foregoing, or any department, agency, authority or other instrumentality of any of the foregoing. "GOVERNMENT OBLIGATIONS" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States and entitled to the benefit of the full faith and credit thereof; and (b) certificates, depositary receipts or other instruments which evidence a direct ownership interest in obligations described in clause (a) above or in any specific interest or principal payments due in respect thereof; provided, however, that the custodian of such obligations or specific interest or principal payments shall be a bank or trust company (which may include the Trustee or any Paying Agent) subject to Federal or state supervision or examination with a combined capital and surplus of at least $50,000,000; and provided, fur ther, that except as may be otherwise required by law, such custodian shall be obligated to pay to the holders of such certificates, depositary receipts or other instruments the full amount received by such custodian in respect of such obligations or specific payments and shall not be permitted to make any deduction therefrom. "GUARANTEE" means the guarantee agreement delivered from the Company to a Trust, for the benefit of the holders of Preferred Securities issued by such Trust. -3- "HOLDER" means a Person in whose name a Security is registered in the Security Register. "INDENTURE" means this instrument as originally executed and delivered and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of a particular series of Securities established as contemplated by Section 301. "INTEREST PAYMENT DATE", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "MATURITY", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as provided in such Security or in this Indenture, whether at the Stated Maturity, by declaration of acceleration, upon call for redemption or otherwise. "OFFICER'S CERTIFICATE" means a certificate signed by an Authorized Officer and delivered to the Trustee. "OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for the Company, but not an employee of the Trust, the Trustee, or other counsel reasonably acceptable to the Trustee. "OUTSTANDING", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore canceled by the Security Registrar or delivered to the Trustee for cancellation; (b) Securities deemed to have been paid in accordance with Section 701; and (c) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it and the Company that such Securities are held by a bona fide purchaser or purchasers in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether or not the Holders of the requisite principal amount of the Securities Outstanding under this Indenture, or the Outstanding Securities of any series, have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether or not a quorum is present at a meeting of Holders of Securities, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor (unless the Company, such Affiliate or such obligor owns all Securities Outstanding under this Indenture, or all Outstanding Securities of each such series, as the case may be, determined without regard to this provision) 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 or upon any such determination as to the presence of a quorum, only Securities which the Trustee knows to be so owned shall be so disregarded; provided, however, that Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the -4- 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 of such other obligor; and provided, further, that, in the case of any Security the principal of which is payable from time to time without presentment or surrender, the principal amount of such Security that shall be deemed to be Outstanding at any time for all purposes of this Indenture shall be the original principal amount thereof less the aggregate amount of principal thereof theretofore paid. "PAYING AGENT" means any Person, including the Company, authorized by the Company to pay the principal of, and premium, if any, or interest, if any, on any Securities on behalf of the Company. "PERSON" means any individual, corporation, partnership, joint venture, trust or unincorpo rated organization or any Governmental Authority. "PLACE OF PAYMENT", when used with respect to the Securities of any series, means the place or places, specified as contemplated by Section 301, at which, subject to Section 602, principal of and premium, if any, and interest, if any, on the Securities of such series are payable. "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 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed (to the extent lawful) to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "PREFERRED SECURITIES" means any preferred securities issued by a Trust or similar securities issued by permitted successors to such Trust in accordance with the Trust Agreement pertaining to such Trust. "PROPERTY TRUSTEE" means The Bank of New York, as Trustee under the Trust Agreement. "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 on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "RESPONSIBLE OFFICER", when used with respect to the Trustee, means any officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "SECURITIES" has the meaning stated in the first recital of this Indenture and more particularly means any securities authenticated and delivered under this Indenture. "SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings specified in Section 305. -5- "SENIOR INDEBTEDNESS" means all obligations (other than non-recourse obligations and the indebtedness issued under this Indenture) of, or guaranteed or assumed by, the Company for borrowed money, including both senior and subordinated indebtedness for borrowed money (other than the Securities and $72,164,950 principal amount of 8.25% Junior Subordinated Deferrable Interest Debentures of the Company issued under its Junior Subordinated Indenture dated as of October 1, 1996 with The Bank of New York, Trustee), or for the payment of money relating to any lease which is capitalized on the consolidated balance sheet of the Company and its subsidiaries in accordance with generally accepted accounting principles as in effect from time to time, or evidenced by bonds, debentures, notes or other similar instruments (other than trade accounts payable in the ordinary course of business), and in each case, amendments, renewals, extensions, modifications and refundings of any such indebtedness or obligations, whether existing as of the date of this Indenture as originally executed and delivered or subsequently incurred by the Company unless, in the case of any particular indebtedness, renewal, extension or refunding, the instrument creating or evidencing the same or the assumption or guarantee of the same expressly provides that such indebtedness, renewal, extension or refunding is not superior in right of payment to or is pari passu with the Securities; provided that the Company's obligations under the Guarantee shall not be deemed to be Senior Indebtedness. "SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the Securities of any series means a date fixed by the Trustee pursuant to Section 307. "STATED MATURITY", when used with respect to any obligation or any installment of principal thereof or interest thereon, means the date on which the principal of such obligation or such installment of principal or interest is stated in such Security to be due and payable (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension). "TRUST" means Atlantic Capital II, a statutory business trust created under the laws of the State of Delaware, or any other Trust designated pursuant to Section 301 hereof or any permitted successor under the Trust Agreement pertaining to such Trust. "TRUST AGREEMENT" means the Amended and Restated Trust Agreement, dated as of October 1, 1998, relating to Atlantic Capital II or an Amended and Restated Trust Agreement relating to a Trust designated pursuant to Section 301 hereof, in each case, among the Company, as Depositor, the trustees named therein and the several holders referred to therein as each such agreement may be amended from time to time. "TRUST INDENTURE ACT" means, as of any time, the Trust Indenture Act of 1939, or any successor statute, as in effect at such time. "TRUSTEE" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such with respect to one or more series of Securities pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "UNITED STATES" means the United States of America, its Territories, its possessions and other areas subject to its political jurisdiction. -6- SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Except as otherwise expressly provided in this Indenture, 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 Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action (including any covenants compliance with which constitutes a condition precedent) have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each Person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person 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 Person, such condition or covenant has been complied with. SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of 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 the matters upon which such Officer's Certificate or opinion are 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. -7- 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. Whenever, subsequent to the receipt by the Trustee of any Board Resolution, Officer's Certificate, Opinion of Counsel or other document or instrument, a clerical, typographical or other inadvertent or unintentional error or omission shall be discovered therein, a new document or instrument may be substituted therefor in corrected form with the same force and effect as if originally filed in the corrected form and, irrespective of the date or dates of the actual execution and/or delivery thereof, such substitute document or instrument shall be deemed to have been executed and/or delivered as of the date or dates required with respect to the document or instrument for which it is substituted. Anything in this Indenture to the contrary notwithstanding, if any such corrective document or instrument indicates that action has been taken by or at the request of the Company which could not have been taken had the original document or instrument not contained such error or omission, the action so taken shall not be invalidated or otherwise rendered ineffective but shall be and remain in full force and effect, except to the extent that such action was a result of willful misconduct or bad faith. Without limiting the generality of the foregoing, any Securities issued under the authority of such defective document or instrument shall nevertheless be the valid obligations of the Company entitled to the benefits of this Indenture equally and ratably with all other Outstanding Securities, except as aforesaid. SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, election, waiver or other action provided by this Indenture to be made, given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Holders voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders duly called and held in accordance with the provisions of Article Thirteen, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments and so voting at any such meeting. Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 901) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. The record of any meeting of Holders shall be proved in the manner provided in Section 1306. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof or may be proved in any other manner which the Trustee and the Company deem sufficient. 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. -8- (c) The principal amount and serial numbers of Securities held by any Person, and the date of holding the same, shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of a Holder shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) Until such time as written instruments shall have been delivered to the Trustee with respect to the requisite percentage of principal amount of Securities for the action contemplated by such instruments, any such instrument executed and delivered by or on behalf of a Holder may be revoked with respect to any or all of such Securities by written notice by such Holder or any subsequent Holder, proven in the manner in which such instrument was proven. (f) Securities of any series authenticated and delivered after any Act of Holders may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any action taken by such Act of Holders. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to such action may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. (g) If the Company shall solicit from Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on the record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of the Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of the record date. SECTION 105. NOTICES, ETC. TO TRUSTEE AND COMPANY. Any request, demand, authorization, direction, notice, consent, election, 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, the Trustee by any Holder or by the Company, or the Company by the Trustee or by any Holder, shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and delivered personally to an officer or other responsible employee of the addressee, or transmitted by facsimile transmission or other direct written electronic means to such telephone number or other electronic communications address as the parties hereto shall from time to time designate, or transmitted by certified or registered mail, charges prepaid, to the applicable address set opposite such party's name below or to such other address as either party hereto may from time to time designate: -9- If to the Trustee, to: The Bank of New York 101 Barclay Street - 21 West New York, New York 10286 Attention: Corporate Trust Administration Telecopy: (212) 815-5915 If to the Company, to: Atlantic City Electric Company 800 King Street Wilmington, Delaware 19899 Attention: Treasurer Telephone: (302) 429-3011 Telecopy: (302) 429-3367 Any communication contemplated herein shall be deemed to have been made, given, furnished and filed if personally delivered, on the date of delivery, if transmitted by facsimile transmission or other direct written electronic means, on the date of transmission, and if transmitted by certified or registered mail, on the date of receipt. SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER. Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given, and shall be deemed given, to Holders 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 Security Register, not later than the latest date, if any, and not earlier than the earliest date, if any, prescribed for the giving of such notice. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice required by this Indenture may be waived in writing by the Person entitled to re ceive such notice, either before or after the event otherwise to be specified therein, 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 107. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this Indenture limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Indenture by, or is otherwise governed by, any of the -10- provisions of the Trust Indenture Act, such other provision shall control; and if any provision hereof otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall control. SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings in this Indenture and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Company and Trustee shall bind their respective successors and assigns, whether so expressed or not. SECTION 110. SEPARABILITY CLAUSE. In case any provision in this Indenture or 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 111. BENEFITS OF INDENTURE. Nothing in this Indenture or the Securities, express or implied, shall give to any Person, other than the parties hereto, their successors hereunder, any Creditors, the Holders and, so long as the notice described in Section 1513 hereof has not been given, the holders of Senior Indebtedness, any benefit or any legal or equitable right, remedy or claim under this Indenture; provided, however, that for so long as any Preferred Securities remain outstanding, the holders of such Preferred Securities, subject to certain limitations set forth in this Indenture, may enforce the Company's obligations hereunder directly against the Company as third party beneficiaries of this Indenture without first proceeding against the Trust issuing such Preferred Securities or the Property Trustee of the Trust. SECTION 112. GOVERNING LAW. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of laws principles. SECTION 113. LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities other than a provision in Securities of any series, or in the indenture supplemental hereto, Board Resolution or Officer's Certificate which establishes the terms of the Securities of such series, which specifically states that such provision shall apply in lieu of this Section) payment of interest or principal and premium, if any, need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment, 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, and in the same amount, as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, as the case may be, and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on the amount so -11- payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day. ARTICLE TWO SECURITY FORMS SECTION 201. FORMS GENERALLY. The definitive Securities of each series shall be in substantially the form or forms thereof established in the indenture supplemental hereto establishing such series or in a Board Resolution establishing such series, or in an Officer's Certificate pursuant to such supplemental indenture or Board Resolution, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form or forms of Securities of any series are established in a Board Resolution or in an Officer's Certificate pursuant to a Board Resolution, such Board Resolution and Officer's Certificate, if any, shall be delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. Unless otherwise specified as contemplated by Section 301, the Securities of each series shall be issuable in registered form without coupons. The definitive Securities shall be produced in such manner as shall be determined by the officers executing such Securities, as evidenced by their execution thereof. SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. The Trustee's certificate of authentication shall be in substantially the form set forth below: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. _________________________________ as Trustee By: _____________________________ Authorized Signatory -12- ARTICLE THREE THE SECURITIES SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited; provided, however, that all Securities shall be issued to a Trust in exchange for securities of such Trust or to evidence loans by a Trust of the proceeds of the issuance of Preferred Securities of such Trust plus the amount deposited by the Company with such Trust from time to time. The Securities may be issued in one or more series. Prior to the authentication and delivery of Securities of any series there shall be established by specification in an indenture supplemental hereto or in a Board Resolution, or in an Officer's Certificate pursuant to an indenture supplemental hereto or a Board Resolution: (a) the title of the Securities of such series (which shall distinguish the Securities of such series from Securities of all other series); (b) any limit upon the aggregate principal amount of the Securities of such series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 304, 305, 306, 406 or 1206 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (c) the Person or Persons (without specific identification) to whom interest on Securities of such series shall be payable on any Interest Payment Date, if other than the Persons in whose names such Securities (or one or more Predecessor Securities) are registered at the close of business on the Regular Record Date for such interest; (d) the date or dates on which the principal of the Securities of such series is payable or any formulary or other method or other means by which such date or dates shall be determined, by reference or otherwise (without regard to any provisions for redemption, prepayment, acceleration, purchase or extension); (e) the rate or rates at which the Securities of such series shall bear interest, if any (including the rate or rates at which overdue principal shall bear interest, if different from the rate or rates at which such Securities shall bear interest prior to Maturity, and, if applicable, the rate or rates at which overdue premium or interest shall bear interest, if any), or any formulary or other method or other means by which such rate or rates shall be determined, by reference or otherwise; the date or dates from which such interest shall accrue; the Interest Payment Dates on which such interest shall be payable and the Regular Record Date, if any, for the interest payable on such Securities on any Interest Payment Date; the right of the Company, if any, to extend the interest payment periods and the duration of any such extension as contemplated by Section 311; and the basis of computation of interest, if other than as provided in Section 310; -13- (f) the place or places at which or methods by which (i) the principal of and premium, if any, and interest, if any, on Securities of such series shall be payable, (ii) registration of transfer of Securities of such series may be effected, (iii) exchanges of Securities of such series may be effected and (iv) notices and demands to or upon the Company in respect of the Securities of such series and this Indenture may be served; the Security Registrar for such series; and, if such is the case, that the principal of such Securities shall be payable without presentment or surrender thereof; (g) the period or periods within which, or the date or dates on which, the price or prices at which and the terms and conditions upon which the Securities of such series may be redeemed, in whole or in part, at the option of the Company and any restrictions on such redemptions, including but not limited to a restriction on a partial redemption by the Company of the Securities of any series, resulting in delisting of such Securities from any national exchange; (h) the obligation or obligations, if any, of the Company to redeem or purchase the Securities of such series pursuant to any sinking fund or other mandatory redemption provisions or at the option of a Holder thereof and the period or periods within which or the date or dates on which, the price or prices at which and the terms and conditions upon which such Securities shall be redeemed or purchased, in whole or in part, pursuant to such obligation, and applicable exceptions to the requirements of Section 404 in the case of mandatory redemption or redemption at the option of the Holder; (i) the denominations in which Securities of such series shall be issuable if other than denominations of $25 and any integral multiple thereof; (j) the currency or currencies, including composite currencies, in which payment of the principal of and premium, if any, and interest, if any, on the Securities of such series shall be payable (if other than in Dollars); (k) if the principal of or premium, if any, or interest, if any, on the Securities of such series are to be payable, at the election of the Company or a Holder thereof, in a coin or currency other than that in which the Securities are stated to be payable, the period or periods within which and the terms and conditions upon which, such election may be made; (l) if the principal of or premium, if any, or interest, if any, on the Securities of such series are to be payable, or are to be payable at the election of the Company or a Holder thereof, in securities or other property, the type and amount of such securities or other property, or the formulary or other method or other means by which such amount shall be determined, and the period or periods within which, and the terms and conditions upon which, any such election may be made; (m) if the amount payable in respect of principal of or premium, if any, or interest, if any, on the Securities of such series may be determined with reference to an index or other fact or event ascertainable outside this Indenture, the manner in which such amounts shall be determined to the extent not established pursuant to clause (e) of this paragraph; (n) if other than the principal amount thereof, the portion of the principal amount of Securities of such series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 802; -14- (o) any Events of Default, in addition to those specified in Section 801, with respect to the Securities of such series, and any covenants of the Company for the benefit of the Holders of the Securities of such series, in addition to those set forth in Article Six; (p) the terms, if any, pursuant to which the Securities of such series may be converted into or exchanged for shares of capital stock or other securities of the Company or any other Person; (q) the obligations or instruments, if any, which shall be considered to be Government Obligations in respect of the Securities of such series denominated in a currency other than Dollars or in a composite currency, and any additional or alternative provisions for the reinstatement of the Company's indebtedness in respect of such Securities after the satisfaction and discharge thereof as provided in Section 701; (r) if the Securities of such series are to be issued in global form, (i) any limitations on the rights of the Holder or Holders of such Securities to transfer or exchange the same or to obtain the registration of transfer thereof, (ii) any limitations on the rights of the Holder or Holders thereof to obtain certificates therefor in definitive form in lieu of temporary form and (iii) any and all other matters incidental to such Securities; (s) if the Securities of such series are to be issuable as bearer securities, any and all matters incidental thereto which are not specifically addressed in a supplemental indenture as contemplated by clause (g) of Section 1201; (t) to the extent not established pursuant to clause (r) of this paragraph, any limitations on the rights of the Holders of the Securities of such Series to transfer or exchange such Securities or to obtain the registration of transfer thereof; and if a service charge will be made for the registration of transfer or exchange of Securities of such series the amount or terms thereof; (u) any exceptions to Section 113, or variation in the definition of Business Day, with respect to the Securities of such series; (v) the designation of the Trust to which Securities of such series are to be issued; and (w) any other terms of the Securities of such series not inconsistent with the provisions of this Indenture. All Securities of any one series shall be substantially identical, except as to principal amount and date of issue and except as may be set forth in the terms of such series as contemplated above. The Securities of each series shall be subordinated in right of payment to Senior Indebtedness as provided in Article Fifteen. SECTION 302. DENOMINATIONS. Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, the Securities of each series shall be issuable in denominations of $25 and any integral multiple thereof. -15- SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, the Securities shall be executed on behalf of the Company by an Authorized Officer and may have the corporate seal of the Company affixed thereto or reproduced thereon attested by any other Authorized Officer or by the Secretary or an Assistant Secretary of the Company. The signature of any or all of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at the time of execution Authorized Officers or the Secretary or an Assistant Secretary 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 original issue of such Securities. The Trustee shall authenticate and deliver Securities of a series, for original issue, at one time or from time to time in accordance with the Company Order referred to below, upon receipt by the Trustee of: (a) the instrument or instruments establishing the form or forms and terms of such series, as provided in Sections 201 and 301; (b) a Company Order requesting the authentication and delivery of such Securities and, to the extent that the terms of such Securities shall not have been established in an indenture supplemental hereto or in a Board Resolution, or in an Officer's Certificate pursuant to a supplemental indenture or Board Resolution, all as contemplated by Sections 201 and 301, establishing such terms; (c) the Securities of such series, executed on behalf of the Company by an Authorized Officer; (d) an Opinion of Counsel to the effect that: (i) the form or forms of such Securities have been duly authorized by the Company and have been established in conformity with the provisions of this Indenture; (ii) the terms of such Securities have been duly authorized by the Company and have been established in conformity with the provisions of this Indenture; and (iii) such Securities, when authenticated and delivered by the Trustee and issued and delivered by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will have been duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, entitled to the benefits provided by this Indenture, and enforceable in accordance with their terms, subject, as to enforcement, to laws relating to or affecting generally the enforcement of creditors' rights, including, without limitation, bankruptcy and insolvency laws and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). -16- If the form or terms of the Securities of any series have been established by or pursuant to a Board Resolution or an Officer's Certificate as permitted by Sections 201 or 301, the Trustee shall not be required to authenticate such Securities if the issuance of such Securities pursuant to this Indenture will materially or adversely affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, each Security shall be dated the date of its authentication. Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, 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 or an Authenticating Agent by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder to the Company, or any Person acting on its behalf, but shall never have been issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits hereof. SECTION 304. TEMPORARY SECURITIES. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities; provided, however, that temporary Securities need not recite specific redemption, sinking fund, conversion or exchange provisions. Unless otherwise specified as contemplated by Section 301 with respect to the Securities of any series, after the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable, without charge to the Holder thereof, for definitive Securities of such series upon surrender of such temporary Securities at the office or agency of the Company maintained pursuant to Section 602 in a Place of Payment for such Securities. Upon such surrender of temporary Securities for such exchange, the Company shall, except as aforesaid, execute and the Trustee shall authenticate and deliver in exchange therefor definitive Securities of the same series, of authorized denominations and of like tenor and aggregate principal amount. Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder. -17- SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. The Company shall cause to be kept in each office designated pursuant to Section 602, with respect to the Securities of each series, a register (all registers kept in accordance with this Section being collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities of such series and the registration of transfer thereof. The Company shall designate one Person to maintain the Security Register for the Securities of each series on a consolidated basis, and such Person is referred to herein, with respect to such series, as the "Security Registrar." Anything herein to the contrary notwithstanding, the Company may designate one or more of its offices as an office in which a register with respect to the Securities of one or more series shall be maintained, and the Company may designate itself the Security Registrar with respect to one or more of such series. The Security Register shall be open for inspection by the Trustee and the Company at all reasonable times. Except as otherwise specified as contemplated by Section 301 with respect to the Securities of any series, upon surrender for registration of transfer of any Security of such series at the office or agency of the Company maintained pursuant to Section 602 in a Place of Payment for such series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of authorized denominations and of like tenor and aggregate principal amount. Except as otherwise specified as contemplated by Section 301 with respect to the Securities of any series, any Security of such series may be exchanged at the option of the Holder, for one or more new Securities of the same series, of authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at any 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 delivered upon any registration of transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company, the Trustee or the Security Registrar) be duly endorsed or shall be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee or the Security Registrar, as the case may be, duly executed by the Holder thereof or his attorney duly authorized in writing. Unless otherwise specified as contemplated by Section 301 with respect to Securities of any series, no service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 406 or 1206 not involving any transfer. The Company shall not be required to execute or to provide for the registration of transfer of or the exchange of (a) Securities of any series during a period of 15 days immediately preceding the date of the mailing of any notice of redemption of such Securities called for redemption or (b) any -18- Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series, and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the ownership of and the destruction, loss or theft of any Security and (b) such security or indemnity as may be reasonably required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security is held by a Person purporting to be the owner of such Security, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series, and of like tenor and principal amount and bearing a number not contemporaneously outstanding. Notwithstanding the foregoing, 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 reasonable expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone other than the Holder of such new Security, and any such new Security shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of such series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Unless otherwise specified as contemplated by Section 301 with respect to the Securities of any series, 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. Subject to Section 311, any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") -19- shall forthwith cease to be payable to the Holder on the related 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 (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a date (herein called 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 of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or 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 promptly 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 of Securities of such series at the address of such Holder as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date. (b) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Sections 305 and 307) interest, if any, 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. -20- SECTION 309. CANCELLATION BY SECURITY REGISTRAR. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Security Registrar, be delivered to the Security Registrar and, if not theretofore canceled, shall be promptly canceled by the Security Registrar. The Company may at any time deliver to the Security Registrar for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever or which the Company shall not have issued and sold, and all Securities so delivered shall be promptly canceled by the Security Registrar. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Security Registrar shall be disposed of in accordance with the customary procedures of the Security Registrar as at the time of disposition shall be in effect (which may or may not include destruction of the certificate or certificates evidencing such Securities). The Security Registrar shall promptly deliver evidence of any cancellation of a Security in accordance with this Section 309 to the Trustee and the Company. SECTION 310. COMPUTATION OF INTEREST. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months and for any period shorter than a full month, on the basis of the actual number of days elapsed in such period. SECTION 311. EXTENSION OF INTEREST PAYMENT. The Company shall have the right at any time, so long as the Company is not in default in the payment of interest on the Securities of any series hereunder, to extend interest payment periods on all Securities of one or more series, if so specified as contemplated by Section 301 with respect to such Securities and upon such terms as may be specified as contemplated by Section 301 with respect to such Securities. SECTION 312. PAYMENT OF EXPENSES. The Company, as issuer of the Securities, shall pay all debts and obligations (other than with respect to the securities of a Trust) and all costs, liabilities and expenses of a Trust (including, but not limited to all costs, liabilities, expenses and indemnities under Section 8.06 of the Trust Agreement dated as of October 1, 1998, and the comparable provisions of any other Trust Agreement, all costs, liabilities and expenses relating to the organization of a Trust, the fees and expenses of the Property Trustee, the Delaware Trustee and the Administrative Trustees and all costs, liabilities and expenses relating to the operation of the Trust (other than with respect to payments due to the holders of the securities of a Trust pursuant to the terms of such securities)) and to pay any and all taxes, duties, assessments or other governmental charges of whatever nature (other than United States withholding taxes) imposed by the United States or any other taxing authority, so that the net amounts received and retained by a Trust after paying such fees, costs, expenses, liabilities, debts and obligations will be equal to the amounts a Trust would have received and retained had no such fees, costs, expenses, liabilities, debts and obligations been incurred by or imposed on a Trust. The foregoing obligations of the Company are for the benefit of, and shall be enforceable by, any person to whom such fees, costs, expenses, liabilities, debts and obligations are owed (each a "Creditor") whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of the Company directly against the Company, and the Company irrevocably waives any right or remedy to require that any such Creditor take any action against -21- a Trust or any other person before proceeding against the Company. The Company shall execute such additional agreements as may be necessary to give full effect to the foregoing. The provisions of this Section 312 shall survive the termination for any reason of this Indenture. ARTICLE FOUR REDEMPTION OF SECURITIES SECTION 401. APPLICABILITY OF ARTICLE. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of such series) in accordance with this Article. SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Securities shall be evidenced by a Board Resolution or an Officer's Certificate. The Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of such Securities to be redeemed. In the case of any redemption of Securities (a) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture or (b) pursuant to an election of the Company which is subject to a condition specified in the terms of such Securities, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction or condition. SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED. If less than all the Securities of any series are to be redeemed, the particular Securities to be redeemed shall be selected by the Trustee from the Outstanding Securities of such series not previously called for redemption, by such method as shall be provided for any particular series, or, in the absence of any such provision, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of such series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of such series; provided, however, that if, as indicated in an Officer's Certificate, the Company shall have offered to purchase all or any principal amount of the Securities then Outstanding of any series, and less than all of such Securities as to which such offer was made shall have been tendered to the Company for such purchase, the Trustee, if so directed by Company Order, shall select for redemption all or any principal amount of such Securities which have not been so tendered. The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected to be redeemed in part, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. -22- SECTION 404. NOTICE OF REDEMPTION. Notice of redemption shall be given in the manner provided in Section 106 to the Holders of the Securities to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date. All notices of redemption shall state: (a) the Redemption Date, (b) the Redemption Price, (c) if less than all the Securities of any series are to be redeemed, the identification of the particular Securities to be redeemed and the portion of the principal amount of any Security to be redeemed in part, (d) that on the Redemption Date the Redemption Price, together with accrued interest, if any, to the Redemption Date, will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price and accrued interest, if any, unless it shall have been specified as contemplated by Section 301 with respect to such Securities that such surrender shall not be required, (f) that the redemption is for a sinking or other fund, if such is the case, and (g) such other matters as the Company shall deem desirable or appropriate. Unless otherwise specified with respect to any Securities in accordance with Section 301, with respect to any notice of redemption of Securities at the election of the Company, unless, upon the giving of such notice, such Securities shall be deemed to have been paid in accordance with Section 701, such notice may state that such redemption shall be conditional upon the receipt by the Paying Agent or Agents for such Securities, on or prior to the date fixed for such redemption, of money sufficient to pay the principal of and premium, if any, and interest, if any, on such Securities and that if such money shall not have been so received such notice shall be of no force or effect and the Company shall not be required to redeem such Securities. In the event that such notice of redemption contains such a condition and such money is not so received, the redemption shall not be made and within a reasonable time thereafter notice shall be given, in the manner in which the notice of redemption was given, that such money was not so received and such redemption was not required to be made, and the Paying Agent or Agents for the Securities otherwise to have been redeemed shall promptly return to the Holders thereof any of such Securities which had been surrendered for payment upon such redemption. Notice of redemption of Securities to be redeemed at the election of the Company, and any notice of non-satisfaction of a condition for redemption as aforesaid, shall be given by the Company or, at the Company's request, by the Security Registrar in the name and at the expense of the Company. Notice of mandatory redemption of Securities shall be given by the Security Registrar in the name and at the expense of the Company. -23- SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, and the conditions, if any, set forth in such notice having been satisfied, the Securities or portions thereof so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless, in the case of an unconditional notice of redemption, the Company shall default in the payment of the Redemption Price and accrued interest, if any) such Securities or portions thereof, if interest-bearing, shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with such notice, such Security or portion thereof shall be paid by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided, however, that no such surrender shall be a condition to such payment if so specified as contemplated by Section 301 with respect to such Security; and provided, further, that except as otherwise specified as contemplated by Section 301 with respect to such Security, any installment of interest on any Security the Stated Maturity of which installment is on or prior to the Redemption Date shall be payable to the Holder of such Security, or one or more Predecessor Securities, registered as such at the close of business on the related Regular Record Date according to the terms of such Security and subject to the provisions of Section 307. SECTION 406. SECURITIES REDEEMED IN PART. Upon the surrender of any Security which is to be redeemed only in part at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities of the same series, of any authorized denomination requested by such Holder and of like tenor and in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE FIVE SINKING FUNDS SECTION 501. APPLICABILITY OF ARTICLE. The provisions of this Article shall be applicable to any sinking fund for the retirement of the Securities of any series, except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 502. Each sinking fund payment shall be applied to the redemption of Securities of the series in respect of which it was made as provided for by the terms of such Securities. -24- SECTION 502. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES. The Company (a) may deliver to the Trustee Outstanding Securities (other than any previously called for redemption) of a series in respect of which a mandatory sinking fund payment is to be made and (b) may apply as a credit Securities of such series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities or Outstanding Securities purchased by the Company, in each case in satisfaction of all or any part of such mandatory sinking fund payment with respect to the Securities of such series; provided, however, that no Securities shall be applied in satisfaction of a mandatory sinking fund payment if such Securities shall have been previously so applied. Securities so applied shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. SECTION 503. REDEMPTION OF SECURITIES FOR SINKING FUND. Not less than 45 days prior to each sinking fund payment date for the Securities of any series, the Company shall deliver to the Trustee an Officer's Certificate specifying: (a) the amount of the next succeeding mandatory sinking fund payment for such series; (b) the amount, if any, of the optional sinking fund payment to be made together with such mandatory sinking fund payment; (c) the aggregate sinking fund payment; (d) the portion, if any, of such aggregate sinking fund payment which is to be satisfied by the payment of cash; and (e) the portion, if any, of such aggregate sinking fund payment which is to be satisfied by delivering and crediting Securities of such series pursuant to Section 502 and stating the basis for such credit and that such Securities have not previously been so credited, and the Company shall also deliver to the Trustee any Securities to be so delivered. If the Company shall not have delivered such Officer's Certificate and, to the extent applicable, all such Securities, on or prior to the 45th day prior to such sinking fund payment date, the sinking fund payment for such series in respect of such sinking fund payment date shall be made entirely in cash in the amount of the mandatory sinking fund payment. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 403 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 404. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 405 and 406. -25- ARTICLE SIX COVENANTS SECTION 601. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company shall pay the principal of and premium, if any, and interest, if any, on the Securities of each series in accordance with the terms of such Securities and this Indenture. SECTION 602. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in each Place of Payment for the Securities of each series an office or agency where payment of such Securities shall be made, where the registration of transfer or exchange of such Securities may be effected and where notices and demands to or upon the Company in respect of such Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency and prompt notice to the Holders of any such change in the manner specified in Section 106. If at any time the Company shall fail to maintain any such required office or agency in respect of Securities of any series, or shall fail to furnish the Trustee with the address thereof, payment of such Securities shall be made, registration of transfer or exchange thereof may be effected and notices and demands in respect thereof may be served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent for all such purposes in any such event. The Company may also from time to time designate one or more other offices or agencies with respect to the Securities of one or more series, for any or all of the foregoing purposes and may from time to time rescind such designations; provided, however, that, unless otherwise specified as contemplated by Section 301 with respect to the Securities of such series, no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency for such purposes in each Place of Payment for such Securities in accordance with the requirements set forth above. The Company shall give prompt written notice to the Trustee, and prompt notice to the Holders in the manner specified in Section 106, of any such designation or rescission and of any change in the location of any such other office or agency. Anything herein to the contrary notwithstanding, any office or agency required by this Section may be maintained at an office of the Company, in which event the Company shall perform all functions to be performed at such office or agency. SECTION 603. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent with respect to the Securities of any series, it shall, on or before each due date of the principal of and premium, if any, and interest, if any, on any of such Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and premium or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided. The Company shall promptly notify the Trustee of any failure by the Company (or any other obligor on such Securities) to make any payment of principal of or premium, if any, or interest, if any, on such Securities. -26- Whenever the Company shall have one or more Paying Agents for the Securities of any series, it shall, on or before each due date of the principal of and premium, if any, and interest, if any, on such Securities, deposit with such Paying Agents sums sufficient (without duplication) to pay the principal and premium or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of any failure by it so to act. The Company shall cause each Paying Agent for the Securities of any series, other than the Company or 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 shall: (a) hold all sums held by it for the payment of the principal of and premium, if any, or interest, if any, on such 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; (b) give the Trustee notice of any failure by the Company (or any other obligor upon such Securities) to make any payment of principal of or premium, if any, or interest, if any, on such Securities; and (c) 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 furnish to the Trustee such information as it possesses regarding the names and addresses of the Persons entitled to such sums. The Company may at any time pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent and, if so stated in a Company Order delivered to the Trustee, in accordance with the provisions of Article Seven; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of and premium, if any, or interest, if any, on any Security and remaining unclaimed for two years after such principal and premium, if any, or interest has become due and payable shall be paid to the Company on Company Request, or, if then held by the Company, shall be discharged from such trust; and, upon such payment or discharge, the Holder of such Security shall, as an unsecured general creditor and not as a Holder of an Outstanding Security, look only to the Company for payment of the amount so due and payable and remaining unpaid, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such payment to the Company, may at the expense of the Company cause to be mailed, on one occasion only, notice to such Holder that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such mailing, any unclaimed balance of such money then remaining will be paid to the Company. -27- SECTION 604. CORPORATE EXISTENCE. Subject to the rights of the Company under Article Eleven, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. SECTION 605. MAINTENANCE OF PROPERTIES. The Company shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) all its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and shall cause (or, with respect to property owned in common with others, make reasonable effort to cause) to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as, in the judgment of the Company, may be necessary so that the business carried on in connection therewith may be properly conducted; provided, however, that nothing in this Section shall prevent the Company from discontinuing, or causing the discontinuance of, the operation and maintenance of any of its properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business. SECTION 606. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE. Not later than September 15 in each year, commencing September 15, 1999, the Company shall deliver to the Trustee an Officer's Certificate which need not comply with Section 102, 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 607. WAIVER OF CERTAIN COVENANTS. The Company may omit in any particular instance to comply with any term, provision or condition set forth in (a) Section 602 or any additional covenant or restriction specified with respect to the Securities of any series, as contemplated by Section 301, if before the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities of all series with respect to which compliance with Section 602 or such additional covenant or restriction is to be omitted, considered as one class, shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition and (b) Section 604, 605 or Article Eleven if before the time for such compliance the Holders of at least a majority in principal amount of Securities Outstanding under this Indenture shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition; but, in the case of (a) or (b), no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect; provided, however, that so long as a Trust holds Securities of any series, such Trust may not waive compliance or waive any default in compliance by the Company with any covenant or other term contained in this Indenture or the Securities of such series without the approval of the holders of at least a majority in aggregate liquidation preference of the outstanding Preferred Securities issued by such Trust affected, obtained as provided in the Trust Agreement pertaining to such Trust. SECTION 608. RESTRICTION ON PAYMENT OF DIVIDENDS. -28- So long as any Preferred Securities of any series remain outstanding, the Company shall not declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company's capital stock, or make any guarantee payments with respect to the foregoing (other than payments under the Guarantee relating to such Preferred Securities) if at such time (a) the Company shall be in default with respect to its payment or other obligations under the Guarantee relating to such Preferred Securities, (b) there shall have occurred and be continuing a payment default (whether before or after expiration of any period of grace) or an Event of Default hereunder or (c) the Company shall have elected to extend any interest payment period as provided in Section 311, and any such period, or any extension thereof, shall be continuing. SECTION 609. MAINTENANCE OF TRUST EXISTENCE. So long as Preferred Securities of any series remain outstanding, the Company shall (i) maintain direct or indirect ownership of all interests in the Trust which issued such Preferred Securities, other than such Preferred Securities, (ii) not voluntarily (to the extent permitted by law) dissolve, liquidate or wind up such Trust, except in connection with a distribution of the Securities to the holders of the Preferred Securities in liquidation of such Trust, (iii) remain the sole Depositor under the Trust Agreement (the "Depositor") of such Trust and timely perform in all material respects all of its duties as Depositor of such Trust, and (iv) use reasonable efforts to cause such Trust to remain a business trust and otherwise continue to be treated as a grantor trust for Federal income tax purposes provided that any permitted successor to the Company under this Indenture may succeed to the Company's duties as Depositor of such Trust; and provided further that the Company may permit such Trust to consolidate or merge with or into another business trust or other permitted successor under the Trust Agreement pertaining to such Trust so long as the Company agrees to comply with this Section 609 with respect to such successor business trust or other permitted successor. ARTICLE SEVEN SATISFACTION AND DISCHARGE SECTION 701. DEFEASANCE. Any Security or Securities, or any portion of the principal amount thereof, shall be deemed to have been paid for all purposes of this Indenture, and the entire indebtedness of the Company in respect thereof shall be deemed to have been satisfied and discharged, if there shall have been irrevocably deposited with the Trustee or any Paying Agent (other than the Company), in trust: (a) money in an amount which shall be sufficient, or (b) in the case of a deposit made prior to the Maturity of such Securities or portions thereof, Government Obligations, which shall not contain provisions permitting the redemption or other prepayment thereof at the option of the issuer thereof, the principal of and the interest on which when due, without any regard to reinvestment thereof, will provide moneys which, together with the money, if any, deposited with or held by the Trustee or such Paying Agent, shall be sufficient, or (c) a combination of (a) or (b) which shall be sufficient, -29- to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Securities or portions thereof on or prior to Maturity; provided, however, that in the case of the provision for payment or redemption of less than all the Securities of any series, such Securities or portions thereof shall have been selected by the Trustee as provided herein and, in the case of a redemption, the notice requisite to the validity of such redemption shall have been given or irrevocable authority shall have been given by the Company to the Trustee to give such notice, under arrangements satisfactory to the Trustee; and provided, further, that the Company shall have delivered to the Trustee and such Paying Agent: (i) if such deposit shall have been made prior to the Maturity of such Securities, a Company Order stating that the money and Government Obligations deposited in accordance with this Section shall be held in trust, as provided in Section 703; and (ii) if Government Obligations shall have been deposited, an Opinion of Counsel that the obligations so deposited constitute Government Obligations and do not contain provisions permitting the redemption or other prepayment at the option of the issuer thereof, and an opinion of an independent public accountant of nationally recognized standing, selected by the Company, to the effect that the requirements set forth in clause (b) above have been satisfied; and (iii) An Opinion of Counsel to the effect that the Holders of such Securities will not recognize income, gain or loss for federal income tax purposes as a result of the satisfaction and discharge of the Company's indebtedness in respect of such Securities, 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 occurred. Upon the deposit of money or Government Obligations, or both, in accordance with this Section, together with the documents required by clauses (i), (ii) and (iii) above, the Trustee shall, upon receipt of a Company Request, acknowledge in writing that the Security or Securities or portions thereof with respect to which such deposit was made are deemed to have been paid for all purposes of this Indenture and that the entire indebtedness of the Company in respect thereof has been satisfied and discharged as contemplated in this Section. In the event that all of the conditions set forth in the preceding paragraph shall have been satisfied in respect of any Securities or portions thereof except that, for any reason, the Opinion of Counsel specified in clause (iii) shall not have been delivered, such Securities or portions thereof shall nevertheless be deemed to have been paid for all purposes of this Indenture, and the Holders of such Securities or portions thereof shall nevertheless be no longer entitled to the benefits of this Indenture or of any of the covenants of the Company under Article Six (except the covenants contained in Sections 602 and 603) or any other covenants made in respect of such Securities or portions thereof as contemplated by Section 301, but the indebtedness of the Company in respect of such Securities or portions thereof shall not be deemed to have been satisfied and discharged prior to Maturity for any other purpose, and the Holders of such Securities or portions thereof shall continue to be entitled to look to the Company for payment of the indebtedness represented thereby; and, upon Company Request, the Trustee shall acknowledge in writing that such Securities or portions thereof are deemed to have been paid for all purposes of this Indenture. If payment at Stated Maturity of less than all of the Securities of any series is to be provided for in the manner and with the effect provided in this Section, the Security Registrar shall select such Securities, or portions of principal amount thereof, in the manner specified by Section 403 for selection for redemption of less than all the Securities of a series. -30- In the event that Securities which shall be deemed to have been paid for purposes of this Indenture, and, if such is the case, in respect of which the Company's indebtedness shall have been satisfied and discharged, all as provided in this Section do not mature and are not to be redeemed within the 60-day period commencing with the date of the deposit of moneys or Government Obligations, as aforesaid, the Company shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Securities, to the Holders of such Securities to the effect that such deposit has been made and the effect thereof. Notwithstanding that any Securities shall be deemed to have been paid for purposes of this Indenture, as aforesaid, the obligations of the Company and the Trustee in respect of such Securities under Sections 304, 305, 306, 312, 404, 503 (as to notice of redemption), 602, 603, 907 and 915 and this Article Seven shall survive. The Company shall pay, and shall indemnify the Trustee or any Paying Agent with which Government Obligations shall have been deposited as provided in this Section against, any tax, fee or other charge imposed on or assessed against such Government Obligations or the principal or interest received in respect of such Government Obligations, including, but not limited to, any such tax payable by any entity deemed, for tax purposes, to have been created as a result of such deposit. Anything herein to the contrary notwithstanding, (a) if, at any time after a Security would be deemed to have been paid for purposes of this Indenture, and, if such is the case, the Company's indebtedness in respect thereof would be deemed to have been satisfied or discharged, pursuant to this Section (without regard to the provisions of this paragraph), the Trustee or any Paying Agent, as the case may be, shall be required to return the money or Government Obligations, or combination thereof, deposited with it as aforesaid to the Company or its representative under any applicable Federal or State bankruptcy, insolvency or other similar law, such Security shall thereupon be deemed retroactively not to have been paid and any satisfaction and discharge of the Company's indebtedness in respect thereof shall retroactively be deemed not to have been effected, and such Security shall be deemed to remain Outstanding and (b) any satisfaction and discharge of the Company's indebtedness in respect of any Security shall be subject to the provisions of the last paragraph of Section 603. SECTION 702. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall upon Company Request cease to be of further effect (except as hereinafter expressly provided), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) no Securities remain Outstanding hereunder; and (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; provided, however, that if, in accordance with the last paragraph of Section 701, any Security, previously deemed to have been paid for purposes of this Indenture, shall be deemed retroactively not to have been so paid, this Indenture shall thereupon be deemed retroactively not to have been satisfied and discharged, as aforesaid, and to remain in full force and effect, and the Company shall execute and deliver such instruments as the Trustee shall reasonably request to evidence and acknowledge the same. -31- Notwithstanding the satisfaction and discharge of this Indenture as aforesaid, the obligations of the Company and the Trustee under Sections 304, 305, 306, 312, 404, 503 (as to notice of redemption), 602, 603, 907 and 915 and this Article Seven shall survive. Upon satisfaction and discharge of this Indenture as provided in this Section, the Trustee shall assign, transfer and turn over to the Company, subject to the lien provided by Section 907, any and all money, securities and other property then held by the Trustee for the benefit of the Holders of the Securities other than money and Government Obligations held by the Trustee pursuant to Section 703. SECTION 703. APPLICATION OF TRUST MONEY. Neither the Government Obligations nor the money deposited pursuant to Section 701, nor the principal or interest payments on any such Government Obligations, shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest, if any, on the Securities or portions of principal amount thereof in respect of which such deposit was made, all subject, however, to the provisions of Section 603; provided, however, that, so long as there shall not have occurred and be continuing an Event of Default any cash received from such principal or interest payments on such Government Obligations, if not then needed for such purpose, shall, to the extent practicable, be invested in Government Obligations of the type described in clause (b) in the first paragraph of Section 701 maturing at such times and in such amounts as shall be sufficient to pay when due the principal of and premium, if any, and interest, if any, due and to become due on such Securities or portions thereof on and prior to the Maturity thereof, and interest earned from such reinvestment shall be paid over to the Company as received, free and clear of any trust, lien or pledge under this Indenture except the lien provided by Section 907; and provided, further, that, so long as there shall not have occurred and be continuing an Event of Default, any moneys held in accordance with this Section on the Maturity of all such Securities in excess of the amount required to pay the principal of and premium, if any, and interest, if any, then due on such Securities shall be paid over to the Company free and clear of any trust, lien or pledge under this Indenture except the lien provided by Section 907; and provided, further, that if an Event of Default shall have occurred and be continuing, moneys to be paid over to the Company pursuant to this Section shall be held until such Event of Default shall have been waived or cured. ARTICLE EIGHT EVENTS OF DEFAULT; REMEDIES SECTION 801. EVENTS OF DEFAULT. "Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events: (a) failure to pay interest, if any, on any Security of such series within 30 days after the same becomes due and payable (whether or not payment is prohibited by the provisions of Article Fifteen hereof); provided, however, that a valid extension of the interest payment period by the Company as contemplated in Section 311 of this Indenture shall not constitute a failure to pay interest for this purpose; or -32- (b) failure to pay the principal of or premium, if any, on any Security of such series at its Maturity (whether or not payment is prohibited by the provisions of Article Fifteen hereof); or (c) failure to perform or breach 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 breach of which is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of one or more series of Securities other than such series) for a period of 60 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 10% in principal amount of the Outstanding Securities of such series, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder, unless the Trustee, or the Trustee and the Holders of a principal amount of Securities of such series not less than the principal amount of Securities the Holders of which gave such notice, as the case may be, shall agree in writing to an extension of such period prior to its expiration; provided, however, that the Trustee, or the Trustee and the Holders of such principal amount of Securities of such series, as the case may be, shall be deemed to have agreed to an extension of such period if corrective action is initiated by the Company within such period and is being diligently pursued; or (d) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition by one or more Persons other than the Company seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official for the Company or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order for relief or any such other decree or order shall have remained unstayed and in effect for a period of 90 consecutive days; or (e) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in a case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by 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, or the authorization of such action by the Board of Directors; or (f) any other Event of Default specified with respect to Securities of such series. SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default due to the default in payment of principal of, or interest on, any series of Securities or due to the default in the performance or breach of any other covenant or warranty of the -33- Company applicable to the Securities of such series but not applicable to all outstanding Securities shall have occurred and be continuing, either the Trustee or the Holders of not less than 25% in principal amount of the Securities of such series may then declare the principal of all Securities of such series and interest accrued thereon to be due and payable immediately; provided, however, that, in the case of the Securities of a series issued to a Trust, if, upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series fail to declare the principal of all the Securities of that series to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of the corresponding series 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 on all the Securities of such series shall become immediately due and payable (provided that the payment of principal and interest on such Securities shall remain subordinated to the extent provided in Article Fifteen hereof). If an Event of Default due to default in the performance of any other of the covenants or agreements herein applicable to all Outstanding Securities or an Event of Default specified in Section 801(d) or (e) shall have occurred and be continuing, either the Trustee or the Holders of not less than 25% in principal amount of all Securities then Outstanding (considered as one class), and not the Holders of the Securities of any one of such series, may declare the principal of all Securities and interest accrued thereon to be due and payable immediately and upon any such declaration such principal amount (or specified amount) of and the accrued interest on all the Securities of such series shall become immediately due and payable (provided that the payment of principal and interest on such Securities shall remain subordinated to the extent provided in Article Fifteen hereof). At any time after such a declaration of acceleration with respect to Securities of any series shall have been made and before a judgment or decree for payment of the money due shall have been obtained by the Trustee as hereinafter in this Article provided, the Event or Events of Default giving rise to such declaration of acceleration shall, without further act, be deemed to have been waived, and such declaration and its consequences shall, without further act, be deemed to have been rescinded and annulled, if (a) the Company shall have paid or deposited with the Trustee a sum sufficient to pay (i) all overdue interest on all Securities of such series; (ii) the principal of and premium, if any, on any Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities; (iii) to the extent that payment of such interest is lawful, interest upon overdue interest, if any, at the rate or rates prescribed therefor in such Securities; (iv) all amounts due to the Trustee under Section 907; and (b) any other Event or Events of Default with respect to Securities of such series, other than the nonpayment of the principal of Securities of such series which shall have become due solely by such declaration of acceleration, shall have been cured or waived as provided in Section 813. -34- No such rescission shall affect any subsequent Event of Default or impair any right consequent thereon. SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. If an Event of Default described in clause (a) or (b) of Section 801 shall have occurred and be continuing, the Company shall, upon demand of the Trustee, pay to it, for the benefit of the Holders of the Securities of the series with respect to which such Event of Default shall have occurred, the whole amount then due and payable on such Securities for principal and premium, if any, and interest, if any, and, to the extent permitted by law, interest on premium, if any, and on any overdue principal and interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover any amounts due to the Trustee under Section 907. If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to Securities of any series shall have occurred and be continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal, premium, if any, and interest, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for amounts due to the Trustee under Section 907) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the -35- event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amounts due it under Section 907. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders in respect of which such judgment has been recovered. SECTION 806. APPLICATION OF MONEY COLLECTED. Subject to the provisions of Article Fifteen, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or premium, if any, or interest, if any, upon presentation of the Securities in respect of which or for the benefit of which such money shall have been collected and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 907; SECOND: To the payment of the amounts then due and unpaid upon the Securities for principal of and premium, if any, and interest, if any, 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, premium, if any, and interest, if any, respectively; and THIRD: To the payment of the remainder, if any, to the Company or to whomsoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. SECTION 807. LIMITATION ON SUITS. No Holder shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such Holder shall have previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of such series; (b) the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of all series in respect of which an Event of Default shall have occurred and be continuing, -36- considered as one class, 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; (c) such Holder or Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceeding; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series in respect of which an Event of Default shall have occurred and be continuing, considered as one class; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 808. 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 307 and 311) interest, if any, on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Any holder of related Preferred Securities shall have the right to institute suit for the enforcement of any such payment to such holder with respect to Securities relating to such Preferred Securities having a principal amount equal to the aggregate liquidation preference amount of the related Preferred Securities held by such holder. SECTION 809. 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 shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, and Trustee and such Holder shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and such Holder shall continue as though no such proceeding had been instituted. SECTION 810. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided in the last paragraph of Section 306, 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 -37- 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 811. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder 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 812. CONTROL BY HOLDERS OF SECURITIES. If an Event of Default shall have occurred and be continuing in respect of a series of Securities, the Holders of a majority in principal amount of the Outstanding Securities of such series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series; provided, however, that if an Event of Default shall have occurred and be continuing with respect to more than one series of Securities, the Holders of a majority in aggregate principal amount of the Outstanding Securities of all such series, considered as one class, shall have the right to make such direction, and not the Holders of the Securities of any one of such series; and provided, further, that such direction shall not be in conflict with any rule of law or with this Indenture. The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Before proceeding to exercise any right or power hereunder at the direction of such Holders, the Trustee shall be entitled to receive from such Holders reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with any such direction. SECTION 813. WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default: (a) in the payment of the principal of or premium, if any, or interest, if any, on any Security of such series, or (b) in respect of a covenant or provision hereof which under Section 1202 cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected; provided, however, that so long as a Trust holds the Securities of any series, such Trust may not waive any past default without the consent of at least a majority in aggregate liquidation preference of the outstanding Preferred Securities issued by such Trust affected, obtained as provided in the Trust Agreement pertaining to such Trust. Upon any such waiver, such default shall cease to exist, and any and all Events 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. -38- SECTION 814. UNDERTAKING FOR COSTS. The Company and the Trustee agree, and each Holder by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount of the Outstanding Securities of all series in respect of which such suit may be brought, considered as one class, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or premium, if any, or interest, if any, on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). SECTION 815. WAIVER OF STAY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE NINE THE TRUSTEE SECTION 901. CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default, (i) 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 (ii) 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; provided, however, that, 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. -39- (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 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 (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (ii) the Trustee shall not be liable for any error or judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) 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 Holders pursuant to Section 812 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 with respect to the Securities of such series. (d) 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 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. (e) 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 902. NOTICE OF DEFAULTS. The Trustee shall give notice of any default hereunder with respect to the Securities of any series to the Holders of Securities of such series in the manner and to the extent required to do so by the Trust Indenture Act, unless such default shall have been cured or waived; provided, however, that in the case of any default of the character specified in Section 801(c), no such notice to Holders shall be given until at least 45 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time, or both, would become, an Event of Default. SECTION 903. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of Section 901 and to the applicable provisions of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in good faith 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 -40- reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, or as otherwise expressly provided herein, and any resolution of the Board of Directors 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 Officer's 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 Holder pursuant to this Indenture, unless such Holder 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, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall (subject to applicable legal requirements) be entitled to examine, during normal business hours, the books, records and premises of the Company, personally or by agent or attorney; (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; and (h) the Trustee shall not be charged with knowledge of any default or Event of Default, as the case may be, with respect to the Securities of any series for which it is acting as Trustee unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of the default or Event of Default, as the case may be, or (ii) written notice of such default or Event of Default, as the case may be, shall have been given to the Trustee by the Company, any other obligor on such Securities or by any Holder of such Securities. SECTION 904. 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 neither the Trustee nor any Authenticating Agent assumes responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any -41- Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 905. MAY HOLD SECURITIES. Each of the Trustee, any Authenticating Agent, any Paying Agent, any Security 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 908 and 913) may otherwise deal with the Company with the same rights it would have if it were not the Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 906. 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 expressly provided herein or otherwise agreed with, and for the sole benefit of, the Company. SECTION 907. COMPENSATION AND REIMBURSEMENT. The Company shall (a) pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, reimburse the Trustee upon its request for all reasonable expenses (including any costs of collection), disbursements and advances reasonably 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 to the extent that any such expense, disbursement or advance may be attributable to the Trustee's negligence, wilful misconduct or bad faith; and (c) indemnify the Trustee for, and hold it harmless from and against, any and all losses, liabilities, demands, claims, causes of action or expenses (including reasonable attorneys' fees and expenses) incurred by it arising out of or in connection with the acceptance or administration of the trust or trusts hereunder or the performance of its duties hereunder, including the reasonable 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, except to the extent any such loss, liability, demand, claim, cause of action or expense may be attributable to its negligence, wilful misconduct or bad faith. At the option of the Trustee, the Company shall assume the defense of the Trustee with counsel acceptable to the Trustee. As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such other than property and funds held in trust under Section 703 (except as otherwise provided in Section 703). "Trustee" for purposes of this Section shall include any predecessor Trustee; -42- provided, however, that the negligence, wilful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder. In addition to the rights provided to the Trustee pursuant to the provisions of the immediately preceding paragraph of this Section 907, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 801(d) or Section 801(e), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or State bankruptcy, insolvency or other similar law. The provisions of this Section 907 shall survive the termination for any reason of this Indenture. SECTION 908. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee shall have or acquire any conflicting interest within the meaning of the Trust Indenture Act, it shall either eliminate such conflicting interest or resign to the extent, in the manner and with the effect, and subject to the conditions, provided in the Trust Indenture Act and this Indenture. For purposes of Section 310(b)(1) of the Trust Indenture Act and to the extent permitted thereby, the Trustee, in its capacity as trustee in respect of the Securities of any series, shall not be deemed to have a conflicting interest arising from its capacity as trustee in respect of the Securities of any other series, under any Guarantee, or as trustee under the Junior Subordinated Indenture dated as of October 1, 1996, the Amended and Restated Trust Agreement dated as of October 1, 1996 and the Guarantee Agreement dated as of October 1, 1996, relating to the Company's 8.25% Junior Subordinated Deferrable Interest Debentures. Each Trust Agreement and each Guarantee pertaining to each Trust shall be deemed to be specifically described in this Indenture for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. SECTION 909. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be (a) a corporation organized and doing business or other Person permitted by the Commission authorized under the laws of the United States, any State or Territory thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or State authority, or (b) if and to the extent permitted by the Commission by rule, regulation or order upon application, a corporation or other Person organized and doing business under the laws of a foreign government, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 or the Dollar equivalent of the applicable foreign currency 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, and, in either case, qualified and eligible under this Article and the Trust Indenture Act. If such corpora tion publishes reports of condition at least annually, pursuant to law or to the requirements of such -43- supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 910. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 911. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 911 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Trustee and to the Company; provided, however, that so long as any Preferred Securities remain outstanding, the Trust which issued such Preferred Securities shall not execute any Act to remove the Trustee without the consent of the holders of a majority in aggregate liquidation preference of Preferred Securities issued by such Trust outstanding, obtained as provided in the Trust Agreement pertaining to such Trust. (d) If at any time: (i) the Trustee shall fail to comply with Section 908 after written request therefor by the Company or by any Holder who has been a bona fide Holder for at least six months, or (ii) the Trustee shall cease to be eligible under Section 909 and shall fail to resign after written request therefor by the Company or by any such Holder, or (iii) 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, (x) the Company by a Board Resolution may remove the Trustee with respect to all Securities or (y) subject to Section 814, any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent juris diction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause (other than as contemplated in clause (y) in subsection (d) of this Section), with respect to the Securities of one or more series, the Company, by -44- a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 911. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 911, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 911, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) So long as no event which is, or after notice or lapse of time, or both, would become, an Event of Default shall have occurred and be continuing, and except with respect to a Trustee appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities pursuant to subsection (e) of this Section, if the Company shall have delivered to the Trustee (i) a Board Resolution appointing a successor Trustee, effective as of a date specified therein, and (ii) an instrument of acceptance of such appointment, effective as of such date, by such successor Trustee in accordance with Section 911, the Trustee shall be deemed to have resigned as contemplated in subsection (b) of this Section, the successor Trustee shall be deemed to have been appointed by the Company pursuant to subsection (e) of this Section and such appointment shall be deemed to have been accepted as contemplated in Section 911, all as of such date, and all other provisions of this Section and Section 911 shall be applicable to such resignation, appointment and acceptance except to the extent inconsistent with this subsection (f). (g) The Company (or, should the Company fail so to act promptly, the successor Trustee at the expense of the Company) shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first- class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its corporate trust office. SECTION 911. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor Trustee with respect to the Securities of all series, every such successor Trustee so appointed 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; provided, however that on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of all sums owed to it, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the -45- retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and (iii) shall add to or change any of the provi sions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent pro vided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; provided, however that on request of the Company or any successor Trustee, such retiring Trustee, upon payment of all sums owed to it, shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any instruments which fully vest in and confirm to such successor Trustee all such rights, powers and trusts referred to in subsection (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 912. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation or other Person into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or other Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or other Person succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation or other Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. -46- SECTION 913. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If the Trustee shall be or become a creditor of the Company or any other obligor upon the Securities (other than by reason of a relationship described in Section 311(b) of the Trust Indenture Act), the Trustee shall be subject to any and all applicable provisions of the Trust Indenture Act regarding the collection of claims against the Company or such other obligor. For purposes of Section 311(b) of the Trust Indenture Act: (a) the term "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; (b) the term "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. SECTION 914. CO-TRUSTEES AND SEPARATE TRUSTEES. At any time or times, for the purpose of meeting the legal requirements of any applicable jurisdiction, the Company and the Trustee shall have power to appoint, and, upon the written request of the Trustee or of the Holders of at least 25% in principal amount of the Securities then Outstanding, the Company shall for such purpose join with the Trustee in the execution and delivery of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Trustee either to act as co-trustee, jointly with the Trustee, or to act as separate trustee, in either case with such 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 Company does not join in such appointment within 15 days after the receipt by it of a request so to do, or if an Event of Default shall have occurred and be continuing, the Trustee alone shall have power to make such appointment. Should any written instrument or instruments from the Company be required by any co-trustee or separate trustee so appointed to more fully confirm 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 Company. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following conditions: (a) the Securities shall be authenticated 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 Trustee hereunder, shall be exercised solely, by the Trustee; -47- (b) the rights, powers, duties and obligations hereby conferred or imposed upon the Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed either by the Trustee or by the 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 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) the Trustee at any time, by an instrument in writing executed by it, with the concurrence of the Company, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, if an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Company. Upon the written request of the Trustee, the Company shall join with the Trustee in the execution and delivery 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; (d) no co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Trustee, or any other such trustee hereunder; and (e) any Act of Holders delivered to the Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. SECTION 915. APPOINTMENT OF AUTHENTICATING AGENT. The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities of one or more series, which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issuance and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States, any State or territory thereof or the District of Columbia, authorized under such laws to act as Authenti cating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. -48- Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, in accordance with, and subject to the provisions of Section 907. The provisions of Sections 308, 904 and 905 shall be applicable to each Authenticating Agent. If an appointment with respect to the Securities of one or more series shall be made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. ------------------------------------------ As Trustee By ---------------------------------------- As Authenticating Agent By ---------------------------------------- Authorized Signatory If all of the Securities of a series may not be originally issued at one time, and if the Trustee does not have an office capable of authenticating Securities upon original issuance located in a Place of Payment where the Company wishes to have Securities of such -49- series authenticated upon original issuance, the Trustee, if so requested by the Company in writing (which writing need not comply with Section 102 and need not be accompanied by an Opinion of Counsel), shall appoint, in accordance with this Section and in accordance with such procedures as shall be acceptable to the Trustee, an Authenticating Agent having an office in a Place of Payment designated by the Company with respect to such series of Securities. ARTICLE TEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 1001. LISTS OF HOLDERS. Semiannually, not later than January 15 and July 15 in each year, commencing January 15, 1999, and at such other times as the Trustee may request in writing, the Company shall furnish or cause to be furnished to the Trustee information as to the names and addresses of the Holders, and the Trustee shall preserve such information and similar information received by it in any other capacity and afford to the Holders access to information so preserved by it, all to such extent, if any, and in such manner as shall be required by the Trust Indenture Act; provided, however, that no such list need be furnished so long as the Trustee shall be the Security Registrar. SECTION 1002. REPORTS BY TRUSTEE. (a) The Trustee shall transmit to the 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. Such of those reports as are required to be transmitted by the 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, 1999. (b) A copy of each such report shall, at the time of such transmission to the Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company shall notify the Trustee when any Securities shall have been listed on any stock exchange. SECTION 1003. REPORTS TO THE TRUSTEE. The Company shall provide to the Trustee such documents, reports, compliance certificates and information as may be required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required thereby. The Company shall notify the Trustee of the listing of any Securities on any securities exchange. Delivery of such reports, information and documents by the Company to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on certificates of officers. -50- ARTICLE ELEVEN CONSOLIDATION, MERGER, CONVEYANCE OR OTHER TRANSFER SECTION 1101. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not consolidate with or merge into any other corporation, or convey or otherwise transfer or lease its properties and assets substantially as an entirety to any Person, unless (a) the corporation 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 Person organized and validly existing under the laws of the United States, any State thereof 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, if any, on all Outstanding Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed; (b) 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 occurred and be continuing; and (c) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, or other transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transactions have been complied with. SECTION 1102. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation by the Company with or merger by the Company into any other corporation or any conveyance, or other transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 1101, the successor corporation formed by such consolidation or into which the Company is merged or the Person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities Outstanding hereunder. -51- ARTICLE TWELVE SUPPLEMENTAL INDENTURES SECTION 1201. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company 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: (a) 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, all as provided in Article Eleven; or (b) to add one or more covenants of the Company or other provisions for the benefit of all Holders or for the benefit of the Holders of, or to remain in effect only so long as there shall be Outstanding, Securities of one or more specified series, or to surrender any right or power herein conferred upon the Company; or (c) to add any additional Events of Default with respect to all or any series of Securities Outstanding hereunder; or (d) to change or eliminate any provision of this Indenture or to add any new provision to this Indenture; provided, however, that if such change, elimination or addition shall adversely affect the interests of the Holders of Securities of any series Outstanding on the date of such indenture supplemental hereto in any material respect, such change, elimination or addition shall become effective with respect to such series only pursuant to the provisions of Section 1202 hereof or when no Security of such series remains Outstanding; or (e) to provide collateral security for all but not part of the Securities; or (f) to establish the form or terms of Securities of any series as contemplated by Sections 201 and 301; or (g) to provide for the authentication and delivery of bearer securities and coupons appertaining thereto representing interest, if any, thereon and for the procedures for the registration, exchange and replacement thereof and for the giving of notice to, and the solicitation of the vote or consent of, the holders thereof, and for any and all other matters incidental thereto; or (h) to evidence and provide for the acceptance of appointment hereunder by a separate or successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 911(b); or -52- (i) to provide for the procedures required to permit the Company to utilize, at its option, a noncertificated system of registration for all, or any series of, the Securities; or (j) to change any place or places where (i) the principal of and premium, if any, and interest, if any, on all or any series of Securities shall be payable, (ii) all or any series of Securities may be surrendered for registration of transfer, (iii) all or any series of Securities may be surrendered for exchange and (iv) notices and demands to or upon the Company in respect of all or any series of Securities and this Indenture may be served; or (k) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other changes to the provisions hereof or to add other provisions with respect to matters or questions arising under this Indenture, provided that such other changes or additions shall not adversely affect the interests of the Holders of Securities of any series in any material respect. Without limiting the generality of the foregoing, if the Trust Indenture Act as in effect at the date of the execution and delivery of this Indenture or at any time thereafter shall be amended and (x) if any such amendment shall require one or more changes to any provisions hereof or the inclusion herein of any additional provisions, or shall by operation of law be deemed to effect such changes or incorporate such provisions by reference or otherwise, this Indenture shall be deemed to have been amended so as to conform to such amendment to the Trust Indenture Act, and the Company and the Trustee may, without the consent of any Holders, enter into an indenture supplemental hereto to effect or evidence such changes or additional provisions; or (y) if any such amendment shall permit one or more changes to, or the elimination of, any provisions hereof which, at the date of the execution and delivery hereof or at any time thereafter, are required by the Trust Indenture Act to be contained herein, this Indenture shall be deemed to have been amended to effect such changes or elimination, and the Company and the Trustee may, without the consent of any Holders, enter into an indenture supplemental hereto to evidence such amendment hereof. SECTION 1202. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under this Indenture, considered as one class, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or modifying in any manner the rights of the Holders of Securities of such series under the Indenture; provided, however, -53- that if there shall be Securities of more than one series Outstanding hereunder and if a proposed supplemental indenture shall directly affect the rights of the Holders of Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that no such supplemental indenture shall: (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on (except as provided in Section 311 hereof), any Security, or reduce the principal amount thereof or the rate of interest thereon (or the amount of any installment of interest thereon) or change the method of calculating such rate or reduce any premium payable upon the redemption thereof, or change the coin or currency (or other property), in which any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity of any Security (or, in the case of redemption, on or after the Redemption Date), without, in any such case, the consent of the Holder of such Security, or (b) reduce the percentage in principal amount of the Outstanding Securities of any series (or, if applicable, in liquidation preference of any series of Preferred Securities), the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with any provision of this Indenture or of any default hereunder and its consequences, or reduce the requirements of Section 1304 for quorum or voting, without, in any such case, the consent of the Holders of each Outstanding Security of such series, or (c) modify any of the provisions of this Section, Section 607 or Section 813 with respect to the Securities of any series, except to increase the percentages in principal amount referred to in this Section or such other Sections or to provide that other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Sections 911(b) and 1201(h). Notwithstanding the foregoing, so long as any of the Preferred Securities remain outstanding, the Trustee may not consent to a supplemental indenture under this Section 1202 without the prior consent, obtained as provided in a Trust Agreement pertaining to a Trust which issued such Preferred Securities, of the holders of not less than a majority in aggregate liquidation preference of all Preferred Securities issued by such Trust affected, considered as one class, or, in the case of changes described in clauses (a), (b) and (c) above, 100% in aggregate liquidation preference of all such Preferred Securities then outstanding which would be affected thereby, considered as one class. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be -54- deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. A waiver by a Holder of such Holder's right to consent under this Section shall be deemed to be a consent of such Holder. SECTION 1203. 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 901) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise. SECTION 1204. 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. Any supplemental indenture permitted by this Article may restate this Indenture in its entirety, and, upon the execution and delivery thereof, any such restatement shall supersede this Indenture as theretofore in effect for all purposes. SECTION 1205. 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 1206. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 1207. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE. If the terms of any particular series of Securities shall have been established in a Board Resolution or an Officer's Certificate as contemplated by Section 301, and not in an indenture supplemental hereto, additions to, changes in or the elimination of any of such -55- terms may be effected by means of a supplemental Board Resolution or Officer's Certificate, as the case may be, delivered to, and accepted in writing by, the Trustee; provided, however, that such supplemental Board Resolution or Officer's Certificate shall not be accepted by the Trustee or otherwise be effective unless all conditions set forth in this Indenture which would be required to be satisfied if such additions, changes or elimination were contained in a supplemental indenture shall have been appropriately satisfied. Upon the acceptance thereof by the Trustee, any such supplemental Board Resolution or Officer's Certificate shall be deemed to be a "supplemental indenture" for purposes of Section 1204 and 1206. ARTICLE THIRTEEN MEETINGS OF HOLDERS; ACTION WITHOUT MEETING SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of Holders of Securities of one or more, or all, series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series. SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS. (a) The Trustee may at any time call a meeting of Holders of Securities of one or more, or all, series for any purpose specified in Section 1301, to be held at such time and at such place in the Borough of Manhattan, The City of New York, as the Trustee shall determine, or, with the approval of the Company, at any other place. Notice of every such meeting, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting. (b) If the Trustee shall have been requested to call a meeting of the Holders of Securities of one or more, or all, series by the Company or by the Holders of 33% in aggregate principal amount of all of such series, considered as one class, for any purpose specified in Section 1301, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have given the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, or in such other place as shall be determined or approved by the Company, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section. (c) Any meeting of Holders of Securities of one or more, or all, series shall be valid without notice if the Holders of all Outstanding Securities of such series are present in person or by proxy and if representatives of the Company and the Trustee -56- are present, or if notice is waived in writing before or after the meeting by the Holders of all Outstanding Securities of such series, or by such of them as are not present at the meeting in person or by proxy, and by the Company and the Trustee. SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS. To be entitled to vote at any meeting of Holders of Securities of one or more, or all, series a Person shall be (a) a Holder of one or more Outstanding Securities of such series, or (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to attend any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 1304. QUORUM; ACTION. The Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of the series with respect to which a meeting shall have been called as hereinbefore provided, considered as one class, shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting which this Indenture expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of such series, considered as one class, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series, considered as one class, shall constitute a quorum. In the absence of a quorum within one hour of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for such period as may be determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Except as provided by Section 1305(e), notice of the reconvening of any meeting adjourned for more than 30 days shall be given as provided in Section 1302(a) not less than 10 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum. Except as limited by Section 1202, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted only by the affirmative vote of the Holders of a majority in aggregate principal amount of the Outstanding Securities of the series with respect to which such meeting shall have been called, considered as one class; provided, however, that, except as so limited, any resolution with respect to any action which this Indenture expressly provides may be taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of such series, considered as one class, may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of such series, considered as one class. -57- Any resolution passed or decision taken at any meeting of Holders of Securities duly held in accordance with this Section shall be binding on all the Holders of Securities of the series with respect to which such meeting shall have been held, whether or not present or represented at the meeting. SECTION 1305. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS. (a) Attendance at meetings of Holders of Securities may be in person or by proxy; and, to the extent permitted by law, any such proxy shall remain in effect and be binding upon any future Holder of the Securities with respect to which it was given unless and until specifically revoked by the Holder or future Holder of such Securities before being voted. (b) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities in regard to proof of the holding of such Securities and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof. (c) The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders as provided in Section 1302(b), in which case the Company or the Holders of Securities of the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series represented at the meeting, considered as one class. (d) At any meeting each Holder or proxy shall be entitled to one vote for each $1 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security or proxy. (e) Any meeting duly called pursuant to Section 1302 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in aggregate principal amount of the Outstanding Securities of all series represented at the meeting, considered as one class; and the meeting may be held as so adjourned without further notice. -58- SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS. The vote upon any resolution submitted to any meeting of Holders shall be by written ballots on which shall be subscribed the signatures of the Holders or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities, of the series with respect to which the meeting shall have been called, held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports of all votes cast at the meeting. A record of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1302 and, if applicable, Section 1304. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 1307. ACTION WITHOUT MEETING. In lieu of a vote of Holders at a meeting as hereinbefore contemplated in this Article, any request, demand, authorization, direction, notice, consent, waiver or other action may be made, given or taken by Holders by written instruments as provided in Section 104. ARTICLE FOURTEEN IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS SECTION 1401. LIABILITY SOLELY CORPORATE. No recourse shall be had for the payment of the principal of or premium, if any, or interest, if any, on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under this Indenture, against any incorporator, stockholder, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and under stood that this Indenture and all the Securities are solely corporate obligations, and that no personal liability whatsoever shall attach to, or be incurred by, any incorporator, stockholder, officer or director, past, present or future, of the Company or of any predecessor or successor corporation, either directly or indirectly through the Company or any predecessor or successor corporation, because of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or to be implied herefrom or therefrom, and that any such personal liability is hereby expressly -59- waived and released as a condition of, and as part of the consideration for, the execution of this Indenture and the issuance of the Securities. ARTICLE FIFTEEN SUBORDINATION OF SECURITIES SECTION 1501. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS. The Company, for itself, its successors and assigns, covenants and agrees, and each Holder of the Securities of each series, by its acceptance thereof, likewise covenants and agrees, that the payment of the principal of and premium, if any, and interest, if any, on each and all of the Securities is hereby expressly subordinated and subject to the extent and in the manner set forth in this Article, in right of payment to the prior payment in full of all Senior Indebtedness. Each Holder of the Securities of each series, by its acceptance thereof, authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article, and appoints the Trustee its attorney-in-fact for any and all such purposes. SECTION 1502. PAYMENT OVER OF PROCEEDS OF SECURITIES. In the event (a) of any insolvency or bankruptcy proceedings or any receivership, liquidation, reorganization or other similar proceedings in respect of the Company or a substantial part of its property, or of any proceedings for liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, or (b) subject to the provisions of Section 1503, that (i) a default shall have occurred with respect to the payment of principal of or interest on or other monetary amounts due and payable on any Senior Indebtedness, or (ii) there shall have occurred a default (other than a default in the payment of principal or interest or other monetary amounts due and payable) in respect of any Senior Indebtedness, as defined therein or in the instrument under which the same is outstanding, permitting the holder or holders thereof to accelerate the maturity thereof (with notice or lapse of time, or both), and such default shall have continued beyond the period of grace, if any, in respect thereof, and, in the cases of subclauses (i) and (ii) of this clause (b), such default shall not have been cured or waived or shall not have ceased to exist, or (c) that the principal of and accrued interest on the Securities of any series shall have been declared due and payable pursuant to Section 801 and such declaration shall not have been rescinded and annulled as provided in Section 802, then: (1) the holders of all Senior Indebtedness shall first be entitled to receive payment of the full amount due thereon, or provision shall be made for such payment in money or money's worth, before the Holders of any of the Securities are entitled to receive a payment on account of the principal of or interest on the indebtedness evidenced by the Securities, including, without limitation, any payments made pursuant to Articles Four and Five; -60- (2) any payment by, or distribution of assets of, the Company of any kind or character, whether in cash, property or securities, to which any Holder or the Trustee would be entitled except for the provisions of this Article, shall be paid or delivered by the person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of such Senior Indebtedness held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid after giving effect to any concurrent payment or distribution (or provision therefor) to the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of the indebtedness evidenced by the Securities or to the Trustee under this Indenture; and (3) in the event that, notwithstanding the foregoing, any payment by, or distribution of assets of, the Company of any kind or character, whether in cash, property or securities, in respect of principal of or interest on the Securities or in connection with any repurchase by the Company of the Securities, shall be received by the Trustee or any Holder before all Senior Indebtedness is paid in full, or provision is made for such payment in money or money's worth, such payment or distribution in respect of principal of or interest on the Securities or in connection with any repurchase by the Company of the Securities shall be paid over to the holders of such Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any such Senior Indebtedness may have been issued, ratably as aforesaid, for application to the payment of all Senior Indebtedness remaining unpaid until all such Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution (or provision therefor) to the holders of such Senior Indebtedness. Notwithstanding the foregoing, at any time after the 123rd day following the date of deposit of cash or Government Obligations pursuant to Section 701 (provided all conditions set out in such Section shall have been satisfied), the funds so deposited and any interest thereon will not be subject to any rights of holders of Senior Indebtedness including, without limitation, those arising under this Article Fifteen; provided that no event described in clauses (d) and (e) of Section 801 with respect to the Company has occurred during such 123-day period. For purposes of this Article only, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan or reorganization -61- or readjustment which are subordinate in right of payment to all Senior Indebtedness which may at the time be outstanding to the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article Eleven hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 1502 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Eleven hereof. Nothing in Section 1501 or in this Section 1502 shall apply to claims of, or payments to, (i) the Trustee under or pursuant to Section 907 or (ii) any Creditor under or pursuant to Section 312. SECTION 1503. DISPUTES WITH HOLDERS OF CERTAIN SENIOR INDEBTEDNESS. Any failure by the Company to make any payment on or perform any other obligation in respect of Senior Indebtedness, other than any indebtedness incurred by the Company or assumed or guaranteed, directly or indirectly, by the Company for money borrowed (or any deferral, renewal, extension or refunding thereof) or any other obligation as to which the provisions of this Section shall have been waived by the Company in the instrument or instruments by which the Company incurred, assumed, guaranteed or otherwise created such indebtedness or obligation, shall not be deemed a default under clause (b) of Section 1502 if (i) the Company shall be disputing its obligation to make such payment or perform such obligation and (ii) either (A) no final judgment relating to such dispute shall have been issued against the Company which is in full force and effect and is not subject to further review, including a judgment that has become final by reason of the expiration of the time within which a party may seek further appeal or review, or (B) in the event that a judgment that is subject to further review or appeal has been issued, the Company shall in good faith be prosecuting an appeal or other proceeding for review and a stay or execution shall have been obtained pending such appeal or review. SECTION 1504. SUBROGATION. Senior Indebtedness shall not be deemed to have been paid in full unless the holders thereof shall have received cash (or securities or other property satisfactory to such holders) in full payment of such Senior Indebtedness then outstanding. Subject to the prior payment in full of all Senior Indebtedness, the rights of the Holders of the Securities shall be subrogated to the rights of the holders of Senior Indebtedness to receive any further payments or distributions of cash, property or securities of the Company applicable to the holders of the Senior Indebtedness until all amounts owing on the Securities shall be paid in full; and such payments or distributions of cash, property or securities received by the Holders of the Securities, by reason of such subrogation, which otherwise would be paid or distributed to the holders of such Senior Indebtedness shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders, be deemed to be a payment by the Company to or on account of Senior Indebtedness, it being understood that the provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of the Senior Indebtedness, on the other hand. -62- SECTION 1505. OBLIGATION OF THE COMPANY UNCONDITIONAL. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets or securities of the Company referred to in this Article, the Trustee and the Holders shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon, and all other facts pertinent thereto or to this Article. SECTION 1506. PRIORITY OF SENIOR INDEBTEDNESS UPON MATURITY. Upon the maturity of the principal of any Senior Indebtedness by lapse of time, acceleration or otherwise, all matured principal of Senior Indebtedness and interest and premium, if any, thereon shall first be paid in full before any payment of principal or premium, if any, or interest, if any, is made upon the Securities or before any Securities can be acquired by the Company or any sinking fund payment is made with respect to the Securities (except that required sinking fund payments may be reduced by Securities acquired before such maturity of such Senior Indebtedness). SECTION 1507. TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS. The Trustee shall be entitled to all rights set forth in this Article with respect to any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness. Nothing in this Article shall deprive the Trustee of any of its rights as such holder. SECTION 1508. NOTICE TO TRUSTEE TO EFFECTUATE SUBORDINATION. Notwithstanding the provisions of this Article or any other provision of the Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of moneys to or by the Trustee unless and until the Trustee shall have received written notice thereof from the Company, from a Holder or from a holder of any Senior Indebtedness or from any representative or representatives of such holder and, prior to the receipt of any such written notice, the Trustee shall be entitled, subject to Section 901, in all respects to assume that no such facts exist; provided, however, that, if -63- prior to the fifth Business Day preceding the date upon which by the terms hereof any such moneys may become payable for any purpose, or in the event of the execution of an instrument pursuant to Section 702 acknowledging satisfaction and discharge of this Indenture, then if prior to the second Business Day preceding the date of such execution, the Trustee shall not have received with respect to such moneys the notice provided for in this Section, then, anything herein contained to the contrary notwithstanding, the Trustee may, in its discretion, receive such moneys and/or 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 on or after such date; provided, however, that no such application shall affect the obligations under this Article of the persons receiving such moneys from the Trustee. SECTION 1509. MODIFICATION, EXTENSION, ETC. OF SENIOR INDEBTEDNESS. The holders of Senior Indebtedness may, without affecting in any manner the subordination of the payment of the principal of and premium, if any, and interest, if any, on the Securities, at any time or from time to time and in their absolute discretion, agree with the Company to change the manner, place or terms of payment, change or extend the time of payment of, or renew or alter, any Senior Indebtedness, or amend or supplement any instrument pursuant to which any Senior Indebtedness is issued, or exercise or refrain from exercising any other of their rights under the Senior Indebtedness including, without limitation, the waiver of default thereunder, all without notice to or assent from the Holders or the Trustee. SECTION 1510. TRUSTEE HAS NO FIDUCIARY DUTY TO HOLDERS OF SENIOR INDEBTEDNESS. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and objectives as are specifically set forth in this Indenture, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be liable to any such holders if it shall mistakenly pay over or deliver to the Holders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. SECTION 1511. PAYING AGENTS OTHER THAN THE TRUSTEE. 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 shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Sections 1507, 1508 and 1510 shall not apply to the Company if it acts as Paying Agent. -64- SECTION 1512. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT IMPAIRED. No right of any present or future holder of Senior Indebtedness to enforce the subordination herein shall at any time or in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. SECTION 1513. EFFECT OF SUBORDINATION PROVISIONS; TERMINATION. Notwithstanding anything contained herein to the contrary, other than as provided in the immediately succeeding sentence, all the provisions of this Indenture shall be subject to the provisions of this Article, so far as the same may be applicable thereto. Notwithstanding anything contained herein to the contrary, the provisions of this Article Fifteen shall be of no further effect, and the Securities shall no longer be subordinated in right of payment to the prior payment of Senior Indebtedness, if the Company shall have delivered to the Trustee a notice to such effect. Any such notice delivered by the Company shall not be deemed to be a supplemental indenture for purposes of Article Twelve. _________________________ 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. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. ATLANTIC CITY ELECTRIC COMPANY By:________________________________________ Senior Vice President and Chief Financial Officer THE BANK OF NEW YORK, Trustee By:__________________________________________ -65- EX-4.(D) 6 FORM OF GUARANTEE AGREEMENT Exhibit 4-D GUARANTEE AGREEMENT Between Atlantic City Electric Company (as Guarantor) and The Bank of New York (as Trustee) dated as of October 1, 1998 CROSS-REFERENCE TABLE ---------------------
Section of Section of Trust Indenture Act Guarantee of 1939, as amended Agreement - ------------------- --------- 310(a).......................................................... 4.01(a) 310(b).......................................................... 4.01(c), 2.08 310(c).......................................................... Inapplicable 311(a).......................................................... 2.02(b) 311(b).......................................................... 2.02(b) 311(c).......................................................... Inapplicable 312(a).......................................................... 2.02(a) 312(b).......................................................... 2.02(b) 313............................................................. 2.03 314(a).......................................................... 2.04 314(b).......................................................... Inapplicable 314(c).......................................................... 2.05 314(d).......................................................... Inapplicable 314(e).......................................................... 1.01, 2.05, 3.02 314(f).......................................................... 2.01, 3.02 315(a).......................................................... 3.01(c) 315(b).......................................................... 2.07 315(c).......................................................... 3.01 315(d).......................................................... 3.01(c) 316(a).......................................................... 5.04(a), 2.06 316(b).......................................................... 5.03 316(c).......................................................... 2.02 317(a).......................................................... Inapplicable 317(b).......................................................... Inapplicable 318(a).......................................................... 2.01(b) 318(b).......................................................... 2.01 318(c).......................................................... 2.01(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................................. 1 SECTION 1.01 Definitions..................................................... 1 ARTICLE II TRUST INDENTURE ACT.............................. 3 SECTION 2.01 Conflict with Trust Indenture Act............................... 3 SECTION 2.02 Lists of Holders of Preferred Securities........................ 3 SECTION 2.03 Reports by the Guarantee Trustee................................ 4 SECTION 2.04 Periodic Reports to Guarantee Trustee........................... 4 SECTION 2.05 Evidence of Compliance with Conditions Precedent................ 4 SECTION 2.06 Events of Default; Waiver....................................... 4 SECTION 2.07 Event of Default; Notice........................................ 4 ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE................. 5 SECTION 3.01 Powers and Duties of the Guarantee Trustee...................... 5 SECTION 3.02 Certain Rights of Guarantee Trustee............................. 6 SECTION 3.03 Not Responsible for Recitals or Issuance of Guarantee........... 8 ARTICLE IV GUARANTEE TRUSTEE............................... 9 SECTION 4.01 Guarantee Trustee; Eligibility.................................. 9 SECTION 4.02 Compensation and Reimbursement.................................. 10 SECTION 4.03 Appointment, Removal and Resignation of Guarantee Trustee...................................................... 10 ARTICLE V GUARANTEE.................................. 11 SECTION 5.01 Guarantee....................................................... 11
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Page ---- SECTION 5.02 Waiver of Notice and Demand.................................... 11 SECTION 5.03 Obligations Not Affected....................................... 11 SECTION 5.04 Rights of Holders.............................................. 12 SECTION 5.05 Guarantee of Payment........................................... 13 SECTION 5.06 Subrogation.................................................... 13 SECTION 5.07 Independent Obligations........................................ 13 ARTICLE VI SUBORDINATION............................... 13 SECTION 6.01 Subordination.................................................. 13 ARTICLE VII TERMINATION................................ 13 SECTION 7.01 Termination.................................................... 13 ARTICLE VIII MISCELLANEOUS............................... 14 SECTION 8.01 Successors and Assigns......................................... 14 SECTION 8.02 Amendments..................................................... 14 SECTION 8.03 Notices........................................................ 14 SECTION 8.04 Benefit........................................................ 15 SECTION 8.05 Interpretation................................................. 15 SECTION 8.06 Governing Law.................................................. 16
ii GUARANTEE AGREEMENT This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of October 1, 1998, 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, 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 II, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust Agreement"), dated as of October 1, 1998, between the Company, as Depositor, the Trustees of the Issuer named therein and the several Holders, as defined therein, the Issuer is issuing as of the date hereof $50,000,000 aggregate liquidation amount of its % Trust Preferred Capital Securities (the "Preferred Securities") and $1,546,400 aggregate liquidation amount of its Common Securities (the "Common Securities" and, together with the Preferred Securities, the "Securities") representing undivided beneficial ownership interests in the Issuer and having the terms set forth in the Trust Agreement; WHEREAS, the Preferred Securities are to be issued for sale by the Issuer and the proceeds, together with the proceeds from the sale of the Common Securities of the Issuer, are to be invested in $30,927,850 principal amount of Debentures (as defined in the Trust Agreement); and WHEREAS, as incentive for the Holders to purchase the Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders 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 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. ARTICLE I DEFINITIONS SECTION 1.01 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. "Event of Default" means a default by the Guarantor on any of its payment obligations under this Guarantee Agreement. "Guarantee Payments" shall mean the following payments or distributions, without duplication, with respect to the Securities, to the extent not paid or made by or on behalf of the Issuer: (a) any accumulated and unpaid Distributions that are required to be paid on such Securities but only if and to the extent that the Property Trustee has available in the Payment Account funds sufficient to make such payment, (b) the Redemption Price with respect to the Securities called for redemption by the Issuer but only if and to the extent that the Property Trustee has available in the Payment Account funds sufficient to make such payment, (c) upon a voluntary or involuntary dissolution, winding- up or termination of the Issuer (unless the Debentures are distributed to the Holders of such Securities), the lesser of (i) the aggregate of the Liquidation Amount and all accumulated and unpaid Distributions on the Securities to the date of payment, and (ii) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (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" shall mean any Person in whose name any Securities are registered in the Securities Registrar; 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 or any Affiliate of the Guarantor. "Indenture" means the Indenture dated as of October 1, 1998, between the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee, pursuant to which the Debentures are issued. "Officer's Certificate" means a certificate signed by the Chairman of the Board, the President, a Vice President, the Treasurer or an Assistant Treasurer of the Guarantor, and delivered to the Guarantee Trustee. Any Officer's Certificate or Opinion of Counsel delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that the officer signing such Officer's Certificate or the counsel rendering such Opinion of Counsel 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 such officer or such counsel in rendering the Officer's Certificate or the Opinion of Counsel; -2- (c) a statement that such officer or counsel has made such examination or investigation as, in such officer's or such counsel's opinion, is necessary to enable such officer or counsel 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 such officer or counsel, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Guarantor or an Affiliate of the Guarantor, or an employee thereof, who shall be acceptable to the Guarantee Trustee. "Responsible Officer" means, with respect to the Guarantee Trustee, any officer of the Guarantee Trustee assigned by the Guarantee Trustee to administer its corporate trust matters. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01. ARTICLE II TRUST INDENTURE ACT SECTION 2.01 CONFLICT WITH TRUST INDENTURE ACT. If any provision of this Guarantee Agreement limits, qualifies or conflicts with another provision hereof which is required or deemed to be included in this Guarantee Agreement by, or is otherwise governed by, any of the provisions of the Trust Indenture Act, such other provision shall control; and if any provision hereof otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall control. SECTION 2.02 LISTS OF HOLDERS OF PREFERRED SECURITIES. (a) Semiannually, not later than January 15 and July 15 in each year, commencing January 15, 1999, and at such other times as the Guarantee Trustee may request in writing, the Guarantor shall furnish or cause to be furnished to the Guarantee Trustee information as to the names and addresses of the Holders, and the Guarantee Trustee shall preserve such information and similar information received by it in any other capacity and afford to the Holders access to information received by it in any other capacity and afford to the Holders access to information so preserved by it, all to such extent, if any, and in such manner as shall be required by the Trust Indenture Act. -3- (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 such Act) and Section 312(b) of the Trust Indenture Act. SECTION 2.03 REPORTS BY THE GUARANTEE TRUSTEE. Not later than 60 days after July 1 of each year, commencing July 1, 1999, the Guarantee Trustee shall provide to 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. SECTION 2.04 PERIODIC REPORTS TO GUARANTEE TRUSTEE. The Guarantor shall provide to the Guarantee Trustee, the Commission and the Holders such documents, reports, compliance certificates and information as may be required by Section 314 of the Trust Indenture Act to be provided by the Guarantor Trustee to such Persons in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. The Guarantor shall provide to the Guarantee Trustee the compliance certificate required by Section 314(a)(4) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314(a)(4) of the Trust Indenture Act. SECTION 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent provided for in this Guarantee Agreement as and to the extent required by Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act may be given in the form of an Officer's Certificate. SECTION 2.06 EVENTS OF DEFAULT; WAIVER. The Holders of a majority in liquidation amount of Outstanding 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 thereon. SECTION 2.07 EVENT OF DEFAULT; NOTICE. (a) The Guarantee Trustee shall give notice of any Event of Default hereunder to the Holders in the manner and to the extent required to do so by the Trust Indenture Act, unless such Event of Default shall have been cured or waived. (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 of such Event of Default. -4- ARTICLE III POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.01 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 or any rights hereunder to any Person except a Holder exercising his or her rights pursuant to Section 5.04 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 vest automatically in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) The Guarantee Trustee, prior to the occurrence of any Event of Default and after the curing or waiving 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 or obligations 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 2.06), and is actually known to a Responsible Officer of the Guarantee Trustee, 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. (c) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement and no implied covenants or obligations shall be read into this Guarantee Agreement against the Guarantee Trustee; and -5- (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; provided, however, that in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the 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 or such Responsible Officer 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 a majority in liquidation amount 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; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly provided, every provision of this Guarantee Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of Sections 3.01(b) and 3.01(c). SECTION 3.02 CERTAIN RIGHTS OF GUARANTEE TRUSTEE. (a) Subject to the provisions of Section 3.01: (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, -6- 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 Officer's Certificate; (iii) whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting 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 Officer's Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor; (iv) the Guarantee Trustee may consult with counsel of its choice, and the advice of such counsel or any Opinion of Counsel of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees; the Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (v) the Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 3.02(a)(v) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation under the last sentence of Section 3.01(b) hereof to exercise the rights and powers vested in it by this Guarantee Agreement; (vi) 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 reasonably believed by it to be genuine, but the Guarantee Trustee, -7- in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (vii) the Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder; (viii) 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 of a majority in liquidation amount of the Preferred Securities, (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; (ix) the Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any tax or securities form) (or any rerecording, refiling or reregistration thereof); and (x) the Guarantee 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 powers conferred upon it by this Guarantee. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty. SECTION 3.03 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee Agreement shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee Agreement. -8- ARTICLE IV GUARANTEE TRUSTEE SECTION 4.01 GUARANTEE TRUSTEE; ELIGIBILITY. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.01(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.01(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.03(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. For the purposes of Section 310(b)(1) of the Trust Indenture Act and to the extent permitted thereby, the Guarantee Trustee, in its capacity as trustee in respect of the Securities of any series shall not be deemed to have a conflicting interest arising from its capacity as trustee in respect of Securities of any other series, or as trustee under the Junior Subordinated Indenture dated as of October 1, 1996, the Amended and Restated Trust Agreement dated as of October 1, 1996, the Guarantee Agreement dated as of October 1, 1996 relating to the Company's 8.25% Junior Subordinated Deferrable Interest Debentures, the Trust Agreement and the Indenture. -9- SECTION 4.02 COMPENSATION AND REIMBURSEMENT. The Guarantor agrees: (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 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 Agreement (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 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 4.03 APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE. (a) Subject to Section 4.03(b), unless an Event of Default shall have occurred and be continuing, the Guarantee Trustee may be 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. -10- (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.03 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. (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 8.03 hereof. Each notice shall include the name of the successor Guarantee Trustee and the address of its Corporate Trust Office. ARTICLE V GUARANTEE SECTION 5.01 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 5.02 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the 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 5.03 OBLIGATIONS NOT AFFECTED. The obligation of the Guarantor to make the Guarantee Payments 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: -11- (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 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, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the 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 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 5.03 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Guarantee Trustee or the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.04 RIGHTS OF HOLDERS. The Guarantor expressly acknowledges that: (a) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (b) 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; (c) the Holders of a majority in liquidation amount of the Outstanding 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 (d) any Holder may institute a legal proceeding directly against the Guarantor -12- to enforce its rights under this Guarantee Agreement without first instituting a legal proceeding against the Issuer, the Guarantee Trustee, or any other person or entity. SECTION 5.05 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). SECTION 5.06 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; 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 of Guarantee Payments 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 5.07 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the 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 5.03. ARTICLE VI SUBORDINATION SECTION 6.01 SUBORDINATION. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all Senior Indebtedness of the Guarantor. Nothing in this Section 6.01 shall apply to claims of, or payments to, the Guarantee Trustee under or pursuant to Section 4.02. If an Event of Default has occurred and is continuing under the Trust Agreement, the rights of the holders of the Common Securities to receive Guarantee Payments hereunder shall be subordinated to the rights of the Holders of the Preferred Securities to receive Guarantee Payments under this Guarantee. -13- ARTICLE VII TERMINATION SECTION 7.01 TERMINATION. Subject to Section 4.02 hereof, this Guarantee Agreement shall terminate and be of no further force and effect upon: (a) full payment of the Redemption Price of all Securities, (b) the distribution of Debentures to Holders in exchange for all of the Securities or (c) 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 the Securities or under this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.01 SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article Eleven of the Indenture, the Guarantor shall not assign its obligations hereunder. SECTION 8.02 AMENDMENTS. This Guarantee Agreement may be amended only by an instrument in writing entered into by the Guarantor and the Guarantee Trustee. Except with respect to any changes which do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior written approval of the Holders of not less than 66 2/3% of the aggregate liquidation amount of all of the outstanding Securities. The provisions of Article VI of the Trust Agreement concerning meetings of Holders shall apply to the giving of such approval. Nothing herein contained shall be deemed to require that the Guarantee Trustee enter into any amendment of this Guarantee Agreement. SECTION 8.03 NOTICES. 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 as the Guarantor may give notice of to the Guarantee Trustee and the Holders of the Preferred Securities: -14- Atlantic City Electric Company 800 King Street Wilmington, DE 19899 Facsimile No: (302) 429-3367 Attention: Treasurer (b) if given to the Issuer, in care of the Administrative Trustees, at the Issuer's (and the Administrative Trustees') address set forth below or such other address as the Administrative Trustees on behalf of the Issuer may give notice of to the Guarantee Trustee and the Holders: Atlantic Capital II c/o Treasury Department, Atlantic City Electric Company 800 King Street Wilmington, DE 19899 Facsimile No: (302) 429-3367 Attention: Administrative Trustees (c) if given to the Guarantee Trustee, to the address set forth below or such other address as the Guarantee Trustee may give notice of to the Guarantor and the Holders of the Preferred Securities: The Bank of New York 101 Barclay Street - 21W New York, New York 10286 Facsimile No: (212) 815-5915 Attention: Corporate Trust Administration (d) if given to any Holder, at the address set forth on the Securities Register. 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 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 8.04 BENEFIT. This Guarantee Agreement is solely for the benefit of the Holders and, subject to Section 3.01(a), is not separately transferable from the Preferred Securities. SECTION 8.05 INTERPRETATION. In this Guarantee Agreement, unless the context otherwise requires: -15- (a) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (b) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (c) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (d) 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; (e) a reference to the singular includes the plural and vice versa; and (f) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 8.06 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 laws 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. -16- THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. Atlantic City Electric Company By: __________________________________ Name: Barbara S. Graham Title: Senior Vice President and Chief Financial Officer The Bank of New York, as Guarantee Trustee By: __________________________________ Name: Title: -17- EX-4.(E) 7 FORM OF OFFICER'S CERTIFICATE Exhibit 4-E ATLANTIC CITY ELECTRIC COMPANY OFFICER'S CERTIFICATE Barbara S. Graham , the Senior Vice President and Chief Financial Officer of Atlantic City Electric Company (the "Company"), pursuant to the authority granted in the Board Resolutions of the Company dated _____________, 1998, and Sections 201 and 301 of the Indenture defined herein, does hereby certify to The Bank of New York (the "Trustee"), as Trustee under the Indenture of the Company (For Unsecured Subordinated Debt Securities relating to Trust Securities) dated as of October 1, 1998 (the "Indenture") that: 1. The securities of the first series to be issued under the Indenture shall be designated "_____% Junior Subordinated Debentures, Series I, Due 2028" (the "Debentures of the First Series"). The Debentures of the First Series are to be issued to The Bank of New York, as Property Trustee (the "Property Trustee") of Atlantic Capital II, a Delaware statutory business trust (the "Trust"); 2. The Debentures of the First Series shall be limited in aggregate principal amount to $30,927,850 at any time Outstanding, except as contemplated in Section 301(b) of the Indenture; 3. The Debentures of the First Series shall mature and the principal shall be due and payable together with all accrued and unpaid interest thereon on ___________, 2028; 4. The Debentures of the First Series shall bear interest from, and including, the date of original issuance, at the rate of _____% per annum 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, 1998. The amount of interest payable for any such period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a full month, on the basis of the actual number of days elapsed in such period. Interest on the Debentures of the First Series will accrue from, and including, the date of original issuance and will accrue to, and including, the first Interest Payment Date, and for each subsequent Interest Payment Date will accrue from, and excluding, the last Interest Payment Date through which interest has been paid or duly provided for to, and including, such Interest Payment Date. The amount of interest payable in respect of the Debentures of the First Series on December 31, 1998 will be computed on the basis of ___ days in a 360-day year. In the event that any Interest Payment Date 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, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such Interest Payment Date; -1- 5. Each installment of interest on a Debenture of the First Series shall be payable to the Person in whose name such Debenture of the First Series is registered in the Securities Register on the close of business on the fifteenth day (whether or not a Business Day) preceding the corresponding Interest Payment Date (the "Regular Record Date") for the Debentures of the First Series; provided, however, that if the Debentures of the First Series are held neither by the Property Trustee of the Trust nor by a securities depositary, the Company shall have the right to change the Regular Record Date by one or more Officer's Certificates. Any installment of interest on the Debentures of the First Series not punctually paid or duly provided for shall forthwith cease to be payable to the Holders of such Debentures of the First Series on such Regular Record Date, and may be paid to the Persons in whose name the Debentures of the First Series are registered in the Securities Register on the close of business on a Special Record Date to be fixed by the Trustee for the payment of such Defaulted Interest, notice of which Defaulted Interest and Special Record Date shall be given to the Holders of the Debentures of the First Series not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures of the First Series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture; 6. The principal and each installment of interest on the Debentures of the First Series shall be payable at, and registration and registration of transfers and exchanges in respect of the Debentures of the First Series may be effected at, the office or agency of the Company in The City of New York; provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto under the Indenture as such addresses appear in the Securities Register. Notices and demands to or upon the Company in respect of the Debentures of the First Series may be served at such office or agency of the Company in The City of New York. The Corporate Trust Office of the Trustee will initially be the agency of the Company for such service of notices and demands and the Company hereby appoint the Trustee for such service; provided, however, that the Company reserves the right to change, by one or more Officer's Certificates any such office or agency or such agent. The Company will be the Security Registrar and the Paying Agent for the Debentures of the First Series; 7. The Debentures of the First Series will be redeemable on or after _________, 2003, at the option of the Company, at any time and from time to time, in whole or in part, at a redemption price equal to 100% of the principal amount of the Debentures of the First Series being redeemed, together with accrued interest, if any, to the redemption date, upon not less than 30 nor more than 60 days' notice given as provided in the Indenture. The Debentures of the First Series will also be redeemable at any time at the option of the Company upon the occurrence and during the continuation of a Tax Event or an Investment Company Event in whole but not in part, at a redemption price equal to 100% of the principal amount of the Debentures of the First Series then Outstanding -2- plus any accrued and unpaid interest, if any, to the redemption date, upon not less than 30 nor more than 60 days' notice given as provided in the Indenture. "Tax Event" means the receipt by the Trust of an opinion of counsel (which may be counsel to the Company or an affiliate but not an employee thereof and which must be acceptable to the Property Trustee under the Trust Agreement) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any administrative pronouncement, action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of issuance of the ____% Trust Preferred Capital Securities of the Trust (the "Preferred Securities"), there is more than an insubstantial risk that at such time or within 90 days thereof (i) the Trust is, or will be, subject to United States federal income tax with respect to income received or accrued on the Debentures of the First Series, (ii) interest payable by the Company on the Debentures of the First Series, is not, or will not be fully deductible for United States federal income tax purposes, or (iii) the Trust is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means 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 to the effect that the Trust 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 law becomes effective on or after the date of original issuance of the Preferred Securities; The Debentures of the First Series will also be redeemable, in whole but not in part, at the option of the Company upon the termination and liquidation of the Trust pursuant to an order for the dissolution, termination or liquidation of the Trust entered by a court of competent jurisdiction at a redemption price equal to 100% of the principal amount of the Debentures of the First Series then Outstanding plus any accrued and unpaid interest, to the redemption date; The Company may not redeem less than all the Debentures of the First Series Outstanding unless all accrued and unpaid interest has been paid in full or duly provided for on all Debentures of the First Series Outstanding under the Indenture for all quarterly interest periods terminating on or prior to the date of redemption; Any notice of redemption given with respect to the Debentures of the First Series shall be unconditional; 8. Pursuant to Section 311 of the Indenture, the Company shall have the right, at any time and from time to time during the term of the Debentures of the First Series, to extend the interest payment period to a period not exceeding 20 consecutive quarters (an "Extension Period") provided that no Extension Period shall extend beyond the Stated Maturity of principal of the Debentures of the First Series. Prior to the end of an Extension Period, the Company may, and at the end of the Extension Period the -3- Company shall, pay all interest accrued and unpaid (together with interest thereon at the rate specified for the Debentures of the First Series, compounded quarterly, to the extent permitted by applicable law). During any such Extension Period, the Company shall not (i) declare or pay any dividend or distribution on (other than a dividend or distribution paid in shares of common stock of the Company), or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, or (ii) make any payment of principal, interest or premium, if any, on or repay, repurchase or redeem any indebtedness that is pari passu with the Debentures of the First Series (including other Securities issued under the Indenture), or make any guarantee payments with respect to the foregoing. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters at any one time or extend beyond the Stated Maturity of the Debentures of the First Series. Upon the termination of any such Extension Period and the payment of all amounts then due, the Company may select 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 will give the Trust or other Holders and the Trustee notice of its election of an Extension Period prior to the earlier of (i) one Business Day prior to the record date for the interest payment which would occur but for such election or (ii) the date the Company is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization of the record date; 9. In the event that, at any time subsequent to the initial authentication and delivery of the Debentures of the First Series, the Debentures of the First Series are to be held by a securities depositary, the Company may at such time establish the matters contemplated in clause (r) in the second paragraph of Section 301 of the Indenture in an Officer's Certificate supplemental to this Certificate; 10. No service charge shall be made for the registration of transfer or exchange of the Debentures of the First Series; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the exchange or transfer; 11. The Debentures of the First Series shall have such other terms and provisions as are provided in the form thereof set forth in Exhibit A hereto, and shall be issued in substantially such form; 12. In the event that the Debentures of the First Series are distributed to holders of the Preferred Securities as a result of the occurrence of (i) a Tax Event or (ii) an Investment Company Event, the Company will use its best efforts to list the Debentures of the First Series on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed; -4- 13. The undersigned has read all of the covenants and conditions contained in the Indenture relating to the issuance of the Debentures of the First Series and in respect of which this certificate is made and the definitions in the Indenture relating thereto; 14. The statements contained in this certificate are based upon the familiarity of the undersigned with the Indenture, the documents accompanying this certificate, and upon discussions by the undersigned with officers and employees of the Company familiar with the matters set forth herein; 15. In the opinion of the undersigned, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion whether or not such covenants and conditions have been complied with; and 16. In the opinion of the undersigned, such conditions and covenants and conditions precedent, if any (including any covenants compliance with which constitutes a condition precedent) to the authentication and delivery of the Debentures of the First Series requested in the accompanying Company Order have been complied with. All capitalized terms used in this certificate which are not defined herein but are defined in the Indenture shall have the meanings set forth in the Indenture. -5- IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate this ____ day of October, 1998. ________________________________________ B.S. Graham, Senior Vice President and Chief Financial Officer -6- Exhibit A NO. R-1 ATLANTIC CITY ELECTRIC COMPANY _____% JUNIOR SUBORDINATED DEBENTURES, SERIES I, DUE 2028 ATLANTIC CITY ELECTRIC COMPANY, a corporation duly organized and existing under the laws of the State of New Jersey (herein referred to as the "Company," which term includes any successor Person under the Indenture), for value received, hereby promises to pay to Atlantic Capital II, or registered assigns, the principal sum of _____________________________ Dollars on ______________, 2028 and to pay interest on said principal sum, from and including, _________, 1998 or from, and excluding, the most recent Interest Payment Date through which interest has been paid or duly provided for, quarterly on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1998 at the rate of _____% per annum until the principal hereof is paid or made available for payment. 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. Interest on the Securities of this series will accrue from, and including, _________, 1998 to and including the first Interest Payment Date, and thereafter will accrue, from, and excluding, the last Interest Payment Date through which interest has been paid or duly provided for. In the event that any Interest Payment Date 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, 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. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the Business Day 15 days preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will 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 of Securities of this series 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 of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture referred to on the reverse hereof. 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, the State of New York in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, at the option of the Company, interest on this Security may be paid by check mailed to the address of the person entitled thereto, as such address shall appear on the Security Register. 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. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. ATLANTIC CITY ELECTRIC COMPANY By: ____________________________________ ATTEST: _____________________________________ CERTIFICATE OF AUTHENTICATION Dated: ___________________ This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee By: ____________________________________ Authorized Signatory -2- REVERSE OF JUNIOR SUBORDINATED DEBENTURE This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of October 1, 1998 (herein, together with any amendments thereto, called the "Indenture," which term shall have the meaning assigned to it in such instrument), between the Company and The Bank of New York, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture, including the Board Resolutions and Officer's Certificate filed with the Trustee on _________, 1998, creating the series designated on the face hereof, for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $__________. The Securities of this series are subject to redemption upon not less than 30 nor more than 60 days' notice by mail, at any time on or after _________, 2003 as a whole or in part, at the election of the Company, at a Redemption Price equal to 100% of the principal amount, together in the case of any such redemption with accrued and unpaid interest to, but not including, the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holder of such Security, or one or more Predecessor Securities, of record at the close of business on the related Regular Record Date referred to on the face hereof, all as provided in the Indenture. The Securities of this series also will be redeemable at the option of the Company if a Tax Event or an Investment Company Event shall occur and be continuing, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Securities of this series then Outstanding plus any accrued and unpaid interest, to the redemption date, upon not less than 30 nor more than 60 days' notice given as provided in the Indenture. "Tax Event" means the receipt by Atlantic Capital II, a Delaware statutory business trust (the "Trust") of an opinion of counsel (which may be counsel to the Company or an affiliate but not an employee thereof and which must be acceptable to the Property Trustee under the Trust Agreement) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of issuance of the _____% Trust Preferred Capital Securities of the Trust (the "Preferred Securities"), there is more than an insubstantial risk that at such time or within 90 days thereof (i) the Trust is, or will be, 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 will not be, fully deductible for United States federal income tax purposes, or (iii) the Trust is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means the occurrence of a change in law or regulation or a change in interpretation or application of law or -3- regulation by any legislative body, court, governmental agency or regulatory authority to the effect that the Trust 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 law becomes effective on or after the date of original issuance of the Preferred Securities. The Securities of this series also will be redeemable, in whole but not in part, at the option of the Company upon the termination and liquidation of the Trust pursuant to an order for the dissolution, termination or liquidation of the Trust entered by a court of competent jurisdiction at a redemption price equal to 100% of the principal amount of the Securities of this series then Outstanding plus any accrued and unpaid interest to the redemption date, upon not less than 30 nor more than 60 days' notice given as provided in the Indenture. In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness, 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 action as may be necessary or appropriate to acknowledge or 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, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. Each Holder hereof, by his acceptance hereof, agrees to treat this security as indebtedness for all United States tax purposes. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance with certain conditions set forth in the Indenture. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of all series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, 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 -4- 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, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than a majority in aggregate principal amount of the Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in aggregate principal amount of Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. 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 any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. The Company has the right at any time and from time to time during the term of the Securities of this series to extend the interest payment period to a period not exceeding 20 consecutive quarters (an "Extension Period"). Prior to the end of an Extension Period, the Company may, and at the end of such Extension Period, the Company shall, pay all interest then accrued and unpaid (together with interest thereon at the same rate as specified for the Securities of this series, compounded quarterly, to the extent permitted by applicable law). During any such Extension Period the Company shall not declare or pay any dividend or distribution (other than a dividend or distribution in common stock of the Company) on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, or make any payment of principal on, interest or premium if any, on or repay, repurchase or redeem any indebtedness that is pari passu with the Securities of this series (including other Securities issued under the Indenture), or make any guarantee payments with respect to the foregoing. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that such Extension Period, together with all such previous and further extensions thereof, may not exceed 20 consecutive quarters or extend beyond the Stated Maturity of the Securities of this series. Upon the termination of any such Extension Period and the payment of all amounts then due, the Company may select a new Extension Period, subject to the above requirements. No interest during the Extension Period, except at the end thereof, shall be due and payable. The Company shall give the Holder of this Security notice of its selection of such Extension Period as provided in or pursuant to the Indenture. -5- 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 of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor and of authorized denominations, as requested by the Holder surrendering the same. As provided in the Indenture, the Company shall not be required to make transfers or exchanges of Securities of this series for a period of 15 days immediately preceding the date of the mailing of any notice of redemption of such Securities and the Company shall not be required to make transfers or exchanges of any Securities of this series so selected for redemption in whole or in part (except the unredeemed portion of thereof). 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. 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 absolute owner hereof for all 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. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. -6- EX-5.(A) 8 OPINION OF SIMPSON THACHER & BARTLETT Exhibit 5A [Letterhead of Simpson Thacher & Bartlett] September 15, 1998 Atlantic City Electric Company 800 King Street Wilmington, Delaware 19899 Ladies and Gentlemen: We have acted as special counsel for Atlantic City Electric Company, a New Jersey corporation (the "Company"), and Atlantic Capital II, 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 (the "Registration Statement"), relating to (i) the issuance by the Trust of its Trust Preferred Capital Securities (the "Preferred Securities") and (ii) in connection therewith, the deposit by the Company with the Trust as trust assets of its Junior Subordinated Debentures, Series I (the "Subordinated Debentures"). Concurrently with the delivery of the 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 Subordinated Debentures. The 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 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. -2- Atlantic City Electric Company September 15, 1998 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 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 Subordinated Debentures have been duly established in accordance with the Indenture and (iv) the 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 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 "Validity of the Securities" in the Prospectus forming a part of the Registration Statement. Very truly yours, /s/ Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT EX-5.(B) 9 OPINION AND CONSENT OF RICHARDS, LAYTON & FINGER Exhibit 5B [Letterhead of Richards, Layton & Finger, PA] September __, 1998 Atlantic Capital II c/o Atlantic City Electric Company 800 King Street Wilmington, Delaware 19899 Re: Atlantic Capital II ------------------- Ladies and Gentlemen: We have acted as special Delaware counsel for Atlantic City Electric Company, a New Jersey corporation (the "Company"), and Atlantic Capital II, 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 (the "Certificate"), as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on September __, 1998; (b) The Trust Agreement of the Trust, dated as of September __, 1998, among the Company, as Depositor, and the trustees of the Trust named therein; (c) The Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus (the "Prospectus") relating to the ___ % Cumulative Trust Preferred Capital Securities of the Trust representing undivided beneficial interests in the assets of the Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), as proposed to be filed by the Company and the Trust with the Securities and Exchange Commission on or about September __, 1998; Atlantic Capital II September __, 1998 Page 2 (d) A form of Amended and Restated Trust Agreement of the Trust, to be entered into among the Company, as Depositor, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the assets of the Trust (including Exhibits B and C thereto) (the "Trust Agreement"), attached as an exhibit to the Registration Statement; and (e) A Certificate of Good Standing for the Trust, dated September __, 1998, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreement. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (e) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (e) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that 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 purposes of this opinion, we have assumed (i) 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 Securities Certificate for such Preferred Security and the payment for the Preferred Security acquired by it, in accordance with the Trust Agreement and the Atlantic Capital II September __, 1998 Page 3 Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with 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. 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 "Validity of Securities" 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, EAM EX-8 10 OPINION OF SIMPSON THACHER & BARTLETT Exhibit 8 [Letterhead of Simpson Thacher & Bartlett] September 14, 1998 Re: Issuance and Sale of Preferred Securities by Atlantic Capital II --------------------------------- Atlantic City Electric Company 800 King Street P.O. Box 231 Wilmington, Delaware 19899 Atlantic Capital II 800 King Street P.O. Box 231 Wilmington, Delaware 19899 Ladies and Gentlemen: We have acted as special tax counsel ("Tax Counsel") to Atlantic City Electric Company, a New Jersey corporation (the "Company"), and Atlantic Capital II, a statutory business trust created under the laws of the State of Delaware (the "Trust"), in connection with the preparation of the Prospectus dated September 11, 1998 (the "Prospectus") with respect to: (i) the issuance and sale of the Subordinated Debentures by the Company pursuant to the Indenture (the "Indenture") between the Company and Wilmington Trust Company, as trustee (in such capacity, the "Debenture Trustee"); and (ii) the issuance and sale of the Preferred Securities and Common Securities (collectively, the "Trust Securities") pursuant to the Original Trust Agreement, as amended and restated, (the "Trust Agreement") among the Company, as depositor, Wilmington Trust Company, as Property Trustee, and the Administrator Trustees named therein. The Common Securities and Preferred Securities are -2- guaranteed by the Company with respect to the payment of distributions and payments upon liquidation, redemption and otherwise pursuant to, and to the extent set forth in, the Guarantee Agreement (the "Guarantee") between the Company and Wilmington Trust Company, as trustee (in such capacity, the "Guarantee Trustee"), for the benefit of the holders of the Common Securities and Preferred Securities. The Preferred Securities will be offered for sale to investors pursuant to the Prospectus. All capitalized terms used in this opinion letter and not otherwise defined herein shall have the meaning ascribed to such terms in the Prospectus. In delivering this opinion letter, we have reviewed and relied upon: (i) the Prospectus; (ii) a form of the Indenture; (iii) a form of the Subordinated Debentures; (iv) a form of the Trust Agreement; (v) a form of the Guarantee; and (vi) forms of the Trust Securities. We also have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and the Trust and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination of such material, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all copies of documents submitted to us. In addition, we also have assumed that the transactions related to the issuance of the Subordinated Debentures and the Trust Securities will be consummated in accordance with the terms of the documents and forms of documents described herein. On the basis of the foregoing and assuming that the Trust was formed and will be maintained in compliance with the terms of the Trust Agreement, we hereby confirm our opinions set forth in the Prospectus under the caption "Certain United States Federal Income Tax Consequences". -3- We express no opinion with respect to the transactions referred to herein or in the Prospectus other than as expressly set forth herein. Moreover, we note that there is no authority directly on point dealing with securities such as the Preferred Securities or transactions of the type described herein and that our opinion is not binding on the Internal Revenue Service or the courts, either of which could take a contrary position. Recently, a petition was filed in the United States Tax Court as a result of a challenge by the Internal Revenue Service of the petitioner's treatment as indebtedness of a loan issued in circumstances with similarities to the issuance of the Subordinated Debentures. Nevertheless, we believe that if challenged, the opinions we express herein would be sustained by a court with jurisdiction in a properly presented case. Our opinion is based upon the Internal Revenue Code of 1986, as amended, 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. We hereby consent to the use of our name in the Prospectus under the caption "Certain United States Federal Income Tax Consequences". Very truly yours, /s/ Simpson Thacher & Bartlett SIMPSON THACHER & BARTLETT EX-23.(A) 11 CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23-A INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Atlantic City Electric Company and Atlantic Capital II on Form S-3 of our report dated February 2, 1998 (March 1, 1998 as to Note 4), appearing in the Annual Report on Form 10-K of Atlantic City Electric Company for the year ended December 31, 1997 and to the reference to us under the heading "Experts" in this Registration Statement. DELOITTE & TOUCHE LLP Parsippany, New Jersey September 14, 1998 EX-25.(A) 12 FORM T-1 RE: TRUST AGREEMENT Exhibit 25a 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.) 1 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip code) _________________ ATLANTIC CAPITAL II (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.) 800 King Street P.O. Box 231 Wilmington, Delaware 19899 (Address of principal executive offices) (Zip code) _________________ ATLANTIC CAPITAL II __% CUMULATIVE TRUST PREFERRED CAPITAL SECURITIES* (Title of the indenture securities) - ------------------ *Specific title to be determined in connection with sale of Atlantic Capital II __% Cumulative Trust Preferred Capital 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. 10005 (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 3/rd/ day of September, 1998. THE BANK OF NEW YORK By: LUCILLE FIRRINCIELI ------------------------- Lucille Firrincieli 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 March 31, 1998, 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.................... $ 6,397,993 Interest-bearing balances.................. 1,138,362 Securities: Held-to-maturity securities................ 1,062,074 Available-for-sale securities.............. 4,167,240 Federal funds sold and Securities purchased under agreements to resell..... 391,650 Loans and lease financing receivables: Loans and leases, net of unearned income................................... 36,538,242 LESS: Allowance for loan and lease losses............................. 631,725 LESS: Allocated transfer risk reserve.................................. 0 Loans and leases, net of unearned income, allowance, and reserve........... 35,906,517 Assets held in trading accounts.............. 2,145,149 Premises and fixed assets (including capitalized leases)........................ 663,928 Other real estate owned...................... 10,895 Investments in unconsolidated subsid- iaries and associated companies............ 237,991 Customers' liability to this bank on acceptances outstanding.................... 992,747 Intangible assets............................ 1,072,517 Other assets................................. 1,643,173 ----------- Total assets................................. $55,830,236 =========== EXHIBIT 7 (Page 2 of 3) LIABILITIES - ----------- Deposits: In domestic offices............................ $24,849,054 Noninterest-bearing............................ 10,011,442 Interest-bearing............................... 14,837,632 In foreign offices, Edge and Agreement subsidiaries, and IBFs............... 15,319,002 Noninterest-bearing............................ 707,820 Interest-bearing............................... 14,611,182 Federal funds purchased and Securities sold under agreements to repurchase............ 1,906,066 Demand notes issued to the U.S. Treasury....................................... 215,985 Trading liabilities.............................. 1,591,288 Other borrowed money: With remaining maturity of one year or less.... 1,991,119 With remaining maturity of more than one year through three years................. 0 With remaining maturity of more than three years.................................. 25,574 Bank's liability on acceptances executed and outstanding....................... 998,145 Subordinated notes and debentures................ 1,314,000 Other liabilities................................ 2,421,281 ----------- Total liabilities................................ 50,631,514 ----------- EQUITY CAPITAL - -------------- Common stock..................................... 1,135,284 Surplus.......................................... 731,319 Undivided profits and capital reserves....................................... 3,328,050 Net unrealized holding gains (losses) on available-for-sale securities............... 40,198 Cumulative foreign currency translation adjustments........................ (36,129) ----------- Total equity capital............................. 5,198,722 ----------- Total liabilities and equity capital............. $55,830,236 =========== 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. Thomas A. Renyi ) Alan R. Griffith ) Directors J. Carter Bacot ) EX-25.(B) 13 FOR T-1 RE: INDENTURE Exhibit 25b 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.) 1 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.) 800 King Street P.O. Box 231 Wilmington, Delaware 19899 (Address of principal executive offices) (Zip code) _________________ ATLANTIC CITY ELECTRIC COMPANY __% JUNIOR SUBORDINATED DEBENTURES, SERIES I, DUE__* (Title of the indenture securities) - ------------------ *Specific title to be determined in connection with sale of __% Junior Subordinated Debentures, Series I, Due __. 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. 10005 (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 3/rd/ day of September, 1998. THE BANK OF NEW YORK By: LUCILLE FIRRINCIELI ----------------------- Lucille Firrincieli 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 March 31, 1998, 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.................... $ 6,397,993 Interest-bearing balances.................. 1,138,362 Securities: Held-to-maturity securities................ 1,062,074 Available-for-sale securities.............. 4,167,240 Federal funds sold and Securities purchased under agreements to resell..... 391,650 Loans and lease financing receivables: Loans and leases, net of unearned income................................... 36,538,242 LESS: Allowance for loan and lease losses............................. 631,725 LESS: Allocated transfer risk reserve.................................. 0 Loans and leases, net of unearned income, allowance, and reserve........... 35,906,517 Assets held in trading accounts.............. 2,145,149 Premises and fixed assets (including capitalized leases)........................ 663,928 Other real estate owned...................... 10,895 Investments in unconsolidated subsid- iaries and associated companies............ 237,991 Customers' liability to this bank on acceptances outstanding.................... 992,747 Intangible assets............................ 1,072,517 Other assets................................. 1,643,173 ----------- Total assets................................. $55,830,236 =========== EXHIBIT 7 (Page 2 of 3) LIABILITIES - ----------- Deposits: In domestic offices........................... $24,849,054 Noninterest-bearing........................... 10,011,442 Interest-bearing.............................. 14,837,632 In foreign offices, Edge and Agreement subsidiaries, and IBFs.............. 15,319,002 Noninterest-bearing........................... 707,820 Interest-bearing.............................. 14,611,182 Federal funds purchased and Securities sold under agreements to repurchase........... 1,906,066 Demand notes issued to the U.S. Treasury...................................... 215,985 Trading liabilities............................. 1,591,288 Other borrowed money: With remaining maturity of one year or less... 1,991,119 With remaining maturity of more than one year through three years................ 0 With remaining maturity of more than three years................................. 25,574 Bank's liability on acceptances executed and outstanding...................... 998,145 Subordinated notes and debentures............... 1,314,000 Other liabilities............................... 2,421,281 ----------- Total liabilities............................... 50,631,514 ----------- EQUITY CAPITAL - -------------- Common stock.................................... 1,135,284 Surplus......................................... 731,319 Undivided profits and capital reserves...................................... 3,328,050 Net unrealized holding gains (losses) on available-for-sale securities.............. 40,198 Cumulative foreign currency translation adjustments....................... (36,129) ----------- Total equity capital............................ 5,198,722 ----------- Total liabilities and equity capital............ $55,830,236 =========== 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. Thomas A. Renyi ) Alan R. Griffith ) Directors J. Carter Bacot ) EX-25.(C) 14 FORM T-1 RE: GUARANTEE AGREEMENT Exhibit 25c 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.) 1 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.) 800 King Street P.O. Box 231 Wilmington, Delaware 19899 (Address of principal executive offices) (Zip code) _________________ ATLANTIC CITY ELECTRIC COMPANY GUARANTEE WITH RESPECT TO ATLANTIC CAPITAL II __% CUMULATIVE TRUST PREFERRED CAPITAL SECURITIES* (Title of the indenture securities) - ------------------ *Specific title to be determined in connection with sale of Atlantic Capital II __% Cumulative Trust Preferred Capital 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. 10005 (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 3/rd/ day of September, 1998. THE BANK OF NEW YORK By: LUCILLE FIRRINCIELI ----------------------- Lucille Firrincieli 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 March 31, 1998, 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.................... $ 6,397,993 Interest-bearing balances.................. 1,138,362 Securities: Held-to-maturity securities................ 1,062,074 Available-for-sale securities.............. 4,167,240 Federal funds sold and Securities purchased under agreements to resell..... 391,650 Loans and lease financing receivables: Loans and leases, net of unearned income................................... 36,538,242 LESS: Allowance for loan and lease losses............................. 631,725 LESS: Allocated transfer risk reserve.................................. 0 Loans and leases, net of unearned income, allowance, and reserve........... 35,906,517 Assets held in trading accounts.............. 2,145,149 Premises and fixed assets (including capitalized leases)........................ 663,928 Other real estate owned...................... 10,895 Investments in unconsolidated subsid- iaries and associated companies............ 237,991 Customers' liability to this bank on acceptances outstanding.................... 992,747 Intangible assets............................ 1,072,517 Other assets................................. 1,643,173 ----------- Total assets................................. $55,830,236 =========== EXHIBIT 7 (Page 2 of 3) LIABILITIES - ----------- Deposits: In domestic offices........................... $24,849,054 Noninterest-bearing........................... 10,011,442 Interest-bearing.............................. 14,837,632 In foreign offices, Edge and Agreement subsidiaries, and IBFs.............. 15,319,002 Noninterest-bearing........................... 707,820 Interest-bearing.............................. 14,611,182 Federal funds purchased and Securities sold under agreements to repurchase........... 1,906,066 Demand notes issued to the U.S. Treasury...................................... 215,985 Trading liabilities............................. 1,591,288 Other borrowed money: With remaining maturity of one year or less... 1,991,119 With remaining maturity of more than one year through three years................ 0 With remaining maturity of more than three years................................. 25,574 Bank's liability on acceptances executed and outstanding...................... 998,145 Subordinated notes and debentures............... 1,314,000 Other liabilities............................... 2,421,281 ----------- Total liabilities............................... 50,631,514 ----------- EQUITY CAPITAL - -------------- Common stock.................................... 1,135,284 Surplus......................................... 731,319 Undivided profits and capital reserves...................................... 3,328,050 Net unrealized holding gains (losses) on available-for-sale securities.............. 40,198 Cumulative foreign currency translation adjustments....................... (36,129) ----------- Total equity capital............................ 5,198,722 ----------- Total liabilities and equity capital............ $55,830,236 =========== 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. Thomas A. Renyi ) Alan R. Griffith ) Directors J. Carter Bacot ) -----END PRIVACY-ENHANCED MESSAGE-----