-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oeGEMi0H1Vztfd7Voklxpmt2W7x2acx/1wAD8JXZjTxOGjbaIc4YUFZ4Jaags6Zl f/KN0Jxt3ddWDLgVnCSwmA== 0000897708-95-000035.txt : 19950615 0000897708-95-000035.hdr.sgml : 19950615 ACCESSION NUMBER: 0000897708-95-000035 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950316 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CAPITAL CORP /DE/ CENTRAL INDEX KEY: 0000897708 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 223211453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-11237 FILM NUMBER: 95521327 BUSINESS ADDRESS: STREET 1: 44 WHIPPANY ROAD CITY: MORRISTOWN STATE: NJ ZIP: 07962-1982 BUSINESS PHONE: 2013973000 MAIL ADDRESS: STREET 1: 44 WHIPPANY RD CITY: MORRISTOWN STATE: NJ ZIP: 07962 10-K405 1 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From to Commission File Number 1-11237 AT&T CAPITAL CORPORATION A DELAWARE I.R.S. EMPLOYER IDENTIFICATION CORPORATION No. 22-3211453 44 Whippany Road, Morristown, New Jersey 07962-1983 Telephone Number 201-397-3000 __________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of exchange on which registered ___________________ ___________________ Common Stock, New York Stock Exchange $.01 par value Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES...x... NO....... Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( x ) The aggregate market value of the common stock of the registrant held by nonaffiliates as of February 28, 1995 was approximately $164,164,429. For purposes of the foregoing calculation only, all directors and officers of the registrant have been deemed affiliates. As of February 28, 1995, there were 47,001,356 shares of the registrants common stock $.01 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's definitive proxy statement dated March 20, 1995 issued in connection with the 1995 annual meeting of shareholders (Part III). 2 TABLE OF CONTENTS PART I Item Description Page 1. Business. 1 2. Properties. 12 3. Legal Proceedings. 12 4. Submission of Matters to a Vote of Security-Holders. 12 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters. 12 6. Selected Financial Data. 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 18 8. Financial Statements and Supplementary Data. 32 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 69 PART III 10. Directors and Executive Officers of the Registrant. 69 11. Executive Compensation. 70 12. Security Ownership of Certain Beneficial Owners and Management. 70 13. Certain Relationships and Related Transactions. 71 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 71 3 PART I ITEM 1. BUSINESS RESTRUCTURING AND INITIAL PUBLIC OFFERING AT&T Capital Corporation ("AT&T Capital" or the "Company"), was incorporated on December 21, 1992 as AT&T Leasing, Inc., and was renamed AT&T Capital Corporation on March 31, 1993. The Company is the successor entity to certain businesses of AT&T Capital Holdings, Inc. (formerly known as AT&T Capital Corporation, renamed AT&T Capital Holdings, Inc. ("Old Capital") on March 31, 1993) a wholly owned subsidiary of AT&T Corp. ("AT&T") and AT&T Credit Holdings, Inc. which commenced operations in 1985, and renamed AT&T Credit Holdings, Inc. ("Old Credit") on March 31, 1993, an indirect wholly owned subsidiary of AT&T. In a restructuring that occurred on March 31, 1993, (the "Restructuring") Old Capital and Old Credit transferred substantially all their assets to the Company except for certain assets, consisting principally of equity interests in project finance transactions and leveraged leases of commercial aircraft ("Lease Finance Assets"), in exchange for shares of the Company's common stock and the assumption by the Company of certain related liabilities. In connection with the Restructuring, AT&T issued a direct, full and unconditional guarantee of all existing indebtedness outstanding as of March 31, 1993 for borrowed money incurred, assumed or guaranteed by Old Capital entitled to the benefit of a Support Agreement between AT&T and Old Capital (the "Support Agreement"), including the debt of Old Capital assumed by the Company in the Restructuring. Debt issued by the Company subsequent to March 31, 1993, however, is not guaranteed or supported by AT&T. An initial public stock offering combined with a management stock offering totalling approximately 14 percent of the Company's stock occurred on August 4, 1993. (See Note 8 to the Consolidated Financial Statements). As a result of the stock offerings, approximately 86 percent of the outstanding common stock of the Company is owned indirectly by AT&T (through Old Capital and Old Credit.) In connection with its initial public offering, the Company entered into certain intercompany, operating, license and tax agreements with AT&T. The Intercompany Agreement includes a provision requiring minimum ownership by AT&T of 20% of the Company's common stock outstanding immediately after the initial public offering for a period of five years. Provisions for management by the Company of certain portfolios owned by AT&T, allowing the Company to utilize certain AT&T corporate and administrative services (for a fee) and generally requiring the Company to continue certain equipment financing programs for AT&T are also included. The Operating Agreement, provides, among other things, that AT&T is required to promote the Company's financing and ancillary services and to provide the Company with certain preferred provider rights in connection with the financing of AT&T products and services. In addition, the Operating Agreement restricts AT&T from competing with the Company with respect to certain products of the Company. The License Agreement defines the Company's rights to use certain AT&T service marks and trade names, and to use "AT&T" as part of the corporate names of the Company and certain of its subsidiaries. The initial term of the License Agreement will expire on the seventh 1 4 anniversary of the date of the initial public offering. The License Agreement may be terminated prior to the end of its term by either party if the other party breaches or defaults on terms of the Intercompany agreement, the Operating Agreement or the License Agreement. Additionally, AT&T can elect to terminate the license agreement if the long-term unsecured debt of the Company is rated below investment grade by at least two nationally recognized rating agencies or if the Company receives a qualified audit opinion from its independent accountants. Because such license is an important strategic asset of the Company, termination of the License Agreement could have an adverse effect on the Company. DESCRIPTION OF THE BUSINESS AT&T Capital is one of the largest equipment leasing and finance companies in the United States based on the aggregate value of equipment leased or financed. The Company is a full-service, diversified equipment leasing and finance company that operates in the United States, Canada, Europe, the Asia/Pacific Region and Mexico. The Company leases and finances equipment manufactured and distributed by AT&T and its affiliates and numerous other companies. The Company's customers include many of the nation's largest industrial and service companies, as well as many small and mid-size business customers and federal, state and local governments and their agencies. AT&T Capital, through its various subsidiaries, leases and finances telecommunications equipment (such as private branch exchanges ("PBXs"), telephone systems and voice processing units), general purpose equipment (such as office equipment and manufacturing equipment), data center equipment (including mainframe computers and related equipment), other data processing equipment (such as personal computers, retail point-of-sale computers, automatic teller machines and bank transaction processing equipment) and transportation equipment (primarily vehicles). The Company is the largest lessor in the United States of telecommunications equipment. The Company also provides inventory financing for equipment dealers and distributors, Small Business Administration ("SBA")lending, and asset management and remarketing services. In addition, the Company offers its customers certain equipment rental and repair services and certain other asset administration services. AT&T Capital offers a variety of lease and other finance instruments, including leases where the Company is the owner of the equipment for tax or accounting purposes and leases and installment sales arrangements where the end-user is such owner. At December 31, 1994, 12.1% of the Company's net investment in leases and finance receivables ("portfolio assets") consisted of leases where the Company was the owner of the equipment for both tax and accounting purposes. The Company's portfolio assets, which aggregated approximately $7.5 billion at December 31, 1994, are diversified across various types of financed equipment, with telecommunications equipment comprising approximately 26% of such portfolio assets at such date. At December 31, 1994, approximately 5% of the Company's portfolio assets were comprised of real estate assets (including commercial loans collateralized 2 5 by real estate generated through the Company's small business lending activity, e.g., SBA and franchise lending) and commercial aircraft leases. AT&T Capital's portfolio assets are diversified among a large customer base as well as geographic regions. At December 31, 1994, the Company's 99 largest customers (after AT&T and its affiliates) accounted for approximately 20% of the Company's portfolio assets, and no single customer (with the exception of AT&T and its affiliates) accounted for more than 1.0% of such portfolio assets. A substantial part of the Company's total United States assets, revenue and net income are attributable to leasing and financing of AT&T equipment provided to customers of AT&T and its affiliates (collectively, "Customers of AT&T Equipment"). AT&T and its affiliates and employees (collectively, "AT&T as End-User") are also significant customers of the Company, primarily with respect to data processing equipment and vehicles leased to as them as end-users. The following table shows (in millions of dollars) the assets, revenue, net income(loss) and income before cumulative effect of accounting change and impact of tax rate change related to United States operations (together with the respective percentages of the assets, revenue, net income(loss) and income before cumulative effect of accounting change and impact of tax rate change related to United States operations represented by such dollar amounts) attributable to (I) leasing and financing services provided by the Company to customers of AT&T equipment, (ii) transactions involving AT&T as End-User and (iii) the Company's non-AT&T businesses, in each case at and for the years ended December 31, 1992, 1993 and 1994. The net income(loss) and income before cumulative effect of accounting change and impact of tax rate change amounts shown below were calculated based upon what the Company believes to be a reasonable allocation of interest, income taxes and certain corporate overhead expenses. Customers of AT&T Equipment Income before cumulative effect of 1993 accounting change and impact Assets Revenue Net Income of tax rate change __________________________________________________________________________ $ % $ % $ % $ % ___________________________________________________________________________ 1992 $2,305.0 40.1% $410.5 32.8% $52.4 60.0% $52.4 60.0% 1993 $2,441.7 40.7% $423.3 33.2% $68.5 87.8% $75.9 80.1% 1994 $2,749.8 38.4% $458.5 36.7% $84.2 80.5% $84.2 80.5% 3 6 AT&T as End-User Income before cumulative effect of 1993 accounting change and impact Assets Revenue Net Income of tax rate change ___________________________________________________________________________ $ % $ % $ % $ % ___________________________________________________________________________ 1992 $658.4 11.4% $185.2 14.8% $13.0 14.9% $13.0 14.9% 1993 $608.8 10.1% $201.9 15.9% $14.2 18.3% $16.9 17.9% 1994 $548.0 7.7% $131.2 10.5% $ 8.5 8.2% $ 8.5 8.2% Non-AT&T Businesses Income before cumulative effect of 1993 accounting Net Income change and impact Assets Revenue (Loss) of tax rate change ___________________________________________________________________________ $ % $ % $ % $ % ___________________________________________________________________________ 1992 $2,786.9 48.5% $655.8 52.4% $21.9 25.1% $21.9 25.1% 1993 $2,952.4 49.2% $649.4 50.9% ($ 4.7) (6.1%) $ 1.9 2.0% 1994 $3,850.9 53.9% $660.9 52.8% $11.9 11.3% $11.9 11.3% The net income(loss) and income before cumulative effect of accounting change and impact of tax rate change from the Company's United States non-AT&T businesses reflects the fact that costs and expenses associated with developing additional and changing existing non-AT&T business units were substantial. Conversely, the securitization of certain non-AT&T portfolio assets positively impacted the non-AT&T businesses in 1992, 1993 and 1994 (see Note 6 to the Consolidated Financial Statements). The Company intends to pursue its strategy of expanding its non-AT&T businesses, while at the same time enhancing its AT&T relationship. Because the desired growth in revenue generated by the Company's non-AT&T businesses can be expected to lag behind the incurrence of costs and expenses necessary to expand and operate such businesses, the Company anticipates that the percentage of its total United States net income and revenue growth attributable to non-AT&T businesses may vary from year to year depending upon the developmental stages associated with the non-AT&T businesses. Although the Company operates principally in the United States, the Company began operations in the United Kingdom in 1991 and, through the hiring of certain employees and the acquisition of certain operating assets (but not Portfolio Assets), began significant operations in Canada in 1992. In January 1994, the Company purchased the stock of Australian Guarantee Corporation Finance (H.K.) Limited ("A.G.C. Finance"), a Hong Kong-based vehicle and equipment leasing finance company with assets at that time of approximately $150 million. Also in January 1994, the Company, through its wholly-owned Canadian subsidiary, acquired the vehicle portfolio and infrastructure assets constituting the Avis Canada Leasing Division of AvisCar, Inc. ("Avis Leasing"). Avis Leasing provides automobile leasing to small and mid-size commercial and corporate clients in Canada and had 4 7 approximately $90 million in assets at the time of acquisition. Also in 1994, the Company opened offices in Mexico and Australia. The Company, from time to time, investigates potential opportunities to make acquisitions abroad, and the Company may open additional foreign offices on a limited basis either directly or through acquisition. On January 4, 1995, the Company acquired the vendor leasing and finance companies of Banco Central Hispano and certain of its affiliates (collectively, "CFH Leasing International") located in the United Kingdom, Germany, France, Italy, Belgium, the Netherlands and Luxembourg. CFH Leasing International provides financial services to equipment manufacturers and vendors. With offices throughout much of western Europe, it serves approximately 4,600 customers and had approximately $540 million in assets at the time of acquisition. The Company's assets, revenue and net income related to foreign operations are not reflected in the above tables which show assets, revenue, net income(loss) and income before cumulative effect of accounting change and impact of tax rate change attributable to the Company's United States operations. At December 31, 1994, 1993 and 1992, the total assets of the Company's foreign operations were $873.2 million (or 10.9% of total assets), $406.9 million (or 6.3% of total assets) and $145.1 million (or 2.5% of total assets), respectively. The total revenue of such operations for the years ended December 31, 1994, 1993 and 1992, were $133.5 million (or 9.6% of total revenue), $85.0 million (or 6.2% of total revenue) and $14.0 million (or 1.1% of total revenue), respectively, and such operations generated net losses of $4.2 million, $9.4 million and $13.8 million, respectively. Such losses reflected the fact that most of the Company's foreign operations are in the start-up phase, with revenue from such operations not yet covering operating costs and expenses. Although a substantial majority of the Company's foreign assets and revenues at and for the years ended December 31, 1994, 1993 and 1992, were attributable to the Company's non-AT&T businesses, a principal focus of such foreign operations is to serve foreign customers of AT&T and its affiliates as well as other vendors. Total assets, revenue and net income related to non-AT&T businesses including both domestic and international businesses for the year ended December 31, 1994 were $4,698.7 million (or 58.6% of total assets), $789.9 million (or 57.1% of total revenue), and $9.0 million (or 9.0% of total net income), respectively. Total assets, revenue and net loss (before cumulative effect of accounting change and the impact of the tax rate change) related to non-AT&T businesses including both domestic and international businesses for the year ended December 31, 1993 were $3,337.1 million, $731.6 million and $7.5 million, respectively. Total assets, revenue and net loss related to non-AT&T businesses including both domestic and international businesses for the year ended December 31, 1992 were $2,906.3 million, $668.1 million and $11.7 million, respectively. Income Tax Considerations The Company is currently a member of AT&T's consolidated group for federal income tax purposes. The Company would cease to be a member of such consolidated group for federal income tax purposes (a "Tax 5 8 Deconsolidation") if, among other events, AT&T's ownership interest in the outstanding common stock decreases to below 80%. Tax Deconsolidation would have certain adverse effects on the Company. As long as the Company is a part of the AT&T consolidated federal income tax group, the payment of federal and state income taxes in all states in which combined returns are filed associated with sales of products manufactured by AT&T is deferred (the amount of such taxes so deferred being herein called "Gross Profit Tax Deferral"), generally as the products are depreciated or until sold outside the group. Pursuant to the Gross Profit Tax Deferral Interest Free Loan Agreement between the Company and AT&T, AT&T has extended and has agreed to extend interest-free loans to the Company from time to time in an amount equal to the then outstanding amount of Gross Profit Tax Deferral. Such loans are repayable by the Company when and to the extent that any such deferred taxes are required to be paid by AT&T. Upon any Tax Deconsolidation, the Company would be required to repay such loans and would no longer receive such loans, which have constituted a competitive advantage to the Company in financing AT&T products. Pursuant to the Federal Tax Sharing and the State Tax Sharing Agreements between the Company and AT&T, the AT&T consolidated federal income tax liability is generally allocated among the members of the AT&T consolidated group that report taxable income. Members of the AT&T consolidated group that report tax losses are compensated currently by AT&T (through cash payments made on a quarterly basis) for their losses to the extent those losses are used to reduce the AT&T consolidated federal income tax liability. Similar principles and cash payments also apply to certain state and local income tax liabilities. Upon any Tax Deconsolidation, the Company would no longer be entitled to receive quarterly cash payments from AT&T in compensation for the use of any tax losses. The tax losses would, instead, be available to the Company to reduce future taxable income. Thus, the Company may derive a benefit in the future from tax losses, but only to the extent the Company has taxable income in later years. In 1994, on a stand-alone basis, the Company had taxable income. In addition, upon Tax Deconsolidation, it is possible that the Company could be subject to the federal alternative minimum tax. A taxpayer's alternative minimum tax liability is computed by applying the alternative minimum tax rate, which is lower than the regular tax rate, to a measure of taxable income that is broader than that used in computing the regular tax. Payments of any alternative minimum tax incurred by the Company after a Tax Deconsolidation would be available in the future as credits against the Company's regular tax liability. Although AT&T has the right to reduce its ownership interest in the 6 9 Company (subject to certain contractual restrictions in the Intercompany Agreement between the Company and AT&T) and effect a Tax Deconsolidation at any time, AT&T has advised the Company that no decision has been made to reduce its ownership interest in the Company. AT&T has indicated to the Company that any decision by AT&T to reduce such ownership interest would be made, in the future on the basis of all the circumstances existing at such time including the effect of any such reduction on AT&T (including any benefit to AT&T from the removal from AT&T's consolidated balance sheet of the Company's indebtedness (and assets) in the event AT&T's interest in the common stock of the Company is reduced below 50%), the needs of AT&T, the success of the Company, stock market conditions and other factors. Credit Quality The control of credit losses is an important element of the Company's business. The Company seeks to minimize its credit risk through diversification of its portfolio assets by customer, customer type, geographic location and maturity. The Company's financing activities have been spread across a wide range of equipment segments (e.g., telecommunications, general, data center, other data processing and transportation) and a large number of end-users located throughout the United States and, to a lesser extent, abroad. The table below provides allowance for credit losses components by loan classification (as prescribed by the Securities and Exchange Commission, "SEC") where Lease Financing includes capital leases and rentals receivable on operating leases and Commercial and Financial includes finance receivables (collectively "finance assets"), as well as other key credit quality indicators. The breakdown of the allowance for credit losses at each year end reflects management's estimate of credit losses and may not be indicative of actual future charge-offs by loan classification. (Dollars in Thousands) 1994 1993 1992 1991 1990 ___________________________________________________________________________ Balance at beginning of year: - - Lease Financing $102,760 $ 87,774 $ 74,106 $ 57,578 $ 31,886 - - Commercial and Financial 57,059 36,187 19,861 17,791 5,982 ___________________________________________________________________________ Total 159,819 123,961 93,967 75,369 37,868 ___________________________________________________________________________ Additions Charged to Operations: - - Lease Financing 66,306 95,034 88,577 100,445 58,767 - - Commercial and Financial 14,582 28,644 23,138 8,190 16,741 ___________________________________________________________________________ Total $ 80,888 $123,678 $111,715 $108,635 $ 75,508 ___________________________________________________________________________ 7 10 1994 1993 1992 1991 1990 ___________________________________________________________________________ Charge-offs: - Lease Financing $ 50,294 $ 61,517 $ 76,587 $ 76,422 $ 49,468 - Commercial and Financial 23,223 14,135 18,183 15,466 4,970 ___________________________________________________________________________ Subtotal 73,517 75,652 94,770 91,888 54,438 ___________________________________________________________________________ Recoveries: - Lease Financing 16,316 15,505 15,038 8,261 7,953 - Commercial and Financial 1,656 1,118 1,365 1,672 38 ___________________________________________________________________________ Subtotal 17,972 16,623 16,403 9,933 7,991 ___________________________________________________________________________ Net Charge-offs: - - Lease Financing 33,978 46,012 61,549 68,161 41,515 - - Commercial and Financial 21,567 13,017 16,818 13,794 4,932 ___________________________________________________________________________ Total 55,545 59,029 78,367 81,955 46,447 ___________________________________________________________________________ Transfers and Other (a): - - Lease Financing (6,558) (34,036) (13,360) (15,756) 8,440 - - Commercial and Financial (2,176) 5,245 10,006 7,674 - ___________________________________________________________________________ Total (8,734) (28,791) (3,354) (8,082) 8,440 ___________________________________________________________________________ Balance at end of year: - - Lease Financing 128,530 102,760 87,774 74,106 57,578 - - Commercial and Financial 47,898 57,059 36,187 19,861 17,791 ___________________________________________________________________________ Total $ 176,428 $159,819 $123,961 $ 93,967 $ 75,369 =========================================================================== Percentage of lease financing assets to total finance assets 80.6% 80.3% 79.9% 78.9% 78.3% =========================================================================== Percentage of commercial and financial assets to total finance assets 19.4% 19.7% 20.1% 21.1% 21.7% =========================================================================== 8 11 1994 1993 1992 1991 1990 ___________________________________________________________________________ Ratio of Net Charge-offs during the year to average finance assets (excluding operating leases) outstanding during the year: - Lease Financing 0.71% 1.21% 1.89% 2.35% 1.72% - Commercial and Financial 1.67% 1.13% 1.51% 1.34% 0.56% =========================================================================== Nonaccrual assets $120,494 $160,574 $151,562 $ 85,381 $ 80,156 =========================================================================== (a) Primarily includes transfers out of allowance for credit losses related to receivables securitized, transfers in of reserves related to businesses acquired and reclassifications. AT&T has agreed in the Operating Agreement to repurchase certain finance assets that go into default. Finance assets subject to such provisions were $243.0 million, $321.0 million and $282.4 million at December 31, 1994, 1993 and 1992, respectively. The Company believes that the remaining net investment in finance assets is adequately reserved for given the level of the Company's total allowance for credit losses. Portfolio credit performance indicators in 1994 have continued to show positive trends. Delinquency and charge-off levels have declined during 1994, and the provision for credit losses decreased $42.8 million, or 34.6%, compared with 1993. The allowance for credit losses as a percentage of portfolio assets at December 31, 1994 was 2.30% compared with 2.56% at December 31, 1993. At December 31, 1994 the allowance for credit losses was $176.4 million compared with $159.8 million at December 31, 1993. Nonaccrual assets at December 31, 1994 totalled $120.5 million compared with $160.6 million at December 31, 1993. The ratio of net charge-offs to average commercial and financial assets increased in 1994 compared with 1993, while the allowance for credit losses decreased in 1994 compared with 1993 due to reserves established for specific assets (particularly in the media portfolio) that were subsequently charged off in 1994. As a result, in 1994 there were fewer assets that required specific reserves. Accounts are placed in nonaccrual status at 90 days past due or sooner if identified as a problem account. Revenue which would have been recorded in 1994 on nonaccrual assets had these assets been earning at the original contractual rate amounted to approximately $12.9 million. Revenue actually recognized in 1994 for assets in nonaccrual status at December 31, 1994 amounted to approximately $7.3 million. Lease terms that are modified in the normal course of business, for which additional consideration is received or insignificant concessions are made, are accounted for as changes in a provision for a lease in accordance 9 12 with Statement of Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases." During the past five years, the Company has had no significant earning finance assets that are required to be reported as a troubled debt restructuring pursuant to SFAS No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings". Residual Value Realization The establishment and realization of residual values on leases are also important elements of the Company's business. Residual values are established upon acquisition and leasing of the equipment based upon the estimated value of the equipment at the end of the lease term. These estimates are derived by the Company from, among other things, market information on sales of used equipment, end-of-lease customer behavior and estimated obsolescence trends. The Company's risk management department, in conjunction with the management of the Company's business units, regularly reviews residual values, and if they have declined, adjustments are made that result in an immediate charge to income for capital leases and adjustments to depreciation expense for operating leases over the shorter of the useful life of the asset or the remaining term of the lease. In January 1994, the Company entered into a significant lease extension associated with mainframe computers leased to AT&T. This extension significantly reduced related mainframe residual exposure. At December 31, 1994 and 1993, total portfolio assets related to mainframe computers were $527.1 million, or 7.0%, and $687.0 million, or 11.3%, respectively. The related residual values of mainframe computers were $79.1 million and $232.2 million at December 31, 1994 and 1993, respectively. The Company actively manages its residuals by working with lessees during the lease term to encourage lessees to extend their leases or upgrade and enhance their leased equipment, as appropriate, and by monitoring the various equipment industry segments, particularly the data center and other data processing industry segments, for obsolescence trends. The Company utilizes its asset management (including asset remarketing), engineering and other technical expertise to help manage its residual positions. In 1994, 1993 and 1992, the Company recognized, in total revenue, amounts in excess of recorded residuals upon the re-lease, sale or other disposition by the Company of leased equipment. Competition and Related Matters The equipment leasing and finance industry is highly competitive. Participants in the industry compete through price (including the ability to control costs), risk management, innovation and customer service. Principal cost factors include the cost of funds, the cost of selling to or obtaining new end-user customers and vendors, and the cost of managing portfolios (including, for example, billing, collection, credit risk management, residual management, etc.). Adequate risk management is required to achieve satisfactory returns on investment and to provide appropriate pricing of finance products. The Company believes that innovation is necessary to compete in the industry, involving specialization in certain types of equipment, financial structuring for 10 13 larger transactions, utilization of alternative channels of distribution and optimization of tax treatment between owner and user. End-users of equipment generally desire transactions to be simple, flexible and customer-responsive. In its leasing and financing operations and programs, the Company competes with captive or related leasing companies (such as General Electric Capital Corporation and IBM Credit Corporation), independent leasing companies (such as Comdisco, Inc.), certain banks engaged in leasing, lease brokers and investment banking firms that arrange for the financing of leased equipment, and manufacturers and vendors who lease their own products to customers. In addition, the Company competes with all banking and other financial institutions, manufacturers, vendors and others who extend or arrange credit for the acquisition of equipment and, in a sense, with the available cash resources of end-users (i.e., end-users may use their available cash resources to purchase for cash equipment that the Company may otherwise finance). Many of the competitors of the Company are large companies that have substantial capital, technological and marketing resources; some of these competitors are significantly larger than the Company and have access to capital at a lower cost than the Company. Recently there have been substantial changes in the equipment leasing and finance industry, including the sale or cessation of operations of certain large competitors of the Company and an apparent trend toward consolidation. While these developments may on balance be favorable for the Company's prospects, they are indicative of the strong competitive pressures on all participants in the industry, including the Company. The Company's penetration rate for AT&T's sales of telecommunications equipment in the United States (i.e., the percentage of the dollar volume of such sales that the Company finances) was approximately 37% for the year ended December 31, 1994. The Company does not expect material increases in this penetration rate, and there can be no assurance that the existing rate will be maintained. Although, the Company has a lower penetration rate (approximately 22% for the year ended December 31, 1994) with respect to sales of AT&T Global Information Solutions products (data processing and related products, including personal computers, retail point-of-sale computers, automatic teller machines and bank transaction processing equipment), the penetration rate has increased in 1994 compared with 1993. Additionally, the Company has an insignificant penetration rate with respect to international sales of AT&T's network systems products (large telecommunications switches, cable products, cellular telephone equipment and microwave dishes and equipment), which sales the Company has been financing for a shorter period of time. Because the markets for financing these products are highly competitive and substantially different from the markets for financing telecommunications equipment in the United States, there can be no assurance that the penetration rates in these product areas will increase. In addition to competition within the leasing and financing industry, competition experienced by AT&T and its affiliates' industries may adversely affect the Company because of the significance to the Company of its business with customers of AT&T and its affiliates. Those industries 11 14 are highly competitive and subject to rapid changes in technology and customer needs. Many of AT&T and its affiliates' competitors are large companies that have substantial capital, technology and marketing resources. Employees AT&T Capital has approximately 2,700 employees as of February 28, 1995, each of whom is referred to within the Company as a "member". Titles are generally not used internally. In general, the members function using a team approach, with business conducted on a collaborative rather than hierarchical basis. Management believes that its members are skilled and highly motivated and that the Company's ability to achieve its objectives depends upon their efforts and competencies. None of the Company's members are represented by a union. The Company believes that its relations with its members are good. ITEM 2. PROPERTIES The Company's properties consist primarily of administrative offices and warehouses for the storage and refurbishment of equipment. The Company has its headquarters in Morristown, New Jersey, with its principal domestic offices and warehouses located in Parsippany, New Jersey; Framingham, Massachusetts; Bloomfield Hills, Michigan; Miamisburg, Ohio; Towson, Maryland; and Dallas, Texas. The Company's principal international offices are in London, England; Toronto, Canada; Hong Kong; Sydney, Australia; and Mexico City, Mexico. All these offices and warehouses are leased (some being subleased from AT&T or one of its affiliates), except for two buildings (of approximately 23,000 and 9,000 square feet) in Framingham, Massachusetts, owned by a subsidiary of the Company. Each of these two buildings is used for office space and storage and one is partially sublet to a nonaffiliated company. The Company considers its present locations suitable and adequate to carry on its current business. ITEM 3. LEGAL PROCEEDINGS The Company is not currently a party to any pending litigation nor is the Company aware of any threatened litigation which in the opinion of the Company's management will have a material adverse impact on the Company's financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS There have been no matters submitted to a vote of security holders during the fourth quarter of 1994. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Market Information The principal market on which the common stock of the Company is traded is the New York Stock Exchange. 12 15 Quarter Ended: Quarterly Stock Prices Dividends declared per share High Low December 31, 1993 $29.250 $22.375 $0.09 March 31, 1994 $27.000 $22.875 $0.09 June 30, 1994 $24.750 $21.625 $0.09 September 30, 1994 $24.375 $21.375 $0.09 December 31, 1994 $24.500 $19.750 $0.10 (b) Holders As of February 28, 1995, there were 815 holders of record of the Company's common stock, including AT&T through Old Capital and Old Credit (which held 40,250,000 shares or approximately 86% of total shares outstanding). (c) Dividends It is anticipated that the Company will continue to pay regular quarterly dividends. The declaration of dividends and their amounts will be at the discretion of the Company's board of directors, and there can be no assurance that additional dividends will be declared. ITEM 6. SELECTED FINANCIAL DATA The Results of Operations Data for the years ended December 31, 1994, 1993, 1992, 1991 and 1990, as well as the Balance Sheet Data and Other Data at December 31, 1994, 1993, 1992 and 1991, are derived from the Consolidated Financial Statements of the Company at such dates and for such periods, which have been audited by Coopers & Lybrand L.L.P., independent accountants. The Results of Operations Data for the years ended December 31, 1989, 1988, 1987, 1986 and 1985, as well as the Balance Sheet Data and Other Data at December 31, 1990, 1989, 1988, 1987, 1986 and 1985, are derived from unaudited consolidated financial information. In management's opinion, the Company's unaudited consolidated financial statements at or for the years ended December 31, 1990, 1989, 1988, 1987, 1986 and 1985, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation. The selected financial data as presented under the "Financial Highlights" caption in the Company's Annual Report should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto. 13 16 For the years ended December 31, (Dollars in thousands, 1994 1993 1992 1991 1990 except per share amounts)______ ______ ______ ______ ______ Results of Operations Data: Total revenue $1,384,079 $1,359,589 $1,265,526 $1,160,150 $ 881,183 Interest expense 271,812 236,335 252,545 275,650 262,646 Operating and administrative expenses 427,187 381,515 359,689 298,833 193,882 Provision for credit losses 80,888 123,678 111,715 108,635 75,508 Income before income taxes, extraordinary loss and cumulative effect on prior years of accounting change 173,614 138,040 114,875 82,559 70,891 Income before extra- ordinary loss, cumu- lative effect on prior years of accounting change and impact of tax rate change 100,336 83,911 73,572 54,199 47,755 Extraordinary loss - - - - - Cumulative effect on prior years of accounting change (1) - (2,914) - - - Impact of 1993 tax rate change (1) - (12,401) - - - Net income (1) 100,336 68,596 73,572 54,199 47,755 Earnings per share (1) 2.14 1.60 1.83 1.35 1.19 Earnings per share before tax charges (1), (2) 2.14 1.95 1.83 1.35 1.19 Dividends paid 17,338 4,216 49,632 55,512 34,423 Dividends per share (7) 0.37 0.09 - - - Return on average equity 10.5% 8.5% 11.4% 10.7% 11.0% Return on average assets 1.4% 1.1% 1.3% 1.1% 1.1% Return on average equity before tax charges (2) 10.5% 10.3% 11.4% 10.7% 11.0% Return on average assets before tax charges (2) 1.4% 1.4% 1.3% 1.1% 1.1% ___________________________________________________________________________ Balance Sheet Data, at December 31: Total assets 8,021,923 6,409,726 5,895,429 5,197,245 4,722,694 Total debt(3) 5,556,458 4,262,405 4,089,483 3,594,247 3,312,421 Total liabilities 7,013,705 5,485,283 5,158,808 4,647,979 4,257,186 Total shareowners' equity $1,008,218 $ 924,443 $ 736,621 $ 549,266 $ 465,508 14 17 For the years ended December 31, (Dollars in thousands, 1989 1988 1987 1986 1985 except per share amounts)______ ______ ______ ______ ______ Results of Operations Data: Total revenue $ 466,508 $ 319,029 $ 259,716 $ 191,284 $ 130,473 Interest expense 177,474 130,913 93,275 67,145 55,947 Operating and administrative expenses 118,430 90,528 76,752 55,211 28,198 Provision for credit losses 32,222 19,135 39,227 28,049 5,970 Income before income taxes, extraordinary loss and cumulative effect on prior years of accounting change 59,346 47,306 40,269 38,816 39,283 Income before extra- ordinary loss, cumu- lative effect on prior years of accounting change and impact of tax rate change 44,416 30,756 26,147 22,659 21,256 Extraordinary loss - - - (1,157) - Cumulative effect on prior years of accounting change (1) - - - - - Impact of 1993 tax rate change (1) - - - - - Net income (1) 44,416 30,756 26,147 21,502 21,256 Earnings per share (1) 1.10 0.76 0.65 0.53 0.53 Earnings per share before tax charges (1), (2) 1.10 0.76 0.65 0.53 0.53 Dividends paid 17,746 28,192 24,674 15,195 7,348 Dividends per share (7) - - - - - Return on average equity 12.7% 11.5% 11.8% 13.0% 16.8% Return on average assets 1.4% 1.2% 1.3% 1.7% 3.1% Return on average equity before tax charges (2) 12.7% 11.5% 11.8% 13.0% 16.8% Return on average assets before tax charges (2) 1.4% 1.2% 1.3% 1.7% 3.1% ___________________________________________________________________________ Balance Sheet Data, at December 31: Total assets 3,836,799 2,715,592 2,324,695 1,552,847 1,048,583 Total debt(3) 2,742,843 1,692,556 1,640,879 1,019,970 739,888 Total liabilities 3,435,792 2,417,280 2,074,198 1,360,870 911,006 Total shareowners' equity $ 401,007 $ 298,312 $ 250,497 $ 191,977 $ 137,577 15 18 At or for the years ended December 31, (Dollars in thousands, 1994 1993 1992 1991 1990 except per share amounts)______ ______ ______ ______ ______ Other Data: Net portfolio assets of the Company $7,484,798 $6,076,805 $5,600,741 $4,956,830 $4,513,280 Allowance for credit losses 176,428 159,819 123,961 93,967 75,369 Assets of others managed by the Company 2,659,526 2,795,663 1,374,354 649,014 313,981 Volume of equipment financed (4) 4,251,000 3,467,000 3,253,000 2,453,000 2,300,000 Ratio of earnings to fixed charges (5) 1.62 1.57 1.44 1.29 1.26 Ratio of total debt to shareowners' equity 5.51 4.61 5.55 6.54 7.12 Ratio of allowance for credit losses to net charge-offs 3.18 2.71 1.58 1.15 1.62 Ratio of charge-offs to net investment (6) 0.73% 0.95% 1.37% 1.62% 1.01% Ratio of allowance for credit losses to net investment (6) 2.30% 2.56% 2.17% 1.86% 1.64% At or for the years ended December 31, 1989 1988 1987 1986 1985 ______ ______ ______ ______ ______ Other Data: Net portfolio assets of the Company 3,228,609 2,529,834 2,094,593 1,440,626 948,307 Allowance for credit losses 37,868 42,733 52,695 29,015 8,794 Assets of others managed by the Company 102,003 18,529 - - - Volume of equipment financed (4) $1,729,000 $1,489,000 $1,409,000 $1,101,000 $ 679,000 Ratio of earnings to fixed charges (5) 1.33 1.36 1.43 1.58 1.70 Ratio of total debt to shareowners' equity 6.84 5.67 6.55 5.31 5.38 Ratio of allowance for credit losses to net charge-offs 1.02 1.47 3.04 3.71 4.40 Ratio of charge-offs to net investment (6) 1.13% 1.13% 0.81% 0.53% 0.21% Ratio of allowance for credit losses to net investment (6) 1.16% 1.66% 2.45% 1.97% 0.92% 16 19 (1) Net income and earnings per share for 1993 were adversely impacted by the federal tax rate increase to 35% ($12.4 million) and a cumulative effect on prior years of accounting change ($2.9 million). (See Note 10 to the Consolidated Financial Statements.) Net income and earnings per share without these charges for 1993 would have been $83.9 million and $1.95 per share, respectively. (2) The Company defines return on average equity before tax charges, return on average assets before tax charges and earnings per share before tax charges, as income before cumulative effect on prior years of accounting change and impact of tax rate change as a percentage of average equity, average assets and divided by average weighted shares outstanding, respectively. (3) Does not include certain interest free loans from AT&T to the Company under certain tax agreements, in aggregate outstanding principle amounts of $214.1 million, $188.6 million, $193.1 million, $206.6 million, $239.6 million, $232.6 million, $244.5 million, $209.0 million, $134.1 million and $56.9 million at December 31, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987, 1986 and 1985, respectively. (4) Total principal amount of loans and total cost of equipment associated with finance and lease transactions recorded by the Company and the increase, if any, in outstanding inventory financing loans. (5) Earnings before income taxes, extraordinary loss and cumulative effect on prior years of accounting change plus the sum of interest on indebtedness and the portion of rentals representative of the interest factor divided by the sum of interest on indebtedness and the portion of rentals representative of the interest factor. A portion of the Company's indebtedness to AT&T does not bear interest. (6) Net investment includes net investment in finance receivables, capital leases and operating leases, prior to deduction of allowance for credit losses. (7) Prior to July 28, 1993, AT&T owned 100% of the Company's stock and therefore, dividends per share is not meaningful. 17 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS 1994 versus 1993 Net income for the year ended December 31, 1994, was $100.3 million, an increase of $31.7 million, or 46.3%, compared with 1993. Earnings per share for the year ended December 31, 1994, were $2.14, a 33.8% increase over the $1.60 reported in 1993. The increase in net income and earnings per share for 1994 compared with 1993 was impacted by the 1993 adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which resulted in a cumulative effect of accounting change of $2.9 million, and an $11.4 million charge to reflect the impact on deferred tax balances of the third quarter 1993 increase in the income tax rate to 35% from 34%. Absent the 1993 effect of adopting SFAS No. 109 and the impact of the increase in the income tax rate, net income increased $17.4 million, or 21.0%, and earnings per share increased $.21 per share. The increase principally reflected a higher average level of finance assets resulting from both origination volume and acquisitions of portfolios and businesses, and improved portfolio performance attributable to a stronger economy, which contributed to a lower provision for credit losses. Finance revenue of $120.8 million increased $13.4 million, or 12.4%, for 1994, compared with 1993, while the average earning finance receivable portfolio increased $165.3 million, or 15.8%, to $1,213.3 million for 1994. The increase in finance revenue due to the higher average earning finance receivables was offset by slightly lower average rates earned on the average 1994 portfolio compared with rates earned on the average 1993 portfolio. This is consistent with the Company's slightly lower average cost of borrowing for 1994, compared with 1993. (See interest expense discussion below.) A higher interest rate environment generally does not impact the margin on assets that are already recorded by the Company, since the Company employs a well-defined strategy to match fund assets with borrowings in order to limit interest rate risk. The effects of higher borrowing costs would be reflected in the pricing of new assets leased or financed. As the lower yielding earning assets (as well as the corresponding lower cost borrowings) are replaced with higher yielding assets, reflective of the current interest rate environment, the Company's average rates associated with recorded assets and associated borrowings will increase. Capital lease revenue of $477.9 million increased $85.9 million, or 21.9%, for 1994, compared with 1993, while the average earning capital lease portfolio increased $1,007.4 million, or 27.6%, to $4,653.3 million for 1994. $40.7 million of the increase in capital lease revenue for 1994, compared with 1993, is due to international acquisitions and expansion. The growth in capital lease revenue resulted from a higher level of assets (including an AT&T mainframe lease extension which resulted in the reclassification of the lease from an operating lease to a capital lease) but was partially offset by a decline in yields due to lower average rates associated with recorded assets of the Company. As noted above, this is 18 21 consistent with the Company's slightly lower cost of borrowing for 1994, compared with 1993. However, the Company has experienced some margin compression in certain equipment leasing portfolios as pricing in connection with some portfolios is less reactive to interest rate movements. Rental revenue on operating leases of $475.4 million decreased $26.8 million, or 5.3%, for 1994, compared with 1993. Depreciation on operating leases of $313.6 million decreased $20.6 million, or 6.2%, for the year ended December 31, 1994, compared with the year ended December 31, 1993. These decreases were primarily due to the AT&T mainframe computer lease extension during the first quarter of 1994. The terms of the extension, which reduced the Company's mainframe residual exposure, resulted in the reclassification of the lease from an operating lease to a capital lease. The impact of this lease extension reduced rental revenue and depreciation by $75.3 million and $51.2 million, respectively, for the year ended December 31, 1994, compared with the year ended December 31, 1993. While domestic rental revenue and depreciation have decreased, rental revenue and depreciation related to the Company's international operations increased $13.0 million and $10.8 million, respectively, for the year ended December 31, 1994, compared with the year ended December 31, 1993. Rental revenue less associated depreciation ("operating lease margin") was $161.8 million or 34.0% of rental revenue for 1994, compared with $167.9 million, or 33.4%, for 1993. Market forces, economic uncertainty and the transition to a new generation of mainframes and technological alternatives, have adversely impacted the market for mainframe computers. At December 31, 1994, $527.1 million, or 7.0%, of portfolio assets (with related residual values of $79.1 million) related to mainframe computers. This compares with $687.0 million, or 11.3%, (with related residual values of $232.2 million) at December 31, 1993. The Company regularly monitors its estimates of residual values for all leased equipment including mainframe computers and believes that its residual values are conservatively stated. For the year ended December 31, 1994, revenue from sales of equipment purchased for resale of $126.6 million decreased $35.0 million, or 21.6%, compared with 1993. Cost of equipment sales of $117.0 million decreased $28.8 million, or 19.8%, for 1994, compared with 1993. Equipment sales revenue less associated cost of equipment sold ("equipment sales margin") was $9.6 million, or 7.6%, of equipment sales revenue for the year ended December 31, 1994. Equipment sales margin for the year ended December 31, 1993, was $15.7 million, or 9.7%, of equipment sales revenue. The decrease in the equipment sales margin as a percentage of related revenue for 1994, compared with 1993, reflects continued softness in the mainframe computer market, as well as increased competition. In 1993, the Company, was able to seize an opportunity to expand this activity to Europe. However, the European market has experienced increased competition in 1994. Therefore, the Company was not able to maintain its 1993 level of European sales and expects that future European activity in this area will be limited. Other revenue of $183.5 million decreased $13.0 million, or 6.6%, in 1994, compared with 1993. Other revenue consists mainly of sales of leased and off-lease equipment, gains on securitization of lease receivables and 19 22 service fee revenue. (See Note 6 to the Consolidated Financial Statements.) The decrease in other revenue for 1994, compared with 1993, is primarily due to lower securitization gains of $36.7 million and lower service fee revenue of $10.2 million recognized for the year ended December 31, 1994, compared with the year ended December 31, 1993. The decreases were partially offset by increased gains on sales of leased and off-lease equipment of $26.8 million. In the fourth quarter of 1994, the Company securitized $259.1 million of lease receivables resulting in a gain of $14.8 million. Similar securitizations in the first and fourth quarters of 1993 of $561.9 million in lease receivables resulted in $51.5 million in gains. While the assets securitized in 1994 were down by 53.9%, the related gain decreased by 71.3%. The difference is primarily attributable to a higher discount rate used in the 1994 securitization due to the higher interest rate environment. Under the terms of these securitizations, the Company is liable to the purchasers of such receivables for a limited amount of recourse granted by the Company to such purchasers. In the unlikely event that all such receivables became uncollectible at December 31, 1994, the Company's maximum exposure under limited recourse provisions granted to the purchasers of all securitized lease receivables was $353.1 million. In addition, the Company provides such purchasers with billing and collection and other services with respect to such securitized receivables. At December 31, 1994, total assets managed by the Company on behalf of others were $2.7 billion compared with $2.8 billion at December 31, 1993. Of the total assets managed by the Company on behalf of others, 55.9% in 1994 and 59.2% in 1993, were assets managed on behalf of AT&T and its affiliates. A substantial part of the Company's total United States assets, revenue and net income are attributable to leasing and financing of AT&T equipment and to leasing and financing equipment to AT&T and its affiliates and employees of AT&T (together, the "relationship with AT&T"). Total United States assets associated with the relationship with AT&T were $3,297.8 million (or 46.1% of total United States assets) and $3,050.5 million (or 50.8% of total United States assets) at December 31, 1994 and 1993, respectively. Total United States revenue and net income associated with the relationship with AT&T was $589.7 million (or 47.2% of total United States revenue) and $92.7 million (or 88.7% of total United States net income) for 1994, and $625.2 million (or 49.1% of total United States revenue) and $92.8 million (or 98.0% of total United States net income, excluding the cumulative effect of accounting change and impact of the tax rate change) for 1993. The Company's United States non-AT&T businesses had assets of $3,850.9 million (or 53.9% of total United States assets) and $2,952.4 million (or 49.2% of total United States assets) at December 31, 1994 and 1993, respectively. The Company's United States non-AT&T businesses contributed revenue of $660.9 million (or 52.8% of total United States revenue) and net income of $11.9 million (or 11.3% of total United States net income) for 1994, and revenue of $649.4 million (or 50.9% of total United States revenue) and net income of $1.9 million (or 2.0% of 20 23 total United States net income, excluding the cumulative effect of accounting change and the impact of the tax rate change) for 1993. At December 31, 1994 and 1993, the total assets of the Company's international operations were $873.2 million (or 10.9% of total assets) and $406.9 million (or 6.3% of total assets), respectively. The total revenue of such operations for the years ended December 31, 1994, 1993 and 1992, were $133.5 million (or 9.6% of total revenue), $85.0 million (or 6.2% of total revenue) and $14.0 million (or 1.1% of total revenue), respectively. The profitability of the Company's international operations continued to improve in 1994. While such operations generated net losses of $4.2 million for the year ended December 31, 1994, the results compare favorably to the $9.4 million loss reported in 1993 and the $13.8 million loss reported in 1992. These losses reflected the fact that most of the Company's international operations are in the start-up phase, with revenue from such operations not covering operating costs and expenses. The Company's operations in the United Kingdom, which were established in 1991, were profitable for the first time in 1994. Although a substantial majority of the Company's international assets and revenues at and for the years ended December 31, 1994, 1993 and 1992, were attributable to the Company's non-AT&T businesses, a principal focus of such foreign operations is to serve foreign customers of AT&T and its affiliates as well as other vendors. Total non-AT&T net income, revenue and total assets including both United States and international businesses for the year ended December 31, 1994, was $9.0 million (or 9.0% of total net income), $789.9 million (or 57.1% of total revenue) and $4,698.7 million (or 58.6% of total assets), respectively. For the year ended December 31, 1993, total non-AT&T net loss (before the impact of SFAS No. 109 and the impact of the 1993 increase in the federal tax rate), revenue and total assets including both United States and international businesses were $7.5 million, $731.6 million (or 53.8% of total revenue) and $3,337.1 million (or 52.1% of total assets), respectively. Growth in the Company's portfolio assets caused the average borrowings outstanding to increase by 15.6%, or $650.2 million, to $4.8 billion, while the Company's interest expense increased 15.0%, or $35.5 million, to $271.8 million during the year ended December 31, 1994, compared with the year ended December 31, 1993. The increase in average borrowings caused interest expense to increase by approximately $37.0 million. This increase was partially offset by $1.5 million in lower interest expense due to lower average interest rates for the year ended December 31, 1994, compared with the year ended December 31, 1993. The Company's average interest rate on borrowings was 5.65% for the year ended December 31, 1994, compared with 5.68% for the year ended December 31, 1993. The recent increase in borrowing costs is reflected in new borrowings made by the Company. Generally, the Company's product pricing is impacted by interest rate movements. As interest rates change, product pricing is generally adjusted to compensate for the Company's higher or lower cost of funds. Although, in certain portfolios, the Company may not be able to increase its product pricing commensurate with, or simultaneous to, any future increases in its borrowing costs. 21 24 Operating and administrative costs of $427.2 million increased $45.7 million, or 12.0%, in 1994, compared with 1993. The increase is primarily attributable to costs of approximately $30 million associated with the start-up of certain non-AT&T businesses, acquisitions and international expansion as well as costs of $10.9 million associated with the Company's new benefit and incentive plans for the year ended December 31, 1994, compared with the year ended December 31, 1993. Also contributing to the increase were higher costs associated with managing a higher level of finance assets. For 1994, operating and administrative costs to total year-end assets decreased to 5.3% compared with 6.0% for 1993. This decrease can be attributed to some of the Company's start-up businesses more fully utilizing their infrastructure, increased operating efficiencies and timing of assets financed. The Company's goal is to reach 4.5% or lower within the next few years. Effective January 1, 1993, the Company adopted SFAS No. 109. The change in accounting for income taxes resulted in a charge to earnings of $2.9 million in the first quarter of 1993 as the cumulative effect on prior years of this change, but had no effect on cash flows. The majority of this charge related to establishing a valuation allowance against certain deferred tax assets relating to state and local income taxes. The effective income tax rate was 42.2% and 48.2% for 1994 and 1993, respectively. The decrease was primarily due to the effect of the retroactive tax rate increase recorded in the third quarter of 1993. Due to the increase in the federal statutory corporate income tax rate from 34% to 35% signed into law in August 1993, the Company recorded an additional charge to the provision for income taxes of $12.4 million in 1993. The $12.4 million charge includes the impact of increasing previously recorded deferred tax liabilities by $11.4 million. (See Note 10 to the Consolidated Financial Statements.) Excluding the $11.4 million impact of increasing previously recorded deferred tax liabilities to reflect the increase in the federal statutory corporate income tax rate for 1993, the effective tax rate would have been 39.9%. The increase in the effective tax rate for 1994, compared with the adjusted effective tax rate for 1993, was due to increased non-deductible goodwill amortization expense related to goodwill associated with assets that were sold during the second quarter of 1994 as well as various other increases. See "Credit Quality" below for a discussion of the provision for credit losses. 1993 versus 1992 Income before income taxes and cumulative effect of an accounting change for the year ended December 31, 1993, of $138.0 million increased $23.2 million, or 20.2%, compared with the year ended December 31, 1992. Total revenue of $1,359.6 million for the year ended December 31, 1993, grew $94.1 million, or 7.4%, compared with the year-earlier period, while total expenses of $1,221.5 million (excluding the provision for income taxes and cumulative effect of accounting change) increased $70.9 million, or 6.2%. The impact of the federal statutory tax rate increase from 34% to 35% in 1993 of $12.4 million (of which $11.4 million related to the impact of adjusting deferred tax balances) adversely affected net income for 1993, 22 25 compared with 1992. Also in the first quarter of 1993, the Company adopted SFAS No. 109, resulting in a charge to earnings of $2.9 million. Without these charges, net income for the year ended December 31, 1993, would have been $83.9 million or $1.95 per share, a 14.1% increase over net income in the prior year. Reported net income for 1993 was $68.6 million, or $1.60 per share. The Company's increase in earnings before income taxes for the year ended December 31, 1993, compared with 1992, principally resulted from a higher average level of finance assets, increased gains on end of lease activity, lower rates on borrowings and higher servicing fees for managed portfolios. Finance revenue of $107.4 million decreased $11.8 million, or 9.9%, for 1993, compared with 1992, while the average finance receivable portfolio increased $73.0 million, or 7.2%, over the same period. The positive revenue variance generated by the increased asset level was more than offset by a decline in rates charged to customers that reflected the lower interest rate environment of 1993, compared with 1992. Capital lease revenue of $392.0 million increased $10.8 million, or 2.8%, for 1993, compared with 1992, while the average capital lease portfolio increased 14.8%. The growth in capital lease revenue resulted from a higher level of assets but was partially offset by a decline in product pricing reflective of the lower interest rate environment. Rental revenue on operating leases of $502.1 million increased $31.1 million, or 6.6%, for 1993, compared with 1992. This increase was due to increased rates charged to customers and to a slight increase in the average net investment in operating leases for 1993, compared with 1992. Depreciation on operating leases of $334.2 million increased $28.7 million, or 9.4%, for 1993, compared with 1992. Rental revenue less associated depreciation ("operating lease margin") was $167.9 million, or 33.4%, of rental revenue for 1993, compared with $165.5 million, or 35.1%, for 1992. The operating lease margin for 1993, was somewhat lower than the operating lease margin for 1992, due to lower estimated residual value assumptions of equipment in both the primary and secondary markets, particularly for computers, resulting in higher depreciation expense. Market forces, economic uncertainty and the transition to a new generation of mainframes and technological alternatives, have impacted the market for mainframe computers. At December 31, 1993, $687.0 million, or 11.3%, of portfolio assets, the majority of which were operating leases, related to mainframe computers. This compares with $791.9 million, or 14.1%, at December 31, 1992. The Company regularly monitors its estimates of residual values for all leased equipment including mainframe computers and believes that its residual values are conservatively stated. As a result of the Company's analysis of developments affecting the major mainframe computer manufacturers and their pricing policies, and technological advances in the computer industry (e.g., advances made in client server architectures), declines in the future residual value of certain mainframe computers were identified during 1993. The effect of this change increased depreciation expense by $2.5 million in 1993. 23 26 For the year ended December 31, 1993, revenue from sales of equipment purchased for resale increased $28.8 million, or 21.7%, to $161.5 million compared with 1992. Cost of equipment sales of $145.8 million increased $24.7 million, or 20.3%, for 1993, compared with 1992. During 1993, the Company expanded this activity to Europe which caused the increase from the prior year. In 1993 and 1992, the Company's total United States revenue associated with financing provided for customers of AT&T and its affiliates was $423.3 million, or 33.2%, of total United States revenue, and $410.5 million, or 32.8%, of total United States revenue, respectively. United States revenue generated from AT&T and its affiliates and employees of AT&T and its affiliates as end-users of equipment was $201.9 million, or 15.9%, and $185.2 million, or 14.8%, in 1993 and 1992, respectively, of total United States revenue. Therefore, $625.2 million, or 49.1%, in 1993 and $595.7 million, or 47.6%, in 1992, of the Company's total United States revenue was associated with the Company's relationship with AT&T. Other revenue of $196.5 million grew $35.1 million, or 21.8%, in 1993, compared with 1992. Other revenue consists mainly of gains on securitization of lease receivables, sales of leased and off-lease equipment and service fee revenue. (See Note 6 to the Consolidated Financial Statements.) The increase in other revenue for 1993, compared with 1992, is primarily due to increased gains on sales of leased and off-lease equipment of $9.8 million and increased service fee revenue of $18.8 million, of which $18.4 million relates to service fees from AT&T for managing certain assets on behalf of AT&T. In the first and fourth quarters of 1993, the Company securitized $151.9 million and $410.0 million of lease receivables, respectively, resulting in a gain of $51.5 million. A similar securitization in the fourth quarter of 1992, resulted in a $52.4 million gain. Under the terms of these securitizations, the Company is liable to the purchasers of such receivables for a limited amount of recourse granted by the Company to such purchasers. In the unlikely event that all such receivables became uncollectible at December 31, 1993, the Company's maximum exposure under limited recourse provisions granted to the purchasers of all securitized lease receivables was $347.3 million. In addition, the Company provides such purchasers with billing and collection and other services with respect to such securitized receivables. At December 31, 1993, total assets managed by the Company on behalf of others were $2.8 billion compared with $1.4 billion at December 31, 1992. Included in assets managed at December 31, 1993, was $1.4 billion of lease finance assets retained by AT&T as a result of the Restructuring. These assets consist principally of equity interests in project finance transactions and leveraged leases of commercial aircraft. Of the total assets managed by the Company, 59.2% in 1993, and 21.6% in 1992, were assets managed on behalf of AT&T and its affiliates. The Company continued to benefit from lower interest rates on its borrowings. Interest expense of $236.3 million decreased $16.2 million, or 6.4%, in 1993, compared with 1992. The decrease was the result of a lower 24 27 cost of funds in 1993, compared with 1992. The lower cost of funds was partially offset by an increase in average borrowings for 1993, compared with 1992. Operating and administrative costs of $381.5 million increased $21.8 million, or 6.1%, in 1993, compared with 1992. The increase in operating and administrative costs for 1993, compared with 1992, reflected an increase of $11.4 million in the Company's cost of operations in Europe and Canada over 1992. The Company's European and Canadian operations generated an aggregate net loss of $9.4 million for 1993, compared with an aggregate net loss of $13.8 million for 1992. The Company also incurred an additional $6.7 million in operating and administrative costs related to start-up businesses such as Small Business Administration ("SBA") lending (which commenced operations late in 1992) for 1993, compared with 1992. The balance of the increase in operating and administrative expenses for the year ended December 31, 1993, compared with the year ended December 31, 1992, is due primarily to costs associated with managing a higher level of finance assets. Effective January 1, 1993, the Company adopted SFAS No. 109. The change in accounting for income taxes resulted in a charge to earnings of $2.9 million, in the first quarter of 1993, as the cumulative effect on prior years of this change, but had no effect on cash flows. The majority of this charge related to establishing additional net deferred tax credits relating to state and local income taxes. The effective income tax rate was 48.2% and 36.0% for 1993 and 1992, respectively. The increase was primarily due to the effect of the retroactive 1993 tax rate increase recorded in the third quarter of 1993. Due to the increase in the federal statutory corporate income tax rate from 34% to 35% signed into law in August 1993, the Company recorded an additional charge to the provision for income taxes of $12.4 million in 1993. The $12.4 million charge includes the impact of increasing previously recorded deferred tax liabilities by $11.4 million. (See Note 10 to the Consolidated Financial Statements.) See "Credit Quality" below for a discussion of the provision for credit losses. FINANCIAL CONDITION Portfolio assets (investment in finance receivables, capital leases and operating leases), net of reserves, increased by $1,408.0 million, or 23.2%, at December 31, 1994, to $7,484.8 million compared with December 31, 1993, principally due to growth in the Company's international lease portfolio and the domestic automobile lease portfolio, as well as a lower level of assets securitized in 1994. During January 1994, the Company purchased Australian Guarantee Corporation Finance (H.K.) Limited ("A.G.C. Finance"), a subsidiary of Australian Guarantee Corporation Limited and A.G.C. Overseas Holdings Limited. A.G.C. Finance, renamed The Capita Corporation Hong Kong Limited, 25 28 is a Hong Kong based automobile and equipment financing and leasing company which also provides commercial and personal loans. Also in January 1994, the Company purchased Avis Leasing, a division of AvisCar, which provides automobile fleet leasing and supporting service programs to small and mid-size commercial and corporate customers in Canada. The total assets acquired through these two international acquisitions were approximately $240 million. Additionally, during 1994, the Company opened offices in Mexico and Australia. The Company has from time to time investigated potential opportunities to make acquisitions abroad, and the Company may open additional foreign offices on a limited basis either directly or through acquisition. As a result of the above mentioned acquisitions, the Company's international assets (excluding cross border transactions) at December 31, 1994, grew to 10.9% of total assets, up from 6.3% at December 31, 1993. In January 1995, the Company acquired the vendor leasing and finance companies of Banco Central Hispano and certain of its affiliates ("CFH Leasing International") located in the United Kingdom, Germany, France, Italy, Belgium, the Netherlands and Luxembourg. CFH Leasing International provides financial services to equipment manufacturers and vendors. With offices throughout western Europe, it serves approximately 4,600 customers and had approximately $540 million in assets at the time of acquisition. The net investment in finance receivables increased by $255.6 million, or 21.4%, at December 31, 1994, to $1,452.9 million compared with December 31, 1993, due primarily to increases in the Company's telecommunications systems portfolio, small business lending portfolio and the acquisition of A.G.C. Finance. The net investment in capital leases increased by $1,229.1 million, or 31.5%, at December 31, 1994, to $5,129.3 million compared with December 31, 1993. This increase was primarily due to an increase in the international lease portfolio and the domestic automobile lease portfolio, as well as to a lower level of assets securitized in the Company's small ticket business equipment lease portfolio in 1994. Also contributing to the increase was the AT&T lease extension in the first quarter of 1994. The terms of the extension, which reduced the Company's mainframe residual exposure, resulted in a reclassification of the mainframe lease from an operating lease to a capital lease. The net investment recorded in capital leases at December 31, 1994, with respect to this lease, was approximately $150 million. The net investment in operating leases decreased by $76.8 million, or 7.8%, at December 31, 1994, to $902.5 million compared with December 31, 1993. The decline was primarily due to the AT&T lease extension during the first quarter of 1994, discussed above, but was somewhat offset by increases in the international lease portfolio and the domestic automobile lease portfolio. 26 29 LIQUIDITY AND CAPITAL RESOURCES The Company generates a substantial portion of its funds from lease and rental receipts, but is also highly dependent upon external financing, including the issuance of commercial paper and medium-term notes in public markets and, to a lesser extent, privately placed asset-backed financings (or securitizations). Standard & Poor's Corporation, Moody's Investors Service, Inc., and Duff & Phelps Credit Rating Co. have rated the Company's senior long-term debt A, A3 and A, respectively, and have rated the Company's commercial paper A-1, P-1 and D-1, respectively. Funds required to support the Company's operations during 1994, were derived internally primarily from principal and interest collections from customers (which include realization of cash from residual values through remarketing activities), and externally from issuances of commercial paper, and issuances of medium-term debt. The Company estimates that, under existing lease and loan terms, gross cash receipts of approximately $8.1 billion may be generated in the future. In 1994, the Company issued commercial paper of $29.0 billion, issued medium-term notes of $2.1 billion and made commercial paper repayments of $28.4 billion and medium-term note repayments of $1.4 billion. In 1993, the Company issued commercial paper of $17.0 billion and made commercial paper repayments of $17.4 billion, and issued medium-term notes of $1.2 billion and repaid medium-term notes of $632.6 million. Additionally, the Company borrowed and repaid approximately $5.0 billion from AT&T on a short-term basis during 1993. During 1994 and 1993, principal collections from customers and proceeds from securitized receivables of approximately $3.8 billion and $4.1 billion, respectively, were received. These receipts were primarily used for financing portfolio assets (including purchases of finance asset portfolios and businesses) of approximately $5.5 billion in 1994, and $5.1 billion in 1993. In conjunction with the Hong Kong acquisition, the Company assumed $106.1 million of A.G.C. Finance's debt, of which $93.0 million was outstanding at December 31, 1994. The Company has paid quarterly dividends every quarter since the fourth quarter of 1993, its first full quarter of operations after its initial public offering. On January 20, 1995, the Company's board of directors declared a quarterly dividend of ten cents per share. The dividend was paid on February 28, 1995, to shareowners of record as of February 10, 1995. During 1993, the Company's borrowings consisted primarily of loans from AT&T, until July 14, 1993, when the Company established its own commercial paper facility. The Company filed a shelf registration with the Securities and Exchange Commission ("SEC") on July 26, 1993, registering $2.5 billion of debt securities. Borrowing under this shelf registration commenced on August 5, 1993. In July 1994, the Company registered with the SEC an additional $2.5 billion of debt securities (including medium-term notes) and warrants to purchase debt securities, currency warrants, index 27 30 warrants and interest rate warrants. At December 31, 1994, $2,474.7 million of medium-term debt was outstanding under these debt registrations. Also in July 1994, the Company re-established credit facilities of $2.0 billion. These facilities, negotiated with a consortium of 32 lending institutions, support the commercial paper issued. At December 31, 1994, these facilities were unused. The Company also has available local lines of credit to meet local funding requirements in Hong Kong, Canada, the United Kingdom and Australia of approximately $134 million, of which approximately $29 million was unused at December 31, 1994. On August 4, 1993, the Company received $117.2 million of proceeds (excluding costs of the transaction of approximately $1.7 million) from stock offerings. (See Notes 1 and 8 to the Consolidated Financial Statements.) These proceeds were used to reduce the amount of the Company's outstanding commercial paper and loans from AT&T otherwise required to be "rolled over" (i.e., refinanced at maturity with the proceeds of newly-incurred indebtedness for borrowed money). The Company has, from time to time, borrowed funds directly from AT&T, including on an interest free basis pursuant to tax agreements. These interest free loans amounted to $214.1 million at December 31, 1994. These sources of funds would not be available if the Company were to cease being a member of AT&T's consolidated group for federal income tax purposes. The Company anticipates obtaining all necessary external financing through issuances of commercial paper, privately placed asset-backed financings (or securitizations), available lines of credit for certain foreign operations and debt registrations. Future financing is contemplated to be arranged through a large number of financial institutions as necessary to meet the Company's capital and other requirements with the timing of issue, principal amount and form depending on the Company's needs, prevailing market and general economic conditions. The Company considers its current financial resources, together with the debt facilities referred to above, and estimated future cash flows, to be adequate to fund the Company's future growth and operating requirements. ASSET AND LIABILITY MANAGEMENT AT&T Capital's asset and liability management ("ALM") process takes a coordinated approach to the management of interest rate and foreign currency risks. The Company's overall strategy is to match the average maturities of its borrowings with the average cash flows of its portfolio assets, as well as the currency denominations of its borrowings with those of its portfolio assets, in a manner intended to reduce the Company's interest rate and foreign currency exposure. The following discussion 28 31 describes certain key elements of this process, including AT&T Capital's use of derivatives to manage risk. Match Funding AT&T Capital generally matches the duration and maturity structure of its liabilities to that of its portfolio assets. The Company routinely projects the expected future cash flows related to its current portfolio assets. Based on these projections, the Company is able to match the maturity and duration of its debt with that of its assets. The cash flow projections incorporate assumptions about customer behavior such as prepayments, refinancings and charge-offs. The assumptions are based on historical experience with the Company's individual markets and customers and are continually monitored and updated as markets and customer behaviors change, to reflect current customer preferences, competitive market conditions, portfolio growth rates and portfolio mix. Interest Rate Risk and Currency Exchange Risk AT&T Capital actively manages interest rate risk to protect the Company's margins on existing transactions. Interest rate risk is the risk of earnings volatility attributable to changes in interest rates. The Company routinely analyzes its portfolio assets and strives to match floating rate assets with floating rate debt and fixed rate assets with fixed rate debt. The Company generally achieves a matched position through issuances of commercial paper and medium-term notes, as well as through the use of interest rate swaps. The Company does not speculate on interest rates, but rather seeks to mitigate the possible impact of interest rate fluctuations. This is a continual process due to prepayments, refinancings, non-performing loans, as well as other portfolio dynamics, and therefore, interest rate risk can be significantly limited but never fully eliminated. Additionally, the Company enters into foreign exchange contracts and participates in the currency swap market to mitigate its exposure to assets and liabilities denominated in foreign currencies and to meet local funding requirements. The Company expects to enter into more foreign exchange contracts and currency swaps in 1995, as a result of the January 1995 acquisition of CFH Leasing International, described above. Using Derivatives to Manage Interest Rate and Currency Risk AT&T Capital uses derivatives to match fund its portfolio and thereby manage interest rate and currency risk. Derivatives can be customized in terms of duration and interest rate basis (i.e., fixed or floating). Derivatives used by the Company are operationally efficient to arrange and maintain. Whether AT&T Capital issues medium-term notes, on which it pays a fixed rate, or issues floating rate debt and utilizes interest rate swaps, on which it generally pays a fixed rate and receives a floating rate, the Company's interest rate risk position can be equally well managed. However, it is the interplay between liquidity, capital, portfolio characteristics, and economic and market conditions which will determine the final mix of medium-term notes, commercial paper and swaps 29 32 (or other derivatives) used to manage interest rate risk. Notes 7 and 13 to the Consolidated Financial Statements provide more details regarding the Company's debt portfolio and interest rate and currency swap and foreign exchange contract positions. Derivative Credit Risk The notional amount of derivative contracts does not represent direct credit exposure. Rather, credit exposure may be defined as the market value of the derivative contract and the ability of the counterparty to perform its payment obligation under the agreement. The majority of the Company's interest rate swaps require AT&T Capital to pay a fixed rate and receive a floating rate. Therefore, this risk is reduced in a declining interest rate environment as the Company is generally in a payable position, and is increased in a rising interest rate environment as the Company is generally in a receivable position. The Company seeks to control the credit risk of its interest rate swap agreements through credit approvals, exposure limits and monitoring procedures. All swap agreements are with major money center banks and intermediaries rated "A" or better by national rating agencies, with the majority of the Company's counterparties being rated "AA" or better. There were no past due amounts or reserves for credit losses at December 31, 1994, related to derivative transactions, nor were there any charge-offs during the three years ended December 31, 1994. Debt to Equity Total debt to equity at December 31, 1994, of 5.51 increased from 4.61 at December 31, 1993. This increase was due to the deployment of the proceeds of the initial public offering of the Company's common stock in the third quarter of 1993. As a result of the January 1995 acquisition of CFH Leasing International, leverage increased to approximately 6.00. CREDIT QUALITY The control of credit losses is an important element of the Company's business. The Company seeks to minimize its credit risk through diversification of its portfolio assets by customer, customer type, geographic location and maturity. The Company's financing activities have been spread across a wide range of equipment segments (e.g., telecommunications, general, data center, other data processing, and transportation) and a large number of customers located throughout the United States and, to a lesser extent, abroad. Portfolio credit performance indicators continued to improve in 1994. Delinquency and charge-off levels declined during 1994, while nonaccrual assets at December 31, 1994, totalled $120.5 million compared with $160.6 30 33 million at December 31, 1993. This lower level of nonaccrual assets, charge-off levels and delinquency, resulted in a decrease in the Company's provision for credit losses of $42.8 million, or 34.6%, to $80.9 million, compared with 1993. For 1994, charge-offs to investment in portfolio assets improved to .73%, compared with .95% for 1993. As a result of the improved credit performance indicators and the strong economy, the allowance for credit losses was 2.30% of the Company's investment in portfolio assets at December 31, 1994, compared with 2.56% at December 31, 1993. At December 31, 1994, the allowance for credit losses was $176.4 million, compared with $159.8 million at December 31, 1993. The Company maintains an allowance for credit losses at an amount based on a detailed analysis of delinquencies and problem portfolio assets, an assessment of overall risk and management's evaluation of probable losses in the portfolio as a whole given its diversification, and a review of historical loss experience. Management also takes into consideration the potential impact of existing and anticipated economic conditions. The Company's management believes that the diversity and strength of its portfolio assets, along with vigilant attention to risk management, position it to deal effectively with a changing global economic environment. RECENT PRONOUNCEMENTS For a discussion of the effect on the Company of SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures", each of which was recently issued by the Financial Accounting Standards Board ("FASB"), see Note 4 to the Consolidated Financial Statements included herein. The FASB also recently issued SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments", which was effective for the Company's December 31, 1994, financial statements. SFAS No. 119 required or suggested certain disclosures with respect to derivative financial instruments. (See Note 13 to the Consolidated Financial Statements included herein.) 31 34 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AT&T CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ___________________________________________________________________________ At December 31, 1994 1993 (Dollars in Thousands) ___________________________________________________________________________ ASSETS: Cash and cash equivalents (Note 2) $ 54,464 $ - Net investment in finance receivables (Note 4) 1,452,947 1,197,303 Net investment in capital leases (Notes 4 and 12) 5,129,326 3,900,224 Net investment in operating leases, net of accumulated depreciation of $567,398 in 1994 and $573,639 in 1993 (Notes 5 and 12) 902,525 979,278 Deferred charges and other assets (Notes 2, 6 and 12) 482,661 332,921 ___________________________________________________________________________ Total Assets 8,021,923 6,409,726 ___________________________________________________________________________ LIABILITIES AND SHAREOWNERS' EQUITY: LIABILITIES: Short-term notes, less unamortized discounts of $4,619 in 1994 and $3,018 in 1993 (Note 7) 2,176,877 1,546,562 Deferred income taxes (Notes 2 and 10) 555,287 445,613 Income taxes and other payables (Notes 2 and 10) 545,270 479,265 Payables to AT&T and affiliates (Notes 10 and 12) 356,690 298,000 Due to AT&T and affiliates for borrowings (Notes 7 and 12) - 35,290 Medium- and long-term debt (Note 7) 3,379,581 2,680,553 Commitments and contingencies (Notes 12 and 13) ___________________________________________________________________________ Total Liabilities $7,013,705 $5,485,283 ___________________________________________________________________________ (Continued on next page) 32 35 AT&T CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) ___________________________________________________________________________ At December 31, 1994 1993 (Dollars in Thousands) ___________________________________________________________________________ SHAREOWNERS' EQUITY (Notes 1, 8 and 11): Common stock, one cent par value: Authorized 100,000,000 shares, issued and outstanding, 46,962,439 shares in 1994 and 46,867,022 in 1993 $ 470 $ 469 Additional paid-in capital 782,785 780,591 Recourse loans to senior executives (19,651) (17,788) Foreign currency translation adjustments (2,158) (2,603) Retained earnings 246,772 163,774 ___________________________________________________________________________ Total Shareowners' Equity 1,008,218 924,443 ___________________________________________________________________________ Total Liabilities and Shareowners' Equity $8,021,923 $6,409,726 ___________________________________________________________________________ The accompanying notes are an integral part of these Consolidated Financial Statements. 33 36 AT&T CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ___________________________________________________________________________ For the Years Ended December 31, 1994 1993 1992 (Dollars in Thousands, except per share amounts) ___________________________________________________________________________ REVENUE: Finance revenue (Notes 2 and 4) $ 120,800 $ 107,436 $ 119,231 Capital lease revenue (Notes 2, 4 and 12) 477,875 391,985 381,141 Rental revenue on operating leases (includes $79,573 in 1994, $158,592 in 1993, and $143,012 in 1992 from AT&T and affiliates) (Notes 2, 5 and 12) 475,375 502,132 471,039 Equipment sales (includes $18,689 in 1992 from AT&T and affiliates) (Note 12) 126,567 161,529 132,709 Other revenue, net (Notes 6 and 12) 183,462 196,507 161,406 ___________________________________________________________________________ Total Revenue 1,384,079 1,359,589 1,265,526 ___________________________________________________________________________ EXPENSES: Interest (includes $21,602 in 1993 and $27,879 in 1992 to AT&T and affiliates) (Notes 2, 7, 12 and 13) 271,812 236,335 252,545 Operating and administrative (includes $24,729 in 1994, $44,775 in 1993, and $37,457 in 1992 to AT&T and affiliates) (Notes 2, 11 and 12) 427,187 381,515 359,689 Depreciation on operating leases (Notes 2 and 5) 313,583 334,191 305,523 Cost of equipment sales (Note 12) 116,995 145,830 121,179 Provision for credit losses (Note 2) 80,888 123,678 111,715 ___________________________________________________________________________ Total Expenses 1,210,465 1,221,549 1,150,651 ___________________________________________________________________________ Income before income taxes and cumulative effect on prior years of accounting change 173,614 138,040 114,875 Provision for income taxes (Notes 2 and 10) 73,278 66,530 41,303 ___________________________________________________________________________ Income before cumulative effect on prior years of accounting change 100,336 71,510 73,572 Cumulative effect on prior years of accounting change (Notes 2 and 10) - (2,914) - ___________________________________________________________________________ NET INCOME $ 100,336 $ 68,596 $ 73,572 ___________________________________________________________________________ (Continued on next page) 34 37 AT&T CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Continued) ___________________________________________________________________________ For the Years Ended December 31, 1994 1993 1992 (Dollars in Thousands, except per share amounts) ___________________________________________________________________________ Earnings per common share and common share equivalent (Note 8): Income before cumulative effect on prior years of accounting change $ 2.14 $ 1.67 $ 1.83 Cumulative effect on prior years of accounting change - (.07) - ___________________________________________________________________________ Net Income Per Share $ 2.14 $ 1.60 $ 1.83 ___________________________________________________________________________ Weighted average shares outstanding (thousands): 46,906 43,002 40,250 ___________________________________________________________________________ The accompanying notes are an integral part of these Consolidated Financial Statements. 35 38 AT&T CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS' EQUITY ___________________________________________________________________________ For the Years Ended December 31, 1994 1993 1992* (Dollars in Thousands) ___________________________________________________________________________ Common stock Balance at beginning of year $ 469 $ 403 $ 403 Stock issuances: Public offering (Note 1) - 58 - Pension and benefit plans (Note 11) 1 8 - ___________________________________________________________________________ Balance at end of year 470 469 403 ___________________________________________________________________________ Additional paid-in capital Balance at beginning of year 780,591 638,371 473,409 Capital contributions - 9,106 164,962 Stock issuances: Public offering (Note 1) - 114,482 - Pension and benefit plans (Note 11) 2,194 18,632 - ___________________________________________________________________________ Balance at end of year 782,785 780,591 638,371 ___________________________________________________________________________ Recourse loans to senior executives (Note 11) Balance at beginning of year (17,788) - - Loans made (2,760) (17,788) - Loans repaid 897 - - ___________________________________________________________________________ Balance at end of year (19,651) (17,788) - ___________________________________________________________________________ Foreign currency translation adjustments Balance at beginning of year (2,603) (1,547) - Unrealized translation gain (loss) 445 (1,056) (1,547) ___________________________________________________________________________ Balance at end of year (2,158) (2,603) (1,547) ___________________________________________________________________________ Retained earnings Balance at beginning of year 163,774 99,394 75,454 Net income 100,336 68,596 73,572 Cash dividends paid (Note 8) (17,338) (4,216) (49,632) ___________________________________________________________________________ Balance at end of year 246,772 163,774 99,394 ___________________________________________________________________________ Total Shareowners' Equity $1,008,218 $924,443 $736,621 ___________________________________________________________________________ * Certain amounts have been reclassified to conform to the 1994 and 1993 presentation. The accompanying notes are an integral part of these Consolidated Financial Statements. 36 39 AT&T CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ___________________________________________________________________________ For the Years Ended December 31, 1994 1993 1992* (Dollars in Thousands) ___________________________________________________________________________ CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 100,336 $ 68,596 $ 73,572 Noncash items included in income: Depreciation and amortization 353,954 384,933 308,419 Deferred taxes 106,384 43,419 111,973 Provision for credit losses 80,888 123,678 111,715 Gain on receivables securitizations (14,799) (51,496) (52,887) Cumulative effect on prior years of accounting change - 2,914 - Increase in receivables from AT&T and affiliates - - (66) (Increase) decrease in deferred charges and other assets (41,837) 78,174 (97,156) Increase (decrease) in income taxes and other payables 3,068 72,451 (24,607) Increase (decrease) in payables to AT&T and affiliates (10,257) (1,340) 7,523 ___________________________________________________________________________ Net Cash Provided by Operating Activities 577,737 721,329 438,486 ___________________________________________________________________________ CASH FLOW FROM INVESTING ACTIVITIES: Acquisitions of fixed assets, net (6,622) (6,555) (15,849) Purchase of businesses, net of cash acquired (234,375) - (28,504) Purchase of finance asset portfolios (217,939) (100,589) (228,512) Financings and lease equipment purchases (5,031,041) (5,027,031) (4,782,911) Principal collections from customers, net of amounts included in income 3,572,112 3,621,189 3,457,271 Cash proceeds from receivables securitizations 203,934 507,160 612,709 Increase in investments, net - - 19 ___________________________________________________________________________ Net Cash Used for Investing Activities $(1,713,931) $(1,005,826) $ (985,777) ___________________________________________________________________________ (Continued on next page) 37 40 AT&T CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) ___________________________________________________________________________ For the Years Ended December 31, 1994 1993 1992* (Dollars in Thousands) ___________________________________________________________________________ CASH FLOW FROM FINANCING ACTIVITIES: Increase (decrease) in short-term notes, net $ 523,370 $ (355,463) $ 62,648 Additions to medium- and long-term debt 2,142,993 1,161,638 1,317,618 Repayments of medium- and long-term debt (1,448,470) (632,563) (388,903) Increase (decrease) in payables to AT&T and affiliates (9,897) 9 (559,402) Capital contributions from AT&T - - 164,962 Dividends paid (17,338) (4,216) (49,632) Proceeds from sale of common stock, net - 115,092 - ___________________________________________________________________________ Net Cash Provided by Financing Activities 1,190,658 284,497 547,291 ___________________________________________________________________________ Net Increase in Cash and Cash Equivalents 54,464 - - Cash and Cash Equivalents at Beginning of Period - - - ___________________________________________________________________________ Cash and Cash Equivalents at End of Period $ 54,464 $ - $ - ___________________________________________________________________________ Interest paid was $253,960, $247,565 and $206,861 during 1994, 1993 and 1992, respectively. Net income taxes received were $55,712, $22,972 and $68,753, during 1994, 1993 and 1992, respectively. Noncash Investing and Financing Activities: In 1994, 1993 and 1992, the Company entered into capital lease obligations of $41,442, $25,259 and $64,917, respectively, for equipment that was subleased. In 1994, the Company assumed $106,945 of debt in conjunction with acquisitions. In 1993, Old Capital (as defined in Note 1) made capital contributions to the Company of $9,106 primarily relating to deferred tax assets arising as a result of the Restructuring. * Certain amounts have been reclassified to conform to the 1994 presentation. The accompanying notes are an integral part of these Consolidated Financial Statements. 38 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands) 1. BACKGROUND, INITIAL PUBLIC OFFERING AND BASIS OF PRESENTATION Background AT&T Capital Corporation ("AT&T Capital" or the "Company"), was incorporated on December 21, 1992, as AT&T Leasing, Inc., and was renamed AT&T Capital on March 31, 1993. The Company is the successor entity to certain businesses of AT&T Capital Corporation, a wholly owned subsidiary of AT&T Corp. ("AT&T") that was renamed AT&T Capital Holdings, Inc., on March 31, 1993 ("Old Capital"), and AT&T Credit Corporation, a wholly owned subsidiary of Old Capital that commenced operations in 1985, and was renamed AT&T Credit Holdings, Inc., on March 31, 1993 ("Old Credit"). In a restructuring which occurred on March 31, 1993 (the "Restructuring"), Old Capital and Old Credit transferred substantially all their assets, except for certain assets consisting principally of equity interests in project finance transactions and leveraged leases of commercial aircraft ("Lease Finance Assets"), in exchange for shares of the Company's common stock and the assumption by the Company of certain related liabilities. In connection with the Restructuring, AT&T issued a direct, full and unconditional guarantee of all existing indebtedness outstanding as of March 31, 1993, for borrowed money incurred, assumed or guaranteed by Old Capital entitled to the benefit of a support agreement between AT&T and Old Capital, including the debt of Old Capital assumed by the Company in the Restructuring. Debt issued by the Company subsequent to March 31, 1993, however, is not guaranteed or supported by AT&T. Initial Public Offering An initial public stock offering combined with a management stock offering totalling approximately 14 percent of the Company's stock occurred on August 4, 1993. (See Note 8.) As a result of the stock offerings, approximately 86 percent of the outstanding common stock of the Company is owned by AT&T through Old Credit and Old Capital. Basis of Presentation The consolidated financial statements reflect the financial position, results of operations and cash flows of the businesses transferred to the Company on March 31, 1993, by Old Capital and Old Credit as a result of the Restructuring. The Restructuring was accounted for in a manner similar to a pooling of interests. The common stock issued in connection with the incorporation of the Company has been reflected as outstanding for all periods presented. The consolidated financial statements include allocations of certain liabilities and expenses relating to the businesses transferred to the Company by Old Capital and Old Credit. 39 42 In the Restructuring described above, the Company assumed all the outstanding indebtedness (including indebtedness to third parties) of Old Capital, but none of the outstanding indebtedness to third parties of Old Credit. For the periods and at the dates reflected in the consolidated financial statements, the statements reflect outstanding indebtedness in an aggregate principal amount equal to the aggregate principal amount of indebtedness associated with the assets and business (the "AT&T Capital Business") transferred to the Company and its subsidiaries in the Restructuring. However, as actually occurred in the Restructuring, no third-party indebtedness of Old Credit was directly allocated to the AT&T Capital Business. To the extent the third-party indebtedness of Old Capital was not associated with the AT&T Capital Business, such amount was reflected as a reduction of the debt shown as "Due to AT&T and affiliates for borrowings." Conversely, to the extent the third-party indebtedness of Old Credit was associated with the AT&T Capital Business, such amount was reflected as an increase in the debt shown as "Due to AT&T and affiliates for borrowings." Interest expense shown in the consolidated financial statements reflects the actual interest expense associated with the AT&T Capital Business for the periods indicated. See Note 10 for a discussion of certain interest free loans made by AT&T to the Company. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation The accompanying consolidated financial statements include all majority-owned subsidiaries. The accounts of operations located outside of the United States are included on the basis of their fiscal years, ended either November 30, or December 31. Revenue Recognition for Finance Receivables and Capital Leases For loans and other financing contracts (Finance Receivables), revenue is recognized over the life of the contract using the interest method. For leases classified as Capital Leases, the difference between (I) the sum of the minimum lease payments due and the estimated unguaranteed residual values and (ii) the asset purchase price paid by the Company is initially recorded as unearned income. The difference is subsequently amortized over the life of the lease contract and recognized as revenue, using the interest method. Unguaranteed residual values are determined on the basis of studies prepared by the Company, professional appraisals, historical experience and industry data. Accrual of income on portfolio assets is generally suspended when a loan or a lease becomes contractually delinquent for 90 days or more (or earlier if specifically identified). Accrual is resumed when the receivable becomes contractually current and management believes there is no longer any significant probability of loss. 40 43 Investment in Operating Leases Equipment under Operating Leases is generally depreciated over the estimated useful life of the asset. During the term of the related lease, annual depreciation is generally calculated on a straight-line basis based on the estimated residual values at the end of the respective lease terms. Rental revenue is recognized on a straight-line basis over the related lease term. Residual Values Residual values are reviewed by the Company at least annually. Declines in residual values for capital leases are recognized as an immediate charge to income. Declines in residual values for operating leases are recognized as adjustments to depreciation expense on operating leases over the shorter of the useful life of the asset or the remaining term of the lease. Allowance for Credit Losses In connection with the financing of leases and other receivables, the Company records an allowance for credit losses to provide for estimated losses in the portfolio. The allowance for credit losses is at a level deemed adequate by management considering delinquencies and problem assets, an assessment of overall risks and management's evaluation of probable losses in the portfolio as a whole given its diversification, and a review of historical loss experience. The Company's charge-off policy is based on an analysis of the aging of the Company's portfolio, a review of all non-performing receivables and leases, and prior collection experience. An account is reserved for or charged off when analysis indicates that the account is uncollectible. Additionally, Company policy generally requires accounts 180 days past due to be reserved for or charged off. Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Income Taxes Through 1992, the Company used the deferred method under Accounting Principles Board Opinion No. 11, "Accounting for Income Taxes" to compute deferred taxes. Effective January 1, 1993, the Company adopted SFAS No. 109, which changed the method of accounting for income taxes from the deferred method to the liability method and requires deferred tax balances to be determined using the enacted income tax rates for the years in which these taxes will actually be paid or refunds received. In the first quarter of 1993, the Company recognized a charge to net income of $2.9 million as the cumulative prior years' effect of this accounting change. This change in accounting for income taxes had no effect on cash flows. Also during 1993, the Company recorded an additional $12.4 million to the provision for income taxes due to the increase in the highest federal corporate income tax rate from 34% to 35% of which $11.4 million relates to adjusting prior years deferred tax balances. 41 44 Other Assets The cost of property and equipment is depreciated on a straight-line basis over their estimated useful lives, which generally range from three to twenty-five years. Leasehold improvements are amortized over the lesser of the term of the related lease or the estimated useful lives of the related assets on a straight-line basis. Goodwill represents the excess of the cost of companies acquired over the fair value of their net assets at dates of acquisition, and is amortized as a charge against income on a straight-line basis generally over three to twenty year periods. Derivative Financial Instruments The Company enters into derivative financial instruments, mainly interest rate swaps and currency swaps, to hedge interest rate and foreign currency exchange risk and to match fund assets and liabilities. Interest rate swaps generally involve the exchange of interest payments without the exchange of underlying notional principal amounts. Currency swaps generally involve both the exchange of principal and interest payments in distinct currencies. The criteria which must be satisfied for hedges are as follows: (1) the asset or liability to be hedged exposes AT&T Capital, as a whole, to interest rate or currency exchange risk, (2) the derivative acts to reduce the interest rate or currency exchange risk by reducing the sensitivity to interest rate or currency exchange movements, and (3) the derivative is designated and effective as a hedge. For interest rate swaps, the Company records a net receivable or payable related to interest to be received or paid as an adjustment to interest expense. In the event of an early termination of a swap contract, the gain or loss on a swap accounted for as a hedge is amortized over the remaining life of the related asset. The Company does not enter into speculative swaps; however, if the underlying transaction associated with a swap accounted for as a hedge is terminated early, the swap would be considered speculative. The gain or loss on a speculative swap would be recognized immediately. The Company enters into foreign exchange contracts as a hedge against assets and liabilities denominated in foreign currencies. Gains and losses are recognized on the contracts and offset foreign exchange gains or losses on the related assets and liabilities. Foreign Currency Translation The financial statements of the Company's foreign operations are translated into U.S. dollars in accordance with SFAS No. 52, "Foreign Currency Translation", the resulting translation adjustments are recorded 42 45 as a separate component of shareowners' equity. A transaction gain or loss realized upon settlement of a foreign currency transaction generally is included in determining net income for the period in which the transaction is settled. Earnings Per Common Share and Common Share Equivalent Earnings per common share and common share equivalent are calculated using the weighted average number of common shares outstanding during the period giving effect to dilutive common stock equivalents in the form of stock options using the treasury stock method. Fully diluted earnings per share is not materially different from primary earnings per share. 3. ACQUISITIONS In January 1994, the Company purchased the stock of A.G.C. Finance, a Hong Kong-based vehicle and equipment leasing finance company with assets at the time of acquisition of approximately $150 million. Also in January 1994, the Company, through its wholly owned Canadian subsidiary acquired the vehicle portfolio and infrastructure assets constituting the Avis Canada Leasing Division of AvisCar, Inc. ("Avis Leasing"). Avis Leasing provides automobile leasing to small and mid-size commercial and corporate clients in Canada and had approximately $90 million in assets at the time of acquisition. In April 1994, the Company acquired Goldome Industrial Credit Corporation ("GICC"), with assets at the time of acquisition of approximately $75 million. GICC provides financing programs for machine tool vendors, distributors and manufacturers. On January 4, 1995, the Company acquired the vendor leasing and finance companies of Banco Central Hispano and certain of its affiliates ("CFH Leasing International") located in the United Kingdom, Germany, France, Italy, Belgium, the Netherlands and Luxembourg. CFH Leasing International provides financial services to equipment manufacturers and vendors and had approximately $540 million in assets at the time of acquisition. This acquisition will be reflected in the Company's financial statements in the first quarter of 1995. The above acquisitions were accounted for by the purchase method and the total cash paid for all of the above was approximately $311.9 million. In addition, the Company assumed certain existing debt associated with these acquisitions. The results of operations are included, or in the case of CFH Leasing International, will be included, in the income statement of the Company from the respective acquisition dates. Unaudited pro forma revenue, net income and earnings per share would have been approximately $1,442.0 million, $108.0 million and $2.31, respectively, for the year ended 1994 had the acquisitions occurred on January 1, 1994, and approximately $1,461.0 million, $78.0 million and $1.82, respectively, for the year ended 1993 had the above acquisitions occurred on January 1, 1993. The pro forma information is based on various assumptions and is not necessarily indicative of results of operations that would have been 43 46 reported had the acquisitions been completed at the dates mentioned above. The associated goodwill is amortized over periods not to exceed 15 years. 4. INVESTMENT IN FINANCE ASSETS The finance receivable and capital lease portfolios consisted of the following: Finance Receivables Capital Leases At December 31, 1994 1993 1994 1993 ___________________________________________________________________________ Receivables $1,634,454 $1,348,691 $5,712,848 $4,267,481 Estimated unguaranteed residual values - - 606,207 566,668 Unearned income (133,620) (94,328) (1,066,457) (835,845) Allowance for credit losses (47,887) (57,060) (123,272) (98,080) ___________________________________________________________________________ Net investment $1,452,947 $1,197,303 $5,129,326 $3,900,224 ___________________________________________________________________________ The schedule of maturities at December 31, 1994 for the finance receivable and capital lease portfolios is as follows: Finance Capital Receivables Leases ___________________________________________________________________________ 1995 $ 488,403 $1,765,863 1996 268,133 1,485,331 1997 209,750 1,231,372 1998 157,735 689,336 1999 98,396 314,064 2000 and thereafter 412,037 226,882 ___________________________________________________________________________ Total $1,634,454 $5,712,848 ___________________________________________________________________________ Rights to certain lease receivables are purchased at a discount from AT&T. AT&T is appointed as agent to bill and collect purchased receivables, and is reimbursed for the reasonable cost thereof. All rights, title, and interest in these receivables are assigned to the Company by AT&T. AT&T has agreed to repurchase certain finance receivables and capital leases that go into default, and the Company will be reimbursed for any adjustments in the face value of the purchased finance assets. At December 31, 1994 and 1993, $155,312 and $222,803, respectively, of the Company's net investment in finance receivables contained such recourse provisions. At December 31, 1994 and 1993, $87,716 and $98,223, respectively, of the Company's net investment in capital leases contained such provisions. 44 47 The FASB recently issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures", each of which must be adopted by the Company by the first quarter of 1995. The new standards require that impaired loans be measured based on the present value of expected cash flows, discounted at the loan's effective interest rate or the fair value of the collateral if the loan is secured, as well as certain related disclosures. When adopted, the new standards will not have a material effect on the consolidated financial statements of the Company. 5. EQUIPMENT UNDER OPERATING LEASES The following is a summary of equipment under operating leases at December 31, 1994 and 1993, including equipment on lease to AT&T affiliates (see Note 12): At December 31, 1994 1993 ___________________________________________________________________________ Data processing $ 571,504 $ 838,952 Telecommunications equipment 366,259 348,017 Automobiles 304,936 188,321 Test equipment and other 204,153 134,545 ___________________________________________________________________________ 1,446,852 1,509,835 Less: Accumulated depreciation (567,398) (573,639) Rentals receivable, net 23,071 43,082 ___________________________________________________________________________ Net investment in operating leases $ 902,525 $ 979,278 ___________________________________________________________________________ Minimum future rentals to be received on noncancelable operating leases as of December 31, 1994, are as follows: 1995 $362,694 1996 199,671 1997 104,534 1998 30,340 1999 16,203 2000 and thereafter 4,306 ___________________________________________________________________________ Total minimum future rentals $717,748 ___________________________________________________________________________ 45 48 6. OTHER REVENUE Other revenue consisted of the following: For the Years Ended December 31, 1994 1993 1992 ___________________________________________________________________________ Net gain on sale of leased and off-lease equipment $ 76,453 $ 49,653 $ 39,868 Gain on receivables securitizations 14,799* 51,496* 52,887* Service fee revenue 27,203 37,363 18,559 Other portfolio related revenue 65,007 57,995 50,092 ___________________________________________________________________________ Total other revenue $183,462 $196,507 $161,406 ___________________________________________________________________________ * $14,799, $39,106 and $52,887 relates to securitizations in the fourth quarter of 1994, 1993 and 1992, respectively; and $12,390 relates to a securitization in the first quarter of 1993. For the years ended December 31, 1994, 1993 and 1992, the Company securitized portions of its capital lease portfolio amounting to $259,061, $561,943 and $511,188, with proceeds received of $287,550, $648,887 and $587,292, respectively. In conjunction with the 1994 and 1993 securitizations, at December 31, 1994, $96,177 of the sale proceeds were retained by the purchaser until certain receivable collections are attained and are included in other assets. In addition, in 1992, the Company securitized portions of its finance receivable portfolio of $24,664, with proceeds received of $25,417. The transactions provide for limited recourse to the Company for any uncollectible amounts. Under the agreements, the Company will service these accounts for the purchasers. A portion of the gains have been deferred representing service fees to be earned over the terms of the agreements plus an estimate of the losses under recourse provisions for the lease receivables securitized. In 1992, the Company increased the allowance for losses related to prior securitizations by $8.9 million to reflect the Company's increased exposure to recourse provisions due to economic conditions. At December 31, 1994 and 1993, $853,003 and $985,104, respectively, of receivables previously securitized remained outstanding. The Company's maximum exposure under these recourse provisions, in the unlikely event that all such receivables became uncollectible, amounted to $353,143 at December 31, 1994, and $347,317 at December 31, 1993. The Company has recorded a liability for the amount that it expects to reimburse. 7. DEBT Commercial Paper Commercial paper is generally issued at a discount. The maturities of commercial paper ranged up to eight months (with the majority maturing within 90 days) at December 31, 1994 and 1993, respectively. Interest rates ranged from 5.0% to 6.0% and 3.1% to 3.4% at December 31, 1994 and 1993, respectively. The discount amortized on commercial paper amounted to $3,176 and $12,009 in 1994 and 1993, respectively. Interest is payable at maturity. 46 49 The Company has revolving credit facilities totalling $2.0 billion, all of which were available at December 31, 1994 and 1993, to support the commercial paper issued. These facilities contain certain restrictive covenants with which the Company is in compliance. In addition, certain of the Company's foreign operations had short-term bank lines of credit of approximately $134.0 million, of which approximately $28.6 million was unused at December 31, 1994. Data with respect to short-term notes (principally commercial paper) are as follows: 1994 1993 1992 ___________________________________________________________________________ End of year balance, net $2,176,877 $1,546,562 $1,899,655 Weighted average interest rate at December 31, 5.8% 3.3% 3.2% Highest month-end balance 2,176,877 2,067,592 2,128,463 Average month-end balance (a) 1,741,872 1,313,312 1,829,298 Weighted average interest rate (b) 4.3% 3.3% 4.0% ___________________________________________________________________________ (a) The average month-end balance was computed by dividing the total of the outstanding month-end balances by the number of months in the year. (b) The weighted average interest rate during the year is calculated by dividing the interest charged for the year by the weighted average short-term notes outstanding during the year. Medium- and Long-term Debt Medium- and long-term debt outstanding at December 31, 1994 and 1993, consisted of the following: Maturities 1994 1993 ___________________________________________________________________________ 3.24% - 5.99% Medium-term notes 1994 - 1998 $1,340,625 $1,731,215 6.00% - 6.99% Medium-term notes 1994 - 1999 1,548,900 377,300 7.00% - 10.05% Medium-term notes 1994 - 2002 326,795 439,520 11.88% - 11.95% Subordinated serial notes 1994 - 1996 6,250 11,250 Other long-term debt 1994 - 2001 157,011 121,268 ___________________________________________________________________________ Total medium- and long-term debt $3,379,581 $2,680,553 ___________________________________________________________________________ 47 50 The Company's medium- and long-term debt matures as follows: 1995 $1,750,172 1996 835,814 1997 507,399 1998 139,018 1999 74,903 2000 and thereafter 72,275 ___________________________________________________________________________ Total $3,379,581 ___________________________________________________________________________ Long-term debt outstanding at December 31, 1994 and 1993, included $980,000 and $475,000, respectively, of variable rate debt with interest rates ranging from 5.79% to 6.20%, and 3.24% to 3.98%, respectively. Such variable rate debt periodically reprices based on various indices and generally matures in one to two years. To reduce exposure to interest rate movements, the Company enters into interest rate swap agreements. (See Note 13 for a discussion of the Company's derivative activities.) The weighted average interest rate on average total debt outstanding was 5.65% and 5.68% for the years ended December 31, 1994 and 1993, respectively. In addition, the Company had interest bearing debt payable to AT&T and affiliates of $35,290 at December 31, 1993, bearing interest at 3.34%. During 1994, the Securities and Exchange Commission ("SEC") declared effective a debt registration statement (which allows the Company to issue debt to the public) of $2.5 billion. As of December 31, 1994, $1,808,325 of this debt registration was available for issuance. As a result of the Restructuring (see Note 1), medium-term notes outstanding at March 31, 1993, entitled to the benefit of a support agreement between AT&T and Old Capital (which agreement was terminated in the Restructuring) became directly guaranteed by AT&T. At December 31, 1994 and 1993, the amount of such guaranteed debt was $747,895 and $1,441,035, respectively. 8. SHAREOWNERS' EQUITY AND EARNINGS PER SHARE During 1994, the Company's board of directors declared dividends totalling thirty-seven cents per share. In addition, on January 20, 1995, the Company's board of directors declared a quarterly dividend of ten cents per share to shareowners of record on February 10, 1995. The dividend was paid on February 28, 1995. On June 28, 1993, the Company effected a 402,500 for one stock reclassification. The par value of the stock remained at $.01 per share. Accordingly, common stock and additional paid-in capital have been restated to reflect the reclassification. 48 51 On August 4, 1993, the Company sold common shares in an initial public stock offering and in a management stock offering. The shares issued represent approximately 14 percent of the total shares outstanding after the offerings. AT&T, through Old Credit and Old Capital, remains the owner of 40,250,000 shares. The net proceeds received by the Company from the sale of the common stock in the stock offerings were $115,092. Certain costs of the offerings not offset by the proceeds were borne by AT&T. Such proceeds did not include $17,788 of future proceeds attributable to the purchases of common stock in the management stock offering that were funded by recourse loans from the Company to certain senior executives of the Company. 9. FAIR VALUE DISCLOSURES Fair value is a subjective and imprecise measurement that is based on assumptions and market data which require significant judgment and may only be valid at a particular point in time. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Accordingly, management cannot provide assurance that the fair values presented are indicative of the amounts that the Company could realize in a current market exchange. The following methods and assumptions were used to estimate the fair value of each class of financial instruments at December 31, 1994 and 1993: Cash and Cash Equivalents For cash and cash equivalents the carrying amount is a reasonable estimate of fair value. Net Investment in Finance Receivables The fair value of the finance receivable portfolio is estimated by discounting the expected future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Short-term Notes and Due to AT&T for Borrowings The carrying amount is a reasonable estimate of fair value. Gross Profit Tax Deferral Payable to AT&T The fair value of the gross profit tax deferral is estimated by discounting the expected future cash flows using the Company's current cost of debt. Medium- and Long-term Debt Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. 49 52 Interest Rate and Currency Swap Agreements The fair value of interest rate and currency swaps is estimated by discounting the expected future cash flows using the rate at which the Company could terminate the swaps in the market today. Foreign Exchange Contracts The fair value of foreign exchange contracts is estimated based on current market quotes for foreign exchange contracts with the same remaining terms. Credit Facilities The fair value of the credit facilities are based on fees currently paid for similar arrangements. The following is the carrying value and fair value (as determined using the methods described above): December 31, 1994 December 31, 1993 ___________________________________________________________________________ Carrying Fair Carrying Fair Amount Value Amount Value ___________________________________________________________________________ Assets: Cash and cash equivalents $ 54,464 $ 54,464 $ - $ - Net investment in finance receivables (Note 4) 1,452,947 1,432,070 1,197,303 1,213,982 Liabilities: Short-term notes (Note 7) 2,176,877 2,176,877 1,546,562 1,546,562 Gross profit tax deferral payable to AT&T (Note 10) 214,066 184,238 188,562 162,753 Medium- and long-term debt (Note 7) 3,379,581 3,319,101 2,680,553 2,727,578 Due to AT&T and affiliates for borrowings (Notes 7 $ - $ - $ 35,290 $ 35,290 and 12) ___________________________________________________________________________ Matching maturities of its portfolio assets and debt is a key component of the financial strategy used by the Company to manage interest rate risk. Based on unaudited calculations performed by the Company, the decreased fair value of the Company's debt has been offset by the decreased fair value of the Company's lease portfolio at December 31, 1994. The fair value of the Company's lease portfolio is not a required disclosure under SFAS No. 107, "Disclosure About Fair Value of Financial Instruments" and, therefore, only the fair value of the loan portfolio has been disclosed. 50 53 Off-balance Sheet Financial Instruments At December 31, 1994 and 1993, the Company had interest rate swaps with a notional amount of $2,711,773 and $2,713,569, respectively. Had the Company terminated these swaps at December 31, 1994 and 1993, it would have received $57,033 and $195, respectively, and would have paid $4,726 and $27,764, respectively. (See Note 13.) At December 31, 1994 and 1993, the Company had $221,817 and $149,210, respectively, of currency swaps outstanding. If terminated at December 31, 1994 and 1993, the Company would have received $11,200 and $1,977, respectively, and would have paid $2,338 and $1,734, respectively, for these currency swaps. At December 31, 1994 and 1993, the Company had $318,054 and $165,969, respectively, of foreign exchange forward contracts outstanding. The contracts had a fair value of $321,290 and $165,688 at December 31, 1994 and December 31, 1993, respectively. The fees for the Company's $2.0 billion revolving credit facilities are .0775% of the unused portion per year plus a .0125% set-up fee. In addition, the Company had approximately $28.6 million of unused foreign credit facilities for which the fees are negligible. (See Note 7.) At December 31, 1994 and 1993, the Company had a maximum exposure under limited recourse provisions related to asset securitizations, in the unlikely event that all such receivables became uncollectible, of $353,143 and $347,317, respectively. The Company has recorded a liability for the amount that it expects to reimburse. (See Note 6.) 10. INCOME TAXES The Company is included in the consolidated federal income tax return, and for certain states, combined state returns, of AT&T. AT&T does not expect to be subject to the alternative minimum tax ("AMT") provisions of the 1986 Tax Reform Act in 1994. Also, in 1993, the Company utilized all AMT credits arising from 1990 and 1992 AMT payments made. The Company's income tax expense would not have differed materially from that reported had the Company filed tax returns on a stand-alone basis. As part of an intercompany agreement, the Company has received interest free loans to the extent of the tax deferrals generated by transactions between AT&T and the Company. These interest free loans amounted to $214,066 and $188,562 at December 31, 1994 and 1993, respectively. The average balance outstanding for such loans was $213,172, $200,835 and $198,255 for the years ended December 31, 1994, 1993 and 1992, respectively. These amounts are repaid to AT&T as the temporary differences that generated the deferrals reverse. In the event the Company was not eligible for inclusion in the consolidated tax return of AT&T, these loans would not be available. 51 54 At December 31, 1994 and 1993, taxes currently receivable from AT&T and third parties were $23,286 and taxes currently payable to AT&T and third parties were $70,010, respectively. Effective January 1, 1993, the Company adopted SFAS No. 109. Among other provisions, this standard requires deferred tax balances to be determined using the enacted income tax rates for the years in which taxes will be paid or refunds received. Prior to 1993, the Company's deferred tax accounts reflected the statutory rates that were in effect when the deferrals were initiated. The adoption of SFAS No. 109 resulted in a charge to net income in 1993 of $2,914 which was recorded as the cumulative effect of an accounting change. Also in 1993, the Company recorded an additional $12.4 million ($11.4 million of which relates to prior years deferred tax balances) to the provision for income taxes under SFAS No. 109 to reflect the increase in the highest federal corporate income tax rate from 34% to 35%. The provision (benefit) for income taxes consisted of the following: For the Years Ended December 31, 1994 1993 1992 ___________________________________________________________________________ Current: Federal $(13,494) $ (8,948) $(82,057) State and local (23,150) 31,448 10,691 Foreign taxes 3,538 611 696 ___________________________________________________________________________ Total current portion (33,106) 23,111 (70,670) ___________________________________________________________________________ Deferred: Federal 72,729 67,101 115,242 State and local 33,655 (23,682) (3,269) Foreign - - - ___________________________________________________________________________ Total deferred portion 106,384 43,419 111,973 ___________________________________________________________________________ Total provision for income taxes $ 73,278 $ 66,530 $ 41,303 ___________________________________________________________________________ The Company recorded tax credits of $3,446 in 1994 and $1,019 in 1992. No tax credits were recorded in 1993. 52 55 Deferred income tax (liabilities) assets are composed of the following: At December 31, 1994 1993 __________________________________________________________________________ Gross deferred income tax liabilities: Lease related differences $(607,085) $(521,371) Other (89,463) (36,843) __________________________________________________________________________ Gross deferred income tax liabilities (696,548) (558,214) __________________________________________________________________________ Gross deferred income tax assets: Allowance for credit losses 101,591 92,766 Pensions 8,052 7,751 State and foreign net operating losses 18,802 12,617 Other 17,293 4,411 __________________________________________________________________________ Gross deferred income tax assets 145,738 117,545 __________________________________________________________________________ Valuation allowance (4,477) (4,944) __________________________________________________________________________ Net deferred income tax liabilities $(555,287) $(445,613) __________________________________________________________________________ A valuation allowance has been recorded to offset related deferred tax assets due to the uncertainty of realizing the benefit of separate state net operating loss carryforwards and net operating loss carryforwards of foreign subsidiaries. State tax loss carryforwards of $285,194 related to various state jurisdictions expire in the following years: 1995 $ 4,663 1996 10,974 1997 26,090 1998 19,896 1999 9,463 2000 and thereafter 214,108 ___________________________________________________________________________ Total $285,194 ___________________________________________________________________________ Financial statements for the years prior to the January 1993 adoption of SFAS No. 109 were not restated to reflect the new accounting standard. 53 56 This table shows the principal sources of the provision for deferred taxes for 1992: For the Year Ended December 31, 1992 ___________________________________________________________________________ Additional tax depreciation on leased equipment $ 403,796 Financing income on leased equipment (318,754) Provision for credit losses (23,699) Gain on sale of assets 39,046 Deferred AMT credits (7,046) Other, net 18,630 ___________________________________________________________________________ Total deferred tax provision $ 111,973 ___________________________________________________________________________ A reconciliation between the federal statutory tax rate and the Company's effective tax rate is shown below: For the Years Ended December 31, 1994 1993 1992 ___________________________________________________________________________ Federal statutory income tax rate 35.0% 35.0% 34.0% State and local income taxes, net of federal income tax effect 3.9 3.7 4.3 Impact of federal tax rate increase on prior years deferred taxes - 8.4 - Excess deferred credits on terminated leases - - - (4.4) Tax exempt lease income (1.7) (0.8) (0.2) Goodwill 1.2 0.8 1.1 Other 3.8 1.1 1.2 ___________________________________________________________________________ Effective tax rate 42.2% 48.2% 36.0% ___________________________________________________________________________ The Company has no available AMT credit carryforwards at December 31, 1994, to reduce future federal income taxes payable. For the years ended December 31, 1994, 1993 and 1992, the consolidated income (loss) before income taxes and cumulative effect of accounting change by domestic and foreign source was $177,662 and $(4,048), $153,010 and $(14,970), and $132,297 and $(17,422), respectively. 11. PENSION AND BENEFIT PLANS Pension Effective January 1, 1994, all employees of the Company and its domestic subsidiaries were covered by the AT&T Capital Corporation Retirement and Savings Plan ("RSP"), a qualified defined contribution plan. 54 57 Under a defined contribution plan, the amount of future pension benefits is based solely on the amount contributed and the returns earned on those amounts. The RSP is composed of a profit sharing plan (including a cash or deferred arrangement) under Section 401(k) of the Internal Revenue Code and a money purchase plan. The Company's annual contribution, which is discretionary above 5%, is expected to equal approximately 9% of employee pay (i.e., aggregate base salaries and annual incentives of participants in the RSP). In addition, the Company matches an amount equal to 66-2/3% of the first 6% that each employee contributes to the RSP under Section 401(k). RSP participants can select from a variety of funds within the RSP to invest their allotments. The Company recorded $13,525 of expense in 1994 related to the RSP. In addition, the Company recorded pension expense of $1,366 in connection with RSP-related nonqualified defined contribution plans. The Company also sponsors various international plans which are available to certain employees of its international subsidiaries. The plans are similar to the RSP, in that they provide for employees of the Company to contribute a percentage of their salary to provide for postretirement income. The Company recorded $1,034 of pension expense in 1994 related to the various international plans. Prior to 1994, most of the Company's employees were covered by AT&T's noncontributory defined benefit pension plans. Also, through December 31, 1993, other eligible employees of several wholly owned subsidiaries of the Company were covered by an AT&T qualified defined contribution retirement plan, with provisions similar to the RSP. The Company recorded pension expense related to the AT&T noncontributory defined benefit plans of $4,457 and $3,320 in 1993 and 1992, respectively. In addition, the Company recorded costs of $6,312 and $1,795, in 1993 and 1992, respectively, related to the AT&T qualified defined contribution retirement plan. On December 8, 1993, the Company sponsored three unfunded supplemental nonqualified defined benefit retirement plans, which became effective on January 1, 1994, that provide certain employees with additional benefits after retirement. The costs of these plans in 1994 included the following components: ________________________________________________________________________ Service cost - benefits earned $ 575 Interest cost on projected benefit obligation 427 Amortization 374 ________________________________________________________________________ Net periodic pension cost $1,376 ________________________________________________________________________ 55 58 The funded status of the plans at December 31, 1994 is as follows: ________________________________________________________________________ Accumulated benefit obligations: Vested benefit obligation $1,119 Non-vested benefit obligation 2,578 Total 3,697 Additional benefits on estimated future salary 1,176 Total projected benefit obligation 4,873 Plan assets at fair value - Unfunded projected benefit obligation 4,873 Unrecognized prior service cost 4,391 Unrecognized net gain (894) Unrecognized transition obligation - Additional liability 2,387 Accrued pension liability recorded $3,763 ________________________________________________________________________ For 1994, the projected benefit obligation was determined using an assumed discount rate of 8.75% and assumed long-term rates of increase in future compensation levels of 4.5% or 5.5%, depending on the plan. Share Performance Incentive Plan The Company's Share Performance Incentive Plan ("SPIP") is designed to grant cash incentive awards to key employees at the end of a three-year performance period, based on the appreciation of the Company's stock relative to (1) the share performance of a select benchmark group of companies in the leasing, finance or lending business, and (2) the return of three-year risk-free treasury notes plus 150 basis points. The cash awards will be calculated at the end of performance periods ending June 30, 1996, 1997, 1998, 1999 and 2000, respectively. The estimated compensation expense relating to the SPIP is charged against income over the respective performance periods. Leveraged Stock Purchase Plan In 1993, the Company adopted the Leveraged Stock Purchase Plan ("LSPP") under which 2,000,000 shares of common stock and options to purchase common stock were reserved for purchase or grant. The terms and provisions of the LSPP required certain senior management employees to purchase an aggregate of 851,716 shares of common stock in conjunction with the Company's initial public offering at the offering price of $21.50 per share ("offering price"). The eligible employees had the option of borrowing from the Company, on a recourse basis, 88.5% to 97.7% of the purchase price of the shares. The recourse loans mature on August 4, 2000, and have a stated interest rate of 6.0% compounded on an annual basis. The purchased shares are pledged as collateral for the recourse loans. Sale of these shares is prohibited prior to August 4, 1996, and is contingent upon repayment of the loan and certain other requirements. The recourse loans are shown on the balance sheet as a reduction of equity. 56 59 In addition, under the LSPP, the same senior management employees were granted premium priced stock options which will provide participants with an opportunity to purchase up to 1,095,040 shares of Company stock at an exercise price equal to 125% of the initial public offering price ($26.875 per share). The options are exercisable during the period from August 4, 1996, through August 4, 2003. During 1994, 54,895 options were forfeited. No options were forfeited during 1993. Pursuant to the terms of the LSPP, no further purchases of stock, Company loans or option grants will be made under the LSPP. Long Term Incentive Plan In 1993, the Company adopted a Long Term Incentive Plan ("LTIP") under which the Company may grant various stock-based and other awards to employees of the Company. The number of shares available for grant under the LTIP is 2,000,000. Similar to the LSPP, eligible employees have the option of borrowing from the Company, on a recourse basis, 88.5% to 97.7% of the purchase price of the shares. The recourse loans, which are due seven years from the loan date, have stated interest rates ranging from 6.0% to 7.74% compounded on an annual basis. The purchased shares are pledged as collateral for the recourse loans. Sale of these shares is prohibited for a three-year period and is contingent upon repayment of the loan and certain other requirements. The recourse loans are shown on the balance sheet as a reduction of equity. Awards under the LTIP will be made to executives and employees of the Company at the Company's discretion. The following table summarizes the option activity relating to the LTIP: Shares Under Option Number Price Per Share ___________________________________________________________________________ Options granted in connection with initial public offering 697,908 $21.50 Changes in 1993: Options canceled (11,605) $21.50 ___________________________________________________________________________ Options outstanding at December 31, 1993 686,303 $21.50 Changes in 1994: Options exercised (274) $21.50 Options canceled (85,367) $21.50-$26.15 Options granted 502,707 $21.81-$30.63 ___________________________________________________________________________ Options outstanding at December 31, 1994 1,103,369 $21.50-$30.63 ___________________________________________________________________________ Options exercisable at December 31, 1994 7,264 $21.50-$26.13 ___________________________________________________________________________ In addition, the Company has awarded restricted stock under the LTIP to certain employees in consideration of services rendered. During 1994 and 1993, respectively, restricted stock awards of 17,801 and 15,306 were made to employees under the LTIP. 57 60 As of December 31, 1994 and 1993, respectively, 735,936 and 1,298,391 shares were available for issuance under the LTIP. The shares are not subject to stock appreciation right features. Employee Stock Purchase Plan In April 1994, the Company's shareowners approved an employee stock purchase plan effective August 1, 1994. The AT&T Capital Corporation 1994 Employee Stock Purchase Plan ("ESPP") enables employees to purchase shares of AT&T Capital common stock at a discount. The price per share is 90% of the fair market value of the common stock at the time of its purchase. No compensation expense is recorded in connection with the ESPP. The maximum aggregate number of shares of common stock that may be purchased under the ESPP is 500,000. During 1994, 13,484 shares were purchased by employees at prices ranging from $19.02 to $21.83 per share. At December 31, 1994, there were 486,516 shares available for offering under the ESPP. Postretirement and Postemployment Benefits Effective January 1, 1993, the Company in conjunction with AT&T, adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". The standard requires companies to accrue postretirement benefits during the years employees are working and earning benefits for retirement. Previously, the Company expensed these benefits as the claims were incurred. During 1992, it was decided that AT&T would keep the responsibility for the initial liability at the AT&T consolidated level and charge the Company only for the earned benefit service cost in each period. Accordingly, the Company has no identifiable initial liability and all costs associated with such obligation have been assumed by AT&T. However, had the Company recorded its initial transition obligation in the first quarter of 1993, the amount would have been immaterial to the Company's financial position and results of operations. Additionally, management believes that SFAS No. 106 will not have a material impact on the Company's financial position or its results of operations in the future as postretirement benefits are generally not extended. In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"). Analogous to SFAS No. 106 for postretirement benefits, this standard requires companies to accrue for estimated future postemployment benefit expenses during the periods when employees are working. Postemployment benefits are any benefits other than retirement benefits that are provided after employment is discontinued. The Company, in conjunction with AT&T, elected to adopt SFAS No. 112 in 1993. Initial adoption of SFAS No. 112 did not have an effect on the Company. Additionally, management believes that SFAS No. 112 will not have a material impact on the Company's financial position or its results of operations in the future. 58 61 12. RELATED-PARTY TRANSACTIONS The Company leases certain office facilities from AT&T and affiliates. Future minimum rental payments under noncancelable, long-term leases with AT&T and affiliates are as follows: 1995 $ 4,291 1996 4,243 1997 2,640 1998 52 1999 - 2000 and thereafter - ___________________________________________________________________________ Total $11,226 ___________________________________________________________________________ Rental expense under existing leases with AT&T and affiliates amounted to $4,101, $7,998 and $8,164, in 1994, 1993 and 1992, respectively. The Company purchases services from AT&T and affiliates, including data processing, billing and collection, administration and other services. The Company's expenses for such services were $20,628 in 1994, $32,320 in 1993 and $19,529 in 1992. Additionally, the Company was charged a fee by AT&T for corporate overhead allocations of $6,444 in 1992. The Company was not charged such a fee from AT&T in 1994 or 1993. At December 31, 1994, 1993 and 1992, the Company was the lessor to AT&T of equipment comprising $268,616, $145,812 and $142,499 of capital leases and $204,647, $376,970 and $468,497 of equipment under operating leases, respectively. Revenue related to these leases was $108,808, $170,788 and $153,087 in 1994, 1993 and 1992, respectively. In 1992, revenue from equipment sales to AT&T and affiliates was $18,689, and the cost of these sales was $17,753. The Company had no significant sales of equipment to AT&T and affiliates in 1994 and 1993. The Company also had an interest bearing intercompany note receivable from AT&T and affiliates of $40,105 at December 31, 1994 and an interest bearing intercompany debt payable to AT&T and affiliates of $35,290 at December 31, 1993, respectively. (See Note 7.) Additionally, the Company had interest free loans related to tax agreements from AT&T at December 31, 1994 and 1993, respectively, of $214,066 and $188,562. (See Note 10.) In 1993, AT&T and the Company entered into an operating agreement, pursuant to which AT&T provides the Company with the right to be the preferred provider of leasing and financing services for AT&T's products on 59 62 a basis consistent with past practice. The Company and AT&T have also entered into an intercompany agreement whereby the Company manages and administers, for a fee, certain lease portfolios, including the Lease Finance Assets of Old Capital and Old Credit which were not transferred to the Company. (See Note 1.) During 1994, 1993 and 1992, the Company recognized service fee revenue of $8,551, $18,361 and $4,200, respectively, for such services. In connection with the Restructuring, AT&T has issued a direct, full and unconditional guarantee of all existing indebtedness outstanding as of March 31, 1993 for borrowed money incurred, assumed or guaranteed by Old Capital entitled to the benefit of a support agreement between AT&T and Old Capital, including the debt of Old Capital that was transferred to the Company. Debt issued by the Company subsequent to March 31, 1993, is not guaranteed or supported by AT&T. At December 31, 1994 and 1993, the amount of such guaranteed debt was $747,895 and $1,441,035, respectively. 13. COMMITMENTS AND CONTINGENCIES Derivative Financial Instruments In the normal course of business, the Company is routinely party to various derivative financial instruments. These financial instruments are used by the Company to reduce interest rate and foreign currency exposure, as well as to meet the financing needs of its customers. At both December 31, 1994 and 1993, in management's opinion, there was no significant risk of loss in the event of nonperformance of the counterparties to derivative contracts. Generally, the Company does not require collateral or other security to support financial instruments with credit risk. There were no past due amounts, nor were there any reserves for credit losses on derivatives as of December 31, 1994, 1993 and 1992. Information is provided below for each significant derivative product type. The derivatives, with which the Company is involved, are primarily interest rate swaps, currency swaps, and foreign currency forward exchange contracts. Interest Rate and Currency Swaps The Company enters into interest rate and foreign currency swap agreements with major money center banks and intermediaries located in major financial centers to reduce interest rate exposure, to more closely match the maturity of its debt portfolio to that of its asset portfolio and to reduce its exposure to currency fluctuations. Interest rate swaps also allow the Company to raise funds at floating rates and effectively swap them into fixed rates that are lower than those available to the Company if fixed-rate borrowings were made directly. Foreign currency swaps are used primarily to hedge Canadian dollars and pounds sterling. Under interest rate swaps, the Company agrees with other parties to 60 63 exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount. A generic swap's notional amount generally does not change for the life of the contract. Amortizing and accreting swaps' notional amounts generally change based upon a predetermined amortization or accretion schedule. The notional amounts shown below represent an agreed upon amount on which calculations of amounts to be exchanged are based. They do not represent amounts exchanged by the parties and, therefore, are not a measure of the exposure of the Company. The Company's exposure is limited to the current fair value of the contracts with a positive fair value at the reporting date. (See Note 9.) A key assumption in the information below is that rates remain constant at the reporting date levels. To the extent that rates change, the variable interest rate information will change. Activity in interest rate and currency swaps which are all held for purposes other than trading for 1994 and 1993, is summarized as follows: Generic Amortizing Generic Pay Pay Pay Currency Notional Amounts Fixed Fixed Floating Swaps Total ___________________________________________________________________________ December 31, 1992 $ 650,000 $ 936,684 $ 50,000 $ 32,186 $1,668,870 Additions 789,000 582,744 450,000 117,024 1,938,768 Maturities/ amortization (300,000) (394,859) (50,000) - (744,859) Terminations - - - - - __________________________________________________________________________ December 31, 1993 1,139,000 1,124,569 450,000 149,210 2,862,779 Additions 607,800 285,972 175,000 129,860 1,198,632 Maturities/ amortization (175,000) (445,568) (450,000) (57,253) (1,127,821) Terminations - - - - - __________________________________________________________________________ December 31, 1994 $1,571,800 $ 964,973 $175,000 $221,817 $2,933,590 __________________________________________________________________________ The schedule of maturities at December 31, 1994 for interest rate and currency swaps which are all held for purposes other than trading is as follows: Generic Amortizing Generic Pay Pay Pay Currency Fixed Fixed Floating Swaps Total ___________________________________________________________________________ Total notional amounts $1,571,800 $964,973 $175,000 $221,817 $2,933,590 Weighted average pay rate 5.75% 5.57% 6.04% 6.21% 5.74% Weighted average receive rate 6.08% 6.09% 5.94% 6.09% 6.08% ___________________________________________________________________________ 61 64 Generic Amortizing Generic Pay Pay Pay Currency Fixed Fixed Floating Swaps Total ___________________________________________________________________________ 1995 Maturities $350,000 $414,180 $175,000 $108,455 $1,047,635 Weighted average pay rate 4.29% 5.19% 6.04% 6.27% 5.14% Weighted average receive rate 6.09% 6.09% 5.94% 6.09% 6.07% 1996 Maturities $527,000 $291,935 - $ 74,970 $ 893,905 Weighted average pay rate 5.42% 5.35% - 5.83% 5.43% Weighted average receive rate 6.04% 6.09% - 6.09% 6.06% 1997 Maturities $163,300 $141,019 - $ 36,603 $ 340,922 Weighted average pay rate 5.72% 5.89% - 6.80% 5.91% Weighted average receive rate 6.14% 6.09% - 6.09% 6.11% 1998 Maturities $300,000 $ 46,749 - $ 1,789 $ 348,538 Weighted average pay rate 6.41% 7.03% - 6.05% 6.49% Weighted average receive rate 6.09% 6.09% - 6.09% 6.09% 1999 Maturities $200,000 $ 30,736 - - $ 230,736 Weighted average pay rate 8.01% 6.83% - - 7.86% Weighted average receive rate 6.09% 6.09% - - 6.09% 2000-2017 Maturities $ 31,500 $ 40,354 - - $ 71,854 Weighted average pay rate 7.01% 7.24% - - 7.14% Weighted average receive rate 6.09% 6.09% - - 6.09% ___________________________________________________________________________ Foreign Currency Forward Exchange Contracts The Company enters into foreign currency forward exchange contracts to manage foreign exchange risk (primarily Canadian dollars and pounds sterling). The notional amount of such contracts was $318,054 and $165,969 at December 31, 1994 and 1993, respectively. The Company enters into these contracts to hedge the cash flows associated with foreign currency denominated assets. The term of these contracts is rarely more than three years. The purpose of the Company's foreign currency hedging activities is to protect the Company from the risk that the eventual dollar net cash inflows resulting from these assets will not be adversely affected by changes in exchange rates. 62 65 Other Commitments and Contingencies Certain regional office facilities and equipment of the Company are leased from unrelated parties with renewal options of one to five years. Rental expense to unrelated parties for the years ended December 31, 1994, 1993 and 1992 was $14,202, $9,626 and $16,992, respectively. Rental expense associated with sublease rentals on operating leases for 1994, 1993 and 1992, was $115, $419 and $5,026, respectively. Minimum annual rental commitments at December 31, 1994, under these agreements are as follows: 1995 $21,828 1996 18,171 1997 13,247 1998 7,769 1999 7,540 2000 and thereafter 3,729 ___________________________________________________________________________ Total $72,284 ___________________________________________________________________________ The total of minimum rentals to be received in the future under noncancelable subleases related to operating leases as of December 31, 1994, was $11,998. The total of minimum rentals to be received in the future under noncancelable subleases related to capital leases as of December 31, 1994, was $65,010. The Company is not currently a party to any material legal proceeding, nor is the Company aware of any pending or threatened litigation which in the opinion of management would have a material impact on its financial condition or results of operations. 14. FOREIGN OPERATIONS The Company operates primarily in one business segment - equipment leasing and financing. This segment represents more than 90% of consolidated revenue, net income and total assets. The following data on other geographic areas pertain to operations that are located outside the U.S. (primarily Canada, Europe and Hong Kong). Net income includes certain allocated operating expenses and interest expense. Revenues between geographic areas are not material. 63 66 A summary of the Company's operations by geographic area is presented below: For the years ended December 31, 1994 1993 1992 __________________________________________________________________________ Total Revenue: United States $1,250,591 $1,274,615 $1,251,493 Foreign 133,488 84,974 14,033 __________________________________________________________________________ Total $1,384,079 $1,359,589 $1,265,526 __________________________________________________________________________ Net Income (Loss): United States $104,558 $78,024 $87,329 Foreign (4,222) (9,428) (13,757) __________________________________________________________________________ Total $100,336 $68,596 $73,572 __________________________________________________________________________ At December 31, 1994 1993 1992 __________________________________________________________________________ Total Assets: United States $7,148,737 $6,002,857 $5,750,294 Foreign 873,186 406,869 145,135 __________________________________________________________________________ Total $8,021,923 $6,409,726 $5,895,429 __________________________________________________________________________ 15. QUARTERLY DATA (Unaudited) Quarters First Second Third Fourth Total 1994 ___________________________________________________________________________ Total revenue $326,012 $332,216 $348,368 $377,483 $1,384,079 Interest expense 60,107 65,654 68,942 77,109 271,812 Net income 15,805 18,901 25,040 40,590 100,336 Earnings per share 0.34 0.40 0.53 0.86 $ 2.14 Stock price per share high 27.000 24.750 24.375 24.500 low $ 22.875 $ 21.625 $ 21.375 $ 19.750 ___________________________________________________________________________ 64 67 Quarters First Second Third Fourth Total 1993 ___________________________________________________________________________ Total revenue $327,542 $317,019 $330,718 $384,310 $1,359,589 Interest expense 59,572 57,747 57,911 61,105 236,335 Income before cumulative effect on prior years of accounting change 14,722 13,769 3,166 39,853 71,510 Net income 11,808 13,769 3,166 39,853 68,596 Earnings per share $ 0.29 $ 0.34 $ 0.07 0.85 $ 1.60 Stock price per share high - - - 29.250 low - - - $ 22.375 ___________________________________________________________________________ Net income and earnings per share in the first and fourth quarters of 1993, and the fourth quarter of 1994, reflected certain securitization transactions. (See Note 6.) Net income and earnings per share for the first quarter of 1993, were impacted by a $2,914 charge, or $.07 per share, for the adoption of SFAS No. 109. (See Notes 2 and 10.) Net income and earnings per share for the third quarter of 1993, were impacted by a $11.4 million charge related to the increase in the federal tax rate to 35%. (See Notes 2 and 10.) Earnings per share are computed independently for each quarter presented. Because of changes in the weighted average number of shares outstanding, the sum of the quarterly earnings per share may not equal the earnings per share for the year. 65 68 REPORT OF MANAGEMENT ____________________ Management is responsible for the preparation, integrity and objectivity of the financial statements and all other financial information included in this report. Management is also responsible for maintaining a system of internal controls as a fundamental requirement for the operational and financial integrity of results. The financial statements, which reflect the consolidated accounts of AT&T Capital Corporation and its subsidiaries, and other financial information shown were prepared in conformity with generally accepted accounting principles. Estimates included in the financial statements were based on judgments of qualified personnel. To maintain its system of internal controls, management carefully selects key personnel and establishes the organizational structure to provide an appropriate division of responsibility. We believe it is essential to conduct business affairs in accordance with the highest ethical standards as set forth in the AT&T Code of Conduct. These guidelines and other informational programs are designed and used to ensure that policies, standards, and managerial authorities are understood throughout the organization. AT&T Capital's Business Controls Group, in conjunction with AT&T's internal auditors, monitor compliance with the system of internal controls by means of an annual plan of internal audits. On an ongoing basis, the system of internal controls is reviewed, evaluated and revised as necessary in light of the results of constant management oversight, internal and independent audits, changes in the Company's business and other conditions. Management believes that the system of internal controls, taken as a whole, provides reasonable assurance that (1) financial records are adequate and can be relied upon to permit the preparation of financial statements in conformity with generally accepted accounting principles, and (2) access to assets occurs only in accordance with management's authorizations. The Audit Committee of the board of directors, which is composed of directors who are not employees of the Company or AT&T, meets periodically with management, AT&T Capital's Business Controls Group and the independent auditors to review the manner in which these groups of individuals are performing their responsibilities and to carry out the Audit Committee's oversight role with respect to auditing, internal controls and financial reporting matters. Periodically, the independent auditors meet privately with the Audit Committee. Both the internal auditors and the independent auditors have access to the Audit Committee and its individual members at any time. 66 69 The financial statements have been audited by Coopers & Lybrand L.L.P., Independent Auditors. Their audits were conducted in accordance with generally accepted auditing standards and include a consideration of the internal control structure and substantive tests of transactions. Their report follows. Thomas C. Wajnert Chairman and Chief Executive Officer Edward M. Dwyer Senior Vice President, Chief Financial Officer and Treasurer 67 70 REPORT OF INDEPENDENT AUDITORS ______________________________ To the Shareowners of AT&T Capital Corporation: We have audited the consolidated balance sheets of AT&T Capital Corporation and Subsidiaries at December 31, 1994 and 1993, and the related consolidated statements of income, changes in shareowners' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AT&T Capital Corporation and Subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 10 to the Consolidated Financial Statements, in 1993, the Company changed its method of accounting for income taxes. COOPERS & LYBRAND L.L.P. 1301 Avenue of the Americas New York, New York January 26, 1995 68 71 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no changes in independent auditors and no disagreements with independent auditors on any accounting or financial disclosure during the past two years. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS The information set forth under the caption "Nominees for Election" in the Company's Proxy Statement for its Annual Meeting of Stockholders to be held on April 21, 1995 (the "Proxy Statement") to be filed within 120 days after the end of the Company's fiscal year ended December 31, 1994, is incorporated herein by reference. EXECUTIVE OFFICERS Executive officers of the Company serve at the discretion of the Board of Directors. No officer of the Company has a written employment or noncompetition agreement with the Company, although each such officer has agreed not to disclose confidential information of the Company. The Company does not have "key man" insurance coverage on any of its officers. The executive officers of the Company comprise the Corporate Leadership Team consisting of the following six officers: Messrs. Wajnert, Rothman, Van Sickle, Dwyer, and McCarthy and Ms. Morey. Thomas C. Wajnert, 51, has served as Chairman of the Board of Directors and Chief Executive Officer of the Company since July 1993 and as a director of the Company since April 1993. From April 1993 to July 1993 Mr. Wajnert was President, Chief Executive Officer and Vice Chairman of the Board of Directors of the Company. From February 1990 to March 1993, Mr. Wajnert was President and Chief Executive Officer and a director of Old Capital. From October 1984 to May 1993, Mr. Wajnert was the Chief Executive Officer of Old Credit. Irving H. Rothman, 47, has served as Group President of the Company since April 1993. Together with Mr. Van Sickle, Mr. Rothman shares responsibility for the operations of the Company, with the heads of the Company's several business units reporting to Messrs. Rothman and Van Sickle jointly. From March 1992 to March 1993 Mr. Rothman served as Vice Chairman of Old Credit. From November 1991 to March 1993, Mr. Rothman was Group President of Old Capital. From March 1990 to January 1992, Mr. Rothman was president and Chief Operating Officer of Old Credit and from February 1990 to March 1993, Mr. Rothman was a director of Old Credit. From February 1988 to February 1990, Mr. Rothman was Executive Vice President and Chief Financial Officer of Old Credit. 69 72 Charles D. Van Sickle, 52, has served as Group President of the Company since April 1993. Together with Mr. Rothman, Mr. Van Sickle shares responsibility for the operations of the Company, with the heads of the Company's business units reporting to Messrs. Van Sickle and Rothman jointly. From November 1991 to March 1993, Mr. Van Sickle was Group President of Old Capital and from March 1992 to March 1993, he was Vice Chairman of Old Capital's Capital Markets division. From January 1991 to March 1992 Mr. Van Sickle was President and Chief Operating Officer of Old Capital's Capital Markets division. From March 1990 to January 1991 and from November 1991 to March 1993, Mr. Van Sickle was a director of Old Credit. From February 1988 to January 1991, Mr. Van Sickle was a Senior Vice President of Old Credit's Capital Markets division. Edward M. Dwyer, 38, has served as Senior Vice President, Chief Financial Officer and Treasurer of the Company since July 1994. From April 1993 to June 1994, Mr. Dwyer was Vice President and Treasurer of the Company. From July 1991 to March 1993, he was Vice President and Treasurer of Old Capital. From February 1990 to July 1991, Mr. Dwyer was Chief Financial Officer of Old Capital's Capital Markets division. From October 1989 to February 1990, he was Old Capital's Head of Business Planning. G. Daniel McCarthy, 45, has served as Senior Vice President, General Counsel, Secretary and Chief Risk Management Officer of the Company since April 1993. From February 1990 to March 1993, Mr. McCarthy was Senior Vice President, General Counsel, Secretary and Chief Risk Management Officer of Old Capital. From February 1988 to February 1990 he was Vice President, General Counsel and Secretary of Old Credit. Ruth A. Morey, 51, has served as Senior Vice President and Corporate Resource Officer of the Company since April 1993. From February 1990 to March 1993, Ms. Morey served as Senior Vice President and Chief Administrative Officer of Old Capital. From March 1989 to February 1991, Ms. Morey was Vice President of Old Credit's Human Resources division and from March 1990 to March 1993 she was a director of Old Credit. From 1987 to March 1989, Ms. Morey was the head of Old Credit's Human Resources division. Item 11. EXECUTIVE COMPENSATION. The information set forth under the caption "Executive Compensation" in the Proxy Statement is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information set forth under the caption "Security Ownership" in the Proxy Statement is incorporated herein by reference. 70 73 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information set forth under the caption "Executive Compensation" in the Proxy Statement is incorporated herein by reference. PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K. (a) Documents filed as a part of the report: (1) Financial Statements: Page Consolidated Balance Sheets 32 Consolidated Statements of Income 34 Consolidated Statements of Changes in Shareowners' Equity 36 Consolidated Statements of Cash Flows 37 Notes to the Consolidated Financial Statements 39 Report of Management 66 Report of Independent Auditors 68 (2) Financial Statement Schedules: Schedule VIII - Valuation and Qualifying Accounts Financial statement schedules other than the one listed above are omitted because the required information is included in the financial statements or notes thereto or because of the absence of conditions under which they are required. Report of Independent Auditors (3) Exhibits: Exhibit Number 3(a). Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant's Registration Statement on Form S-1 [No. 33-49605], filed with the Securities and Exchange Commission). 3(b). Amended and Restated By-laws of the registrant dated as of October 21, 1994. 71 74 4(a). Indenture dated as of July 1, 1993 between the registrant and Chemical Bank, Trustee (the "Indenture")(incorporated by reference to Exhibit 4A to the registrant's Registration Statement on Form S-3 [No. 33-49671] filed with the Securities and Exchange Commission). 4(b). First Indenture Supplement dated as of June 24, 1994, to the Indenture (incorporated by reference to Exhibit 4A-2 to the registrant's Registration Statement on Form S-3 [No.33-54359] filed with the Securities and Exchange Commission). 4(c). Instruments other than described above in 4(a) and 4(b) that define the rights of holders of long-term debt of the registrant and all of its consolidated subsidiaries, are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. 10(a). Operating Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to exhibit 10.1 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(b). Intercompany Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.2 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(c). License Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.3 to the registrant's Registration Statement on Form S-1 [No. 33- 49605] filed with the Securities and Exchange Commission). 10(d). Registration Rights Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.4 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(e). Tax Agreements between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.5 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(f). AT&T Capital Corporation 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.9 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(g). Form of Stock Option Agreement under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.10 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 72 75 10(h). Form of Restricted Stock Agreement under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.11 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(i). Form of Director's Stock Option Agreement under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.12 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(j). Form of Director's Restricted Stock Award under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.13 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(k). AT&T Capital Corporation 1993 Leveraged Stock Purchase Plan (incorporated by reference to Exhibit 10.14 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(l). Form of Stock Purchase Agreement and related exhibits under the 1993 Leveraged Stock Purchase Plan (incorporated by reference to Exhibit 10.15 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(m). AT&T Capital Corporation 1993 Annual Incentive Plan (incorporated by reference to Exhibit 10.16 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(n). AT&T Capital Corporation 1993 Share Performance Incentive Plan (incorporated by reference to Exhibit 10.17 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(o). Restructuring Agreement dated as of March 29, 1993, among the Registrant, Old Capital, Old Credit and AT&T (incorporated by reference to Exhibit 10.18 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(p). Credit Agreement dated as of July 11, 1994, among the registrant, the Banks listed therein and Morgan Guaranty Trust Company of New York, as Agent (three-year term). 73 76 10(q). Credit Agreement dated as of July 11, 1994, among the registrant, the Banks listed therein and Morgan Guaranty Trust Company of New York, as Agent (364-day term). 10(r). Form of AT&T Capital Corporation 1993 Employee Compensation Adjustment Plan (incorporated by reference to Exhibit 10.21 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(s). Form of AT&T Capital Corporation 1993 Deferred Compensation Plan (incorporated by reference to Exhibit 10.22 to the registrant's Registration Statement on Form S-1 [No.33- 49605]filed with the Securities and Exchange Commission). 10(t). Form of AT&T Capital Corporation 1993 Financial Counseling Plan (incorporated by reference to Exhibit 10.22 to the registrant's Registration Statement on Form S-1 [No.33-49605] filed with the Securities and Exchange Commission). 10(u). AT&T Capital Corporation 1994 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4(c) to the registrant's Registration Statement on Form S-8 [No. 33- 54315] filed with the Securities and Exchange Commission). 10(v). Form of Summary Plan Description AT&T Capital Corporation Retirement and Savings Plan (including the Form of Description AT&T Capital Corporation Excess Benefit Plan). 10(w). AT&T Capital Corporation 1995 Annual Incentive Plan. 10(x). AT&T Capital Corporation 1995 Senior Executive Annual Incentive Plan (incorporated by reference to Exhibit A to the registrant's definitive Proxy Statement dated March 20, 1995 issued in connection with the 1995 Annual Meeting of Stockholders). 10(y). Form of Summary Plan Description of AT&T Capital Corporation Executive Benefit Plan. 10(z). Form of Summary Plan Description of AT&T Capital Corporation Supplemental Executive Retirement Plan. 10(aa).Form of Summary Plan Description of AT&T Capital Corporation Compensation Limit Excess Plan. 11. Computation of Earnings Per Share 12. Computation of Ratio of Earnings to Fixed Charges. 21. Subsidiaries of the registrant. 23. Consent of Coopers & Lybrand L.L.P. 74 77 24(a). Powers of Attorney executed by officers and directors who signed this report. 24(b). Certificate of Corporate Resolution. 27. Financial Data Schedule (b) Reports on Form 8-K: None 75 78 SCHEDULE VIII AT&T CAPITAL CORPORATION VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (Dollars In Thousands) Column A Column B Column C Column D Column E Column F ___________________________________________________________________________ Other Balance at Charge-offs, Additions/ Balance Beginning Net of (Deductions) at End of Period Additions Recoveries (a) of Period ___________________________________________________________________________ 1994 Allowance for Credit Losses: Lease Financing(1)$102,760 $ 66,306 $ 33,978 $ (6,558) $128,530 Commercial & Financial (2) 57,059 14,582 21,567 (2,176) 47,898 ___________________________________________________________________________ Total $159,819 $ 80,888 $ 55,545 $ (8,734) $176,428 =========================================================================== 1993 Allowance for Credit Losses: Lease Financing(1)$ 87,774 $ 95,034 $ 46,012 $(34,036) $102,760 Commercial & Financial (2) 36,187 28,644 13,017 5,245 57,059 __________________________________________________________________________ Total $123,961 $123,678 $ 59,029 $(28,791) $159,819 ========================================================================== 1992 Allowance for Credit Losses: Lease Financing(1)$ 74,106 $ 88,577 $ 61,549 $(13,360) $ 87,774 Commercial & Financial (2) 19,861 23,138 16,818 10,006 36,187 __________________________________________________________________________ Total $ 93,967 $111,715 $ 78,367 $ (3,354) $123,961 ========================================================================== (1) Shown on the balance sheet as a deduction from applicable finance assets, primarily capital leases. (2) Shown on the balance sheet as a deduction from finance receivables. (a) Primarily includes transfers out of credit losses related to receivables securitized, transfers in of reserves related to businesses acquired and reclassifications. 76 79 REPORT OF INDEPENDENT AUDITORS ______________________________ Our report on the consolidated financial statements of AT&T Capital Corporation and Subsidiaries is included on page 68 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed as an exhibit on page 71 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. As discussed in our report referred to above, the Company changed its method of accounting for income taxes in 1993. COOPERS & LYBRAND L.L.P. 1301 Avenue of the Americas New York, New York January 26, 1995 77 80 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AT&T CAPITAL CORPORATION Thomas C. Wajnert By_____________________________ Thomas C. Wajnert, March 15, 1995 (Chairman and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Principal Executive Officer: T. C. Wajnert Chairman and Chief Executive Officer Principal Financial Officer: E. M. Dwyer Senior Vice President, Chief Financial Officer and Treasurer Thomas C. Wajnert By _________________________ Principal Accounting Officer: (Thomas C. Wajnert, Attorney-in-fact* and on his own behalf as R. Oliu, Jr. Vice President, Controller Director and a Principal and Chief Accounting Officer Executive Officer). Directors: T. C. Wajnert J. P. Clancey J. P. Kelly March 15, 1995 G. M. Lowrie A. J. Mandl R. A. McGinn J. J. Melone R. W. Miller * by power of attorney S. L. Prendergast B. Walker, Jr. 78 81 EXHIBIT INDEX Exhibit Number 3(a). Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant's Registration Statement on Form S-1 [No. 33-49605], filed with the Securities and Exchange Commission). 3(b). Amended and Restated By-laws of the registrant dated as of October 21, 1994. 4(a). Indenture dated as of July 1, 1993 between the registrant and Chemical Bank, Trustee (the "Indenture")(incorporated by reference to Exhibit 4A to the registrant's Registration Statement on Form S-3 [No. 33-49671] filed with the Securities and Exchange Commission). 4(b). First Indenture Supplement dated as of June 24, 1994, to the Indenture (incorporated by reference to Exhibit 4A-2 to the registrant's Registration Statement on Form S-3 [No.33-54359] filed with the Securities and Exchange Commission). 4(c). Instruments other than described above in 4(a) and 4(b) that define the rights of holders of long-term debt of the registrant and all of its consolidated subsidiaries, are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. 10(a). Operating Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to exhibit 10.1 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(b). Intercompany Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.2 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(c). License Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.3 to the registrant's Registration Statement on Form S-1 [No. 33- 49605] filed with the Securities and Exchange Commission). 10(d). Registration Rights Agreement between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.4 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 79 82 10(e). Tax Agreements between the registrant and AT&T dated as of June 25, 1993 (incorporated by reference to Exhibit 10.5 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(f). AT&T Capital Corporation 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.9 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(g). Form of Stock Option Agreement under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.10 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(h). Form of Restricted Stock Agreement under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.11 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(i). Form of Director's Stock Option Agreement under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.12 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(j). Form of Director's Restricted Stock Award under the 1993 Long Term Incentive Plan (incorporated by reference to Exhibit 10.13 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(k). AT&T Capital Corporation 1993 Leveraged Stock Purchase Plan (incorporated by reference to Exhibit 10.14 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(l). Form of Stock Purchase Agreement and related exhibits under the 1993 Leveraged Stock Purchase Plan (incorporated by reference to Exhibit 10.15 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(m). AT&T Capital Corporation 1993 Annual Incentive Plan (incorporated by reference to Exhibit 10.16 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(n). AT&T Capital Corporation 1993 Share Performance Incentive Plan (incorporated by reference to Exhibit 10.17 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 80 83 10(o). Restructuring Agreement dated as of March 29, 1993, among the Registrant, Old Capital, Old Credit and AT&T (incorporated by reference to Exhibit 10.18 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(p). Credit Agreement dated as of July 11, 1994, among the registrant, the Banks listed therein and Morgan Guaranty Trust Company of New York, as Agent (three-year term). 10(q). Credit Agreement dated as of July 11, 1994, among the registrant, the Banks listed therein and Morgan Guaranty Trust Company of New York, as Agent (364-day term). 10(r). Form of AT&T Capital Corporation 1993 Employee Compensation Adjustment Plan (incorporated by reference to Exhibit 10.21 to the registrant's Registration Statement on Form S-1 [No. 33-49605] filed with the Securities and Exchange Commission). 10(s). Form of AT&T Capital Corporation 1993 Deferred Compensation Plan (incorporated by reference to Exhibit 10.22 to the registrant's Registration Statement on Form S-1 [No.33- 49605]filed with the Securities and Exchange Commission). 10(t). Form of AT&T Capital Corporation 1993 Financial Counseling Plan (incorporated by reference to Exhibit 10.22 to the registrant's Registration Statement on Form S-1 [No.33-49605] filed with the Securities and Exchange Commission). 10(u). AT&T Capital Corporation 1994 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4(c) to the registrant's Registration Statement on Form S-8 [No. 33- 54315] filed with the Securities and Exchange Commission). 10(v). Form of Summary Plan Description of AT&T Capital Corporation Retirement and Savings Plan (including the Form of Description of AT&T Capital Corporation Excess Benefit Plan). 10(w). AT&T Capital Corporation 1995 Annual Incentive Plan. 10(x). AT&T Capital Corporation 1995 Senior Executive Annual Incentive Plan (incorporated by reference to Exhibit A to the registrant's definitive Proxy Statement dated March 20, 1995 issued in connection with the 1995 Annual Meeting of Stockholders). 10(y). Form of Summary Plan Description of AT&T Capital Corporation Executive Benefit Plan. 81 84 10(z). Form of Summary Plan Description of AT&T Capital Corporation Supplemental Executive Retirement Plan. 10(aa).Form of Summary Plan Description of AT&T Capital Corporation Compensation Limit Excess Plan. 11. Computation of Earnings Per Share 12. Computation of Ratio of Earnings to Fixed Charges. 21. Subsidiaries of the registrant. 23. Consent of Coopers & Lybrand L.L.P. 24(a). Powers of Attorney executed by officers and directors who signed this report. 24(b). Certificate of Corporate Resolution. 27. Financial Data Schedule 82 EX-3 2 1 EXHIBIT 3(b) Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION AMENDED AND RESTATED BY-LAWS OCTOBER 21, 1994 BY-LAWS OF AT&T CAPITAL CORPORATION (hereinafter called the "Corporation") ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be in the City of Dover, County of Kent, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Each meeting of the stockholders shall be chaired by the Chairman of the Board of Directors or his designee. Section 2. Annual Meetings. The Annual Meeting of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meeting the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Written notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Any previously scheduled Annual Meeting of Stockholders may be postponed by resolution of the Board of Directors upon public notice given on or prior to the date previously scheduled for such meeting. 2 Section 3. Special Meetings. Unless otherwise prescribed by law or by the Restated Certificate of Incorporation of the Corporation (including any Certificates of Designation with respect to any Preferred Stock, the "Certificate of Incorporation"), Special Meetings of Stockholders, for any purpose or purposes, may be called by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, (iii) the President, (iv) the Secretary or (v) the Chairman of the Executive Committee, and shall be called by any such officer at the request in writing of a majority of the entire Board of Directors or, so long as (and only so long as) such request is received prior to the Trigger Date, of the holders of a majority of the then outstanding Common Stock. Such request shall state the purpose or purposes of the proposed meeting. Written notice of a Special Meeting of Stockholders stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. Except as otherwise required by law or by the Certificate of Incorporation, no business shall be transacted at any Special Meeting of Stockholders other than the items of business stated in the notice of meeting. If the Chairman of a Special Meeting of Stockholders determines that any business proposed to be conducted at such meeting was not properly brought before such meeting in accordance with the foregoing procedures, the Chairman shall declare to such meeting that such business was not properly brought before such meeting, and such business shall not be transacted. For purposes of these By-Laws: 1. "Trigger Date" shall mean the first date on which AT&T ceases to beneficially own (excluding for such purposes shares of Common Stock beneficially owned by AT&T but not for its own account, including (in such exclusion) beneficial ownership which arises by virtue of some entity that is an affiliate of AT&T being a sponsor or advisor of a mutual or similar fund that beneficially owns shares of Common Stock) forty percent or more of the then outstanding Common Stock and preferred stock entitled to vote together with the Common Stock as a single class (collectively, the "Voting Stock"); 2. "AT&T" shall have the meaning specified in Section D(1) of Article FIFTH of the Certificate of Incorporation; and 3. "affiliate" and "beneficial ownership" shall have the respective meanings given to such terms in Rules 12b-2 and 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect at the Filing Time (as defined in the Certificate of Incorporation). Section 4. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person 3 or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting of the place, date and hour of the adjourned meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Section 5. Voting. Unless otherwise required by law, the Certificate of Incorporation or these By-Laws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder or such other vote, if any, as shall be set forth in the Certificate of Incorporation. Such votes may be cast in person or by duly executed proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 6. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. Section 7. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 6 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. Section 8. Nomination of Directors. After the Trigger Date, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances: Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders (a) by or at the direction of 4 the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 8 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 8. In addition to any other applicable requirements of (i) the Exchange Act and the rules and regulations thereunder, (ii) the General Corporation Law of the State of Delaware, (iii) the rules or regulations of any national securities exchange or similar body overseeing any trading of shares of the Corporation, (iv) the Certificate of Incorporation or (v) these By-laws, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation, as set forth below. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of such person as a director pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder or any other applicable laws, rules or regulations (including those of any national securities exchange or similar body overseeing any trading of shares of the Corporation); and (b) as to the stockholder giving the notice (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a detailed description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be 5 accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. After the Trigger Date, no person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 8. If the Chairman of an Annual Meeting of Stockholders determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to such meeting that the nomination was defective and such defective nomination shall be void for all purposes and shall be disregarded. Section 9. Business at Annual Meetings. No business may be transacted at an Annual Meeting of Stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the Annual Meeting of Stockholders by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the Annual Meeting of Stockholders by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 9. In addition to any other applicable requirements of (i) the Exchange Act and the rules and regulations thereunder, (ii) the General Corporation Law of the State of Delaware, (iii) the rules or regulations of any national securities exchange or similar body overseeing any trading of shares of the Corporation, (iv) the Certificate of Incorporation or (v) these By-laws, for business to be properly brought before an Annual Meeting of Stockholders by a stockholder (other than business consisting of the election of directors, with respect to which the procedures set forth in Section 8 shall be applicable), such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; provided, however, that in the event that the Annual Meeting of Stockholders is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the Annual Meeting of Stockholders was mailed or public disclosure of the date of the Annual Meeting of Stockholders was made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the Annual Meeting of Stockholders (i) a brief description of the business desired to be brought before the Annual Meeting of Stockholders and the reasons for conducting such business at such meeting, (ii) the name and record address of such stockholder and the name and address of the 6 beneficial owner, if any, on whose behalf the proposal is made, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder and such other person or persons in such business and (v) a representation that such stockholder intends to appear in person or by proxy at such meeting to bring such business before the meeting. No business shall be conducted at any Annual Meeting of Stockholders except business brought before such meeting in accordance with the procedures set forth in this Section 9; provided, however, that once business has been properly brought before an Annual Meeting of Stockholders in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion at such meeting by any stockholder of any such business. If the Chairman of an Annual Meeting of Stockholders determines that business was not properly brought before such meeting in accordance with the foregoing procedures, the Chairman shall declare to such meeting that the business was not properly brought before the meeting and such business shall not be transacted. Section 10. Inspectors. Prior to any meeting of stockholders, the Board of Directors or the Chief Executive Officer shall appoint one or more inspectors to act at such meeting and make a written report thereof and may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at the meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and (subject to any appropriate review) the validity of proxies and ballots, count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons to assist them in the performance of their duties. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted therewith, any information provided by a stockholder who submits a proxy by telegram, cablegram or other electronic transmission from which it can be determined that the proxy was authorized by the stockholder, ballots and the regular books and records of the corporation, and they may also consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors 7 consider other reliable information for such purpose, they shall, at the time they make their certification, specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. ARTICLE III DIRECTORS Section 1. Number and Election of Directors. The Board of Directors shall consist of not less than three nor more than twenty-five members, the exact number of which shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors. Any director may resign at any time by delivering a written notice of resignation, signed by such director, to the Board of Directors or the Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon delivery. Directors need not be stockholders. Section 2. Vacancies. Any vacancy on the Board of Directors may be filled in accordance with Section 223 of the General Corporation Law of the State of Delaware; provided, however, that after the Trigger Date, vacancies and newly created directorships resulting from any increase in the authorized number of directors may only be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next election of directors and until their successors are duly elected and qualified, or until their earlier death, resignation or removal. Section 3. Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. Section 4. Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Each meeting of the Board of Directors shall be chaired by the Chairman of the Board of Directors, who shall be a director chosen by a majority of the entire Board, or, in his absence, by the Vice Chairman of the Board of Directors, who shall also be a director chosen by a majority of the entire Board, or, in their absence, by such director as shall be chosen by a majority of the directors in attendance at such meeting. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman, the Vice Chairman, the Chief Executive Officer, the President or any director. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such shorter notice as 8 the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Section 5. Quorum. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these By-Laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 6. Actions by Consent. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, by written consent of all the members of the Board of Directors or such committee, as the case may be, which consent may be executed in counterparts, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee. Section 7. Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, members of the Board of Directors of the Corporation, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting. Section 8. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 9. Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary or retainer as director. No such payment shall preclude 9 any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings or acting as chairman of any committee. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chief Executive Officer, a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor need such officers be directors of the Corporation. The Chairman and Vice Chairman of the Board of Directors, in such capacity, shall not be considered officers of the Corporation. Section 2. Election. The Board of Directors at its first meeting held after each Annual Meeting of Stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier death, resignation or removal. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries and other compensation of all officers of the Corporation shall be fixed from time to time by the Board of Directors or the appropriate committee thereof; provided that the Board of Directors or such committee may delegate to the Chief Executive Officer (who may further delegate such power) the power to fix from time to time the salaries and other compensation of any officer of the Corporation other than the Chief Executive Officer. Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chief Executive Officer, the President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. Section 4. Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation, shall have general and active supervision, and plenary power, over all the business and 10 affairs of the Corporation, subject to the control of the Board of Directors, shall be responsible for the general management and direction of all the business and affairs of the Corporation and except where by law the signature of the President is required, shall possess the same power as the President to execute, in the name and on behalf of the Corporation, all bonds, mortgages, contracts and other instruments of the Corporation which may be authorized by the Board of Directors. During the absence or disability of the President, the Chief Executive Officer shall exercise all the powers and discharge all the duties of the President. The Chief Executive Officer shall also perform such other duties and may exercise such other powers as are incident to his office or as from time to time may be assigned to him by these By-Laws or by the Board of Directors. Section 5. President. The President shall, subject to the control of the Board of Directors and of the Chief Executive Officer, have general and active supervision over all the business and affairs of the Corporation and shall see that all orders and resolutions of the Board of Directors and of the Chief Executive Officer are carried into effect. At the request of the Chief Executive Officer or in his absence or in the event of his inability or refusal to act, the President shall perform the duties of the Chief Executive Officer and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The President shall execute, in the name and on behalf of the Corporation, all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By-Laws, the Board of Directors, the Chief Executive Officer or the President. The President also may execute, in the name and on behalf of the Corporation, all other bonds, mortgages, contracts and other instruments of the Corporation. The President shall also perform such other duties and may exercise such other powers as are incident to his office or as from time to time may be assigned to him by these By-Laws or by the Board of Directors or by the Chief Executive Officer. Section 6. Vice Presidents. In the absence of the President or in the event of his inability or refusal to act, the Vice President or the Vice Presidents if there is more than one (in the order designated by the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer or the President from time to time may prescribe. Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for each standing committee when required by such committee. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer or the President. If the Secretary shall be unable or shall refuse to cause to be given notice of any meeting of the stockholders or special meeting of the Board of Directors, and if 11 there be no Assistant Secretary, then the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. In addition, the Secretary shall, promptly upon receipt of a request for indemnification from any director, officer, employee or agent pursuant to Section 3 of Article VIII, advise the Board of Directors in writing of the receipt of such request. Section 8. Treasurer. Subject at all times to the control of the Board of Directors, the Chief Executive Officer and the President, the Treasurer shall have custody of, and be responsible for, the corporate funds and securities and shall invest the same in his discretion and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer or the President, and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer or the President from time to time may prescribe. Section 9. Assistant Secretaries. Except as may be otherwise provided in these By-Laws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 10. Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. 12 Section 11. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. Section 12. Removal and Resignation; Vacancies. Any officer may be removed for or without cause at any time by the Board of Directors. Any officer may resign at any time by delivering a written notice of resignation, signed by such officer, to the Board of Directors or the Chief Executive Officer. Unless otherwise specified therein, such resignation shall take effect upon delivery. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors. ARTICLE V STOCK Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chief Executive Officer, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Section 2. Signatures. Where a certificate is countersigned by (i) a transfer agent other than the Corporation or its employee, or (ii) a registrar other than the Corporation or its employee, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or it were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon 13 the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or, prior to the Trigger Date, entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any such other corporate action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and for all other purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VI NOTICES Section 1. Notices. Whenever written notice is required by law, the Certificate of Incorporation or these By-Laws to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, facsimile, telex, cable or nationally recognized overnight courier. Section 2. Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, and, in the case of a waiver of notice of a meeting, whether or not the business to be transacted at or the purposes of such meeting is set forth in such waiver, shall be deemed equivalent thereto. The attendance of any person at any meeting, in person or, in the case of a meeting of stockholders, by proxy, shall constitute a waiver of notice of such meeting except where such person attends such meeting for the express purpose of objecting at the beginning of such meeting to the transaction of any business on the grounds that such meeting is not duly called or convened. 14 ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as may be provided by these By-laws or as the Board of Directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal--Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than Those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall, to the fullest extent permitted by applicable law, indemnify any person who was or is a party to (or witness in) or is threatened to be made a party to (or witness in) any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action or suit by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was a director or officer of the Corporation serving (or has agreed to serve) at the request of the Corporation as a director or officer, employee, trustee or agent of or in any other capacity with respect to another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (in any of the foregoing capacities, a "Representative of the Corporation"), or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party to (or witness in) or is threatened to be made a party to (or witness in) any such action, suit or proceeding by reason of the fact that he is or was or has agreed to become an employee or agent of the Corporation, or is or was serving (or has agreed to serve) at the 15 request of the Corporation as a Representative of the Corporation, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, have reasonable cause to believe that his conduct was unlawful. Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall, to the fullest extent permitted by applicable law, indemnify any person who was or is a party to (or witness in) or is threatened to be made a party to (or witness in) any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was a director or officer of the Corporation serving (or has agreed to serve) at the request of the Corporation as a Representative of the Corporation, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party to (or witness in) or is threatened to be made a party to (or witness in) any such action, suit or proceeding by reason of the fact that he is or was or has agreed to become an employee or agent of the Corporation, or is or was an employee or agent of the Corporation serving (or has agreed to serve) at the request of the Corporation as a Representative of the Corporation, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Section 3. Authorization of Indemnification; Procedures. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer (or employee or agent, as the case may be) is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. A director, officer, employee or agent seeking indemnification under this Article VIII shall submit to the Secretary of the Corporation a written request including such documentation and information as is reasonably available to such director, officer, 16 employee or agent and reasonably necessary to determine whether and to what extent such director, officer, employee or agent is entitled to indemnification (the "Supporting Documentation"). Such determination shall be made not later than 60 calendar days after receipt by the Corporation of such request together with the Supporting Documentation (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by majority vote of the stockholders. If no such determination has been made within 60 calendar days after receipt by the Corporation of the request therefor together with the Supporting Documentation such director, officer, employee or agent shall be deemed entitled to indemnification, unless (x) such director, officer, employee or agent misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (y) such indemnification is prohibited by law. Notwithstanding the foregoing, to the extent that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. If a determination shall have been made or deemed to have been made, pursuant to this Section 3, or pursuant to the preceding sentence is not required to be made, that any director, officer, employee or agent is entitled to indemnification, the Corporation shall be obligated to pay the amounts constituting such indemnification within five days after such determination has been made or deemed to have been made and shall be conclusively bound by such determination unless (A) such director, officer, employee or agent misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (B) such indemnification is prohibited by law. In the event that (x) advancement of expenses is not timely made pursuant to Section 6 or (y) payment of indemnification is not made within five calendar days after a determination of entitlement to indemnification has been made or deemed to have been made or is not required to be made pursuant to this Section 3, such director, officer, employee or agent shall be entitled to seek judicial enforcement, in any court of competent jurisdiction, of the Corporation's obligations to pay such advancement of expenses or indemnification. Notwithstanding the foregoing, the Corporation may bring an action, in an appropriate court in the State of Delaware or any other court of competent jurisdiction, contesting the right of any director, officer, employee or agent to receive indemnification hereunder due to the occurrence of an event or a condition described in subclause (A) or (B) of the second preceding sentence (a "Disqualifying Event"); provided, however, that in any such action the Corporation shall have the burden of proving the occurrence of such Disqualifying Event. Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information 17 supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise, unless the Corporation shall sustain the burden of proof that such person had actual knowledge that such records, books of account, information, advice or reports were incorrect in a material respect. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a Representative of the Corporation. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be. Section 5. Actions for Indemnification. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer shall, after the 60 calendar day period referred to in Section 3 of this Article VIII has elapsed, be entitled to seek an adjudication of his entitlement to indemnification under this Article VIII either, at his sole option, in (i) any court of competent jurisdiction in the State of Delaware or (ii) an arbitration to be conducted by a single arbitrator pursuant to the then applicable rules of the American Arbitration Association. The basis of any such indemnification shall be a determination by such court or arbitrator that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be. It shall be a defense to any such adjudication (other than an adjudication brought to enforce a claim for the advance of costs, charges and expenses under Section 6 of this Article VIII where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Section 1 or 2 of this Article VIII, but the burden of proving such defense shall be on the Corporation. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such claim for indemnification or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. The Corporation shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 5 that the procedures and presumptions of this Article VIII are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Corporation is bound by all the provisions of this Article. Notice of any adjudication for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of the application for such adjudication. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense (including attorneys' fees) of prosecuting such adjudication. 18 Section 6. Expenses Payable in Advance. Expenses (including attorneys' fees) incurred by a director or officer in defending or investigating any threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding within five business days after the receipt by the Corporation of a statement or statements from such director or officer requesting such advance or advances from time to time. Such statement or statements shall reasonably evidence such expenses and shall include or be accompanied by an undertaking by or on behalf of such director or officer to repay such amount or amounts if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses (including attorneys' fees) incurred by other employees and agents of the Corporation may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may authorize the Corporation's counsel to represent such Director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, any By-Law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. Section 8. Insurance. The Corporation may, to the fullest extent permitted by applicable law, purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was a director, officer, employee or agent of the Corporation serving at the request of the Corporation as a Representative of the Corporation against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII. Section 9. Certain Definitions. For purposes of this Article VIII, references to "fines" shall include any excise taxes assessed on or against a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be 19 in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "in or not opposed to the best interests of the Corporation" as referred to in this Article VIII. Section 10. Survival of Indemnification and Advancement of Expenses; Contract Right. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The indemnification provisions of this Article VIII shall be deemed to be a contract between the Corporation and each director, officer, employee and agent who serves in any such capacity at any time while these provisions are in effect, and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a "contract right" may not be modified retroactively without the consent of such director, officer, employee or agent. Section 11. Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 hereof), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. Section 12. Severability. If this Article VIII or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VIII that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE IX AMENDMENTS Section 1. Amendments. The Board of Directors shall have the express power, without a vote of stockholders, to adopt any By-Law, and to amend, alter or repeal these By-Laws, except to the extent that these By-Laws or the Certificate of Incorporation otherwise provide. The Board of Directors may exercise such power upon the affirmative vote of a majority of the entire Board of Directors. Stockholders may not adopt any By-Law, nor amend, alter or repeal these By-Laws of the Corporation, except upon the affirmative vote of the holders of at least a majority of the votes entitled to be cast by the holders of all then outstanding shares of stock 20 of the Corporation entitled to vote generally in the election of directors, voting together as a single class. ARTICLE X CONSTRUCTION Section 1. Construction. In the event of any conflict between the provisions of these By-Laws as in effect from time to time and the provisions of the Certificate of Incorporation of the Corporation as in effect from time to time, the provisions of such Certificate of Incorporation shall be controlling. Section 2. Entire Board of Directors. As used in this Article X and in these By-Laws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies in the Board of Directors. EX-10 3 1 Exhibit 10(p) Form 10-K for 1994 File No. 1-11237 CONFORMED COPY $500,000,000 CREDIT AGREEMENT dated as of July 11, 1994 among AT&T Capital Corporation The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Agent 2 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01 Definitions. . . . . . . . . . . . . . . . . . . . 1 1.02 Accounting Terms and Determinations. . . . . . . . 11 1.03 Types of Borrowings. . . . . . . . . . . . . . . . 12 1.04 Basis for Ratings. . . . . . . . . . . . . . . . . 12 ARTICLE II THE CREDITS SECTION 2.01 Commitments to Lend. . . . . . . . . . . . . . . . 12 2.02 Notice of Committed Borrowing. . . . . . . . . . . 13 2.03 Money Market Borrowings. . . . . . . . . . . . . . . . 13 2.04 Notice to Banks; Funding of Loans. . . . . . . . . 17 2.05 Notes. . . . . . . . . . . . . . . . . . . . . . . 18 2.06 Maturity of Loans; Termination of Commitments. . . . . . . . . . . . . . . . . . . 19 2.07 Interest Rates . . . . . . . . . . . . . . . . . . 19 2.08 Facility Fees. . . . . . . . . . . . . . . . . . . 22 2.09 Optional Termination or Reduction of Commitments . . . . . . . . . . . . 23 2.10 Method of Electing Interest Rates. . . . . . . . . 23 2.11 Optional Prepayments . . . . . . . . . . . . . . . 24 2.12 General Provisions as to Payments. . . . . . . . . 25 2.13 Funding Losses . . . . . . . . . . . . . . . . . . 26 2.14 Computation of Interest and Fees . . . . . . . . . 27 2.15 Regulation D Compensation. . . . . . . . . . . . . 27 ARTICLE III CONDITIONS SECTION 3.01 Closing. . . . . . . . . . . . . . . . . . . . . . 28 3.02 Borrowings . . . . . . . . . . . . . . . . . . . . 28 3 Page ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01 Corporate Existence and Power. . . . . . . . . . . 29 4.02 Corporate and Governmental Authorization; No Contravention. . . . . . . . . 29 4.03 Binding Effect . . . . . . . . . . . . . . . . . . 29 4.04 Financial Information. . . . . . . . . . . . . . . 30 4.05 Litigation.. . . . . . . . . . . . . . . . . . . . 30 4.06 Subsidiaries.. . . . . . . . . . . . . . . . . . . 31 4.07 Not an Investment Company. . . . . . . . . . . . . 31 4.08 Full Disclosure. . . . . . . . . . . . . . . . . . 31 ARTICLE V COVENANTS SECTION 5.01 Information. . . . . . . . . . . . . . . . . . . . 31 5.02 Maintenance of Existence . . . . . . . . . . . . . 32 5.03 Fixed Charge Coverage. . . . . . . . . . . . . . . 32 5.04 Debt . . . . . . . . . . . . . . . . . . . . . . . 32 5.05 Limitation on Secured Debt . . . . . . . . . . . . 33 5.06 Consolidations, Mergers and Sales of Assets. . . . . . . . . . . . . . . . . 35 5.07 Use of Proceeds. . . . . . . . . . . . . . . . . . 35 ARTICLE VI DEFAULTS SECTION 6.01 Events of Default. . . . . . . . . . . . . . . . . 36 6.02 Notice of Default. . . . . . . . . . . . . . . . . 38 6.03 Rescission . . . . . . . . . . . . . . . . . . . . 38 ARTICLE VII THE AGENT SECTION 7.01 Appointment and Authorization. . . . . . . . . . . 38 7.02 Agent and Affiliates.. . . . . . . . . . . . . . . 38 7.03 Action by Agent. . . . . . . . . . . . . . . . . . 39 4 Page 7.04 Consultation with Experts. . . . . . . . . . . . . 39 7.05 Liability of Agent . . . . . . . . . . . . . . . . 39 7.06 Indemnification. . . . . . . . . . . . . . . . . . 39 7.07 Credit Decision. . . . . . . . . . . . . . . . . . 40 7.08 Successor Agent. . . . . . . . . . . . . . . . . . 40 7.09 Agent's Fee. . . . . . . . . . . . . . . . . . . . 40 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair. . . . . . . . . . . . 40 8.02 Illegality . . . . . . . . . . . . . . . . . . . . 41 8.03 Increased Cost and Reduced Return. . . . . . . . . 42 8.04 Taxes. . . . . . . . . . . . . . . . . . . . . . . 44 8.05 Base Rate Loans Substituted for Affected Fixed Rate Loans. . . . . . . . . . . . 46 8.06 Substitution of Bank . . . . . . . . . . . . . . . 47 8.07 Compensation . . . . . . . . . . . . . . . . . . . 47 ARTICLE IX MISCELLANEOUS SECTION 9.01 Notices. . . . . . . . . . . . . . . . . . . . . . 47 9.02 No Waivers . . . . . . . . . . . . . . . . . . . . 48 9.03 Expenses; Indemnification. . . . . . . . . . . . . 48 9.04 Sharing of Set-Offs. . . . . . . . . . . . . . . . 49 9.05 Amendments and Waivers . . . . . . . . . . . . . . 49 9.06 Successors and Assigns . . . . . . . . . . . . . . 49 9.07 Collateral . . . . . . . . . . . . . . . . . . . . 51 9.08 Governing Law; Submission to Juris- diction. . . . . . . . . . . . . . . . . . . . . 51 9.09 Counterparts; Integration; Effectiveness. . . . . . . . . . . . . . . . . . 52 9.10 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 52 9.11 Confidentiality. . . . . . . . . . . . . . . . . . 52 5 Page Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Borrower Exhibit F - Opinion of Special Counsel for the Agent Exhibit G - Assignment and Assumption Agreement 6 CREDIT AGREEMENT AGREEMENT dated as of July 11, 1994 among AT&T CAPITAL CORPORATION, the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. W I T N E S S E T H : WHEREAS, the Borrower (as defined below) has heretofore entered into a $500,000,000 Credit Agreement dated as of July 12, 1993 with the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as agent for such banks (the "Existing Credit Agreement"); and WHEREAS, the Borrower wishes to enter into this Agreement to replace the Existing Credit Agreement; and WHEREAS, upon the effectiveness of this Agreement in accordance with Section 9.09, the Existing Credit Agreement shall terminate; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Accounts Receivable" shall mean (i) any accounts receivable (whether or not earned by performance), chattel paper, instruments, documents, general intangibles, trade acceptances, any other rights to receive installment, rental or other payments for, or relating to amounts due or to become due on account of equipment or goods sold or leased or to be sold or leased or services rendered or to be 7 rendered or funds advanced or loaned or to be advanced or loaned and other rights to payment of any kind, (ii) any proceeds of any of the foregoing and (iii) any interest in any property or asset of any kind (whether of the obligor under such Accounts Receivable or any other Person) securing the payment of any item listed in clause (i) hereof. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as agent for the Banks hereunder, and its successors in such capacity. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Applicable Margin" has the meaning set forth in Section 2.07(h). "Assessment Rate" has the meaning set forth in Section 2.07(b). "Asset Drop-Down" has the meaning set forth in Section 5.06. "Assignee" has the meaning set forth in Section 9.06(c). "AT&T" means American Telephone and Telegraph Company, a New York corporation, and its successors. "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. 8 "Base Rate Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article VIII or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Borrower" means AT&T Capital Corporation, a Delaware corporation, and its successors. "Borrower's 1993 Form 10-K" means the Borrower's annual report on Form 10-K for 1993, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrower's Latest Form 10-Q" means the Borrower's quarterly report on Form 10-Q for the quarter ended March 31, 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means (i) a Committed Loan which bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately before it became overdue. "CD Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of an Adjusted CD Rate. "CD Reference Banks" means Chemical Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York. "Closing Date" means the date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.09. 9 "Committed Loan" means a loan made by a Bank pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated EBIT" means, for any period, the sum of (i) the consolidated net income from continuing operations of the Borrower and its Consolidated Subsidiaries for such period before extraordinary items and without giving effect to unusual non-recurring events plus (ii) to the extent deducted in determining such consolidated net income from continuing operations, the sum of Consolidated Interest Expense and the provision for income tax for such period. "Consolidated Interest Expense" means, for any period, the interest expense of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Net Tangible Assets" means, at the date of any determination, the total assets appearing on the consolidated balance sheet of the Borrower and its Restricted Subsidiaries as at the end of the most recent fiscal quarter of the Borrower for which such balance sheet is available, prepared in accordance with generally accepted accounting principles, less (a) all current liabilities (obligations whose liquidation is reasonably expected to occur within twelve months), (b) investments in and advances to Subsidiaries of the Borrower other than Restricted Subsidiaries or other entities accounted for on the equity method of accounting, and (c) Intangible Assets. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. 10 "Consolidated Tangible Net Worth" means, at any date, the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries less Intangible Assets, all determined as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money and (ii) all obligations of others for borrowed money guaranteed by such Person; provided, however, that any recourse provided by any Person in connection with any sale, transfer or other disposition by such Person of Accounts Receivable or of any subsidiary of such Person substantially all the assets of which are Accounts Receivable which constitutes a "sale" under generally accepted accounting principles (as in effect at the time of such sale, transfer or other disposition) shall not, in any event, constitute Debt. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Drop-Down Subsidiary" has the meaning set forth in Section 5.06. 11 "Effective Date" means the date this Agreement becomes effective in accordance with Section 9.09. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(c) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Fuji Bank, Limited, Royal Bank of Canada and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). 12 "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreement" has the meaning set forth in the recitals hereto. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Committed Loans which are Base Rate Loans at such time or (ii) all Committed Loans which are Fixed Rate Loans of the same type having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Indemnitee" has the meaning set forth in Section 9.03(b). "Intangible Assets", means the value (net of any applicable reserves), as shown on or reflected in the Borrower's balance sheet, of: (i) all trade names, trademarks, licenses, patents, copyrights and goodwill; (ii) organization and development costs; (iii) deferred charges 13 (other than prepaid items such as insurance, taxes, interest, commissions, rents and similar items and tangible assets being amortized); and (iv) unamortized debt discount and expense, less unamortized premium. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (2) with respect to each CD Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end 14 after the Termination Date shall end on the Termination Date. (3) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (c) below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (4) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 14 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Level I Status" exists at any date if, at such 15 date, (i) the Borrower's outstanding senior unsecured long-term debt is rated both A+ or higher by S&P and A1 or higher by Moody's and (ii) the Borrower's commercial paper is rated both A1 or higher by S&P and P1 by Moody's. "Level II Status" exists at any date if, at such date, (a) both (i) the Borrower's outstanding senior unsecured long-term debt is rated both A- or higher by S&P and A3 or higher by Moody's and (ii) the Borrower's commercial paper is rated both A1 or higher by S&P and P1 by Moody's and (b) Level I Status does not exist at such date. "Level III Status" exists at any date if, at such date, neither Level I Status nor Level II Status exists. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means any mortgage, pledge, security interest or lien. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Adverse Effect" means a material adverse effect on the consolidated financial position of the Borrower and its subsidiaries. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Agent; provided that any Bank may from time to time by notice to the Borrower and the Agent designate separate Money Market Lending Offices for its 16 Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Moody's" means Moody's Investors Service, Inc. or any successor rating agency acceptable to the Agent and the Borrower. "Non-Recourse Debt" of the Borrower or any Restricted Subsidiary means any indebtedness for borrowed money of the Borrower or any Restricted Subsidiary, as the case may be, which is secured by any Lien on or payable solely from the income and proceeds of any property (including, without limiting the generality of such term, any intangible assets), shares of stock, other equity interests or debt of the Borrower or such Restricted Subsidiary, as the case may be, and which is not a general obligation of the Borrower or such Restricted Subsidiary, as the case may be. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). 17 "Notice of Interest Rate Election" has the meaning set forth in Section 2.10. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Quarterly Date" means the last Euro-Dollar Business Day of each March, June, September and December. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 51% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the Loans. "Restricted Subsidiary" means each Subsidiary of the Borrower organized under the laws of any State of the United States or the District of Columbia no substantial portion of the business of which is carried on outside of the United States; provided that each Drop-Down Subsidiary (as defined in Section 5.06) shall be a Restricted Subsidiary. "S&P" means Standard & Poor's Corporation or any successor rating agency acceptable to the Agent and the Borrower. 18 "Status" means, at any date, whichever of Level I Status, Level II Status or Level III Status exists at such date. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower (or, if such term is used with reference to any other Person, by such other Person). "Termination Date" means July 11, 1997, or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes made in consultation with the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the 19 relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on the same date, all of which Loans are of the same type (subject to Article VIII) and, except in the case of Base Rate Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). SECTION 1.04. Basis for Ratings. The credit ratings to be utilized in the determination of a Status are the ratings assigned to unsecured obligations of the Borrower without third party credit support. Ratings assigned to any obligation which is secured or which has the benefit of third party credit support shall be disregarded. ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time prior to the Termination Date in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $50,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the 20 aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, prepay Loans to the extent permitted by Section 2.11, and reborrow at any time prior to the Termination Date. SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or at a CD Rate or a Euro-Dollar Rate, and (d) in the case of a Fixed Rate Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks to make offers to make Money Market Loans to the Borrower prior to the Termination Date. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request 21 substantially in the form of Exhibit B hereto so as to be received no later than 10:30 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $5,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Borrower and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market 22 Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 4:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin 23 above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market 24 Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $5,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in 25 respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower by 3:00 P.M. (New York City time) on the date of such Borrowing at the Agent's aforesaid address. (c) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 26 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement or any error in making the same shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans; Termination of Commitments. (a) The Commitments shall terminate on the Termination Date, and all Committed Loans shall mature, and the principal amount thereof shall be due and payable, on such date. 27 (b) Each Money Market Loan included in any Money Market Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Date and on the Termination Date, and, with respect to the principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; provided that if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day. 28 The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. 29 "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. S 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means a rate of interest determined by the Agent on the basis of at least two offered rates for deposits in United States dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on the Reuters Screen LIBO Page as of 11:00 A.M. (London time) on the day that is two Euro-Dollar Business Days prior to the first day of such Interest Period. If at least two such offered rates appear on the Reuters Screen LIBO Page, the rate with respect to each Interest Period will be the arithmetic average (rounded upwards to the next 1/16th of 1%) of such offered rates. If fewer than two offered rates appear, the "London Interbank Offered Rate" in respect of any Interest Period will be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. 30 (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day. (e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation necessary to determine an interest rate in accordance with this Section, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. 31 (h) The "Applicable Margin" with respect to any Euro-Dollar Loan or CD Loan at any date is the applicable percentage amount set forth in the table below based on the Status on such date: Level I Level II Level III Status Status Status Euro-Dollar Loans 0.2700% 0.3000% 0.4250% CD Loans 0.3950% 0.4250% 0.5500% SECTION 2.08. Facility Fees. The Borrower shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate. Such facility fee shall accrue from and including the Closing Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused). Accrued facility fees shall be payable quarterly on each Quarterly Date and upon the date of termination of the Commitments in their entirety. The "Facility Fee Rate" at any date is: (i) 0.0800% if Level I Status exists at such date, (ii) 0.1000% if Level II Status exists at such date and (iii) 0.2000% if Level III Status exists at such date. SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows: 32 (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue such Loans as CD Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans; and (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Domestic Loans to Domestic Loans of the other type or continued as Domestic Loans of the same type for an additional Interest Period, in which case such notice shall be delivered to the Agent at least two Domestic Business Days before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $50,000,000 or any larger multiple of $5,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; 33 (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Fixed Rate Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay the Group of Base Rate Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)) in whole at any time, or from time to time in part in amounts aggregating $50,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) The Borrower may, upon at least three Domestic Business Days' notice to the Agent, in the case of a Group of CD Loans or upon at least three Euro-Dollar Business Days' notice to the Agent, in the case of a Group of Euro-Dollar Loans, prepay the Loans comprising such a Group on the last day of any Interest Period applicable to such Group, in whole at any time, or from time to time in part in amounts aggregating $50,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group. 34 (c) Except as provided in subsection (a) above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (d) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans or the Money Market LIBOR Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Absolute Rate Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended pursuant to this Agreement or by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to 35 the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Base Rate Loan (pursuant to Article VI or VIII or otherwise) on any day prior to the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a) or 2.11(d), the Borrower shall reimburse each Bank as provided in the following paragraph for any resulting loss or expense incurred by it (or by a Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of the Applicable Margin or any other margin for the period after any such payment or conversion or failure to borrow or prepay. A certificate of each Bank setting forth such amount or amounts (including the computation of such amount or amounts) as shall be necessary to compensate such Bank or a Participant for the out-of-pocket expenses incurred by such Bank shall be delivered to the Borrower and such amount or amounts may be reviewed by the Borrower. If the Borrower, after receipt of any such certificate from such Bank, disagrees in good faith with such Bank on the computation of the amount or amounts owed to such Bank pursuant to this Section 2.13, the Bank and the Borrower shall negotiate in good faith to promptly resolve such disagreement. Any payment required to be paid to such Bank pursuant to this Section 2.13 shall be paid within 30 days after demand is made therefor (or if there is a disagreement, after such disagreement is resolved). Each Bank shall have a duty to mitigate the damages to such Bank that may arise as a consequence of such funding losses described above to the extent that such mitigation will not, in the judgment of such Bank, entail any cost or disadvantage to such Bank that such Bank is not reimbursed or compensated for by the Borrower. 36 SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Regulation D Compensation. For so long as any Bank maintains reserves against "Eurocurrency liabilities" (or any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of such Bank to United States residents), and as a result the cost to such Bank (or its Applicable Lending Office) of making or maintaining its Euro-Dollar Loans is increased, then such Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum up to but not exceeding the excess of (i)(A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the rate specified in clause (i)(A). Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the rate and place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans an officers' certificate setting forth the amount to which such Bank is then entitled under this Section 2.15 (which shall be consistent with such Bank's good faith estimate of the level at which the related reserves are maintained by it). 37 ARTICLE III CONDITIONS SECTION 3.01. Closing. The closing hereunder shall occur upon receipt by the Agent of the following documents, each dated the Closing Date unless otherwise indicated: (a) a duly executed Note for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.05; (b) an opinion of the General Counsel or any Assistant General Counsel of the Borrower, substantially in the form of Exhibit E hereto; (c) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto; and (d) all documents the Agent may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Borrower and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the Closing Date shall have occurred not later than the Effective Date; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (c) immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; 38 (d) immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Section 4.04(c) and 4.05) shall be true in all material respects on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted except those which the failure to have would not have a Material Adverse Effect. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any material agreement, judgment, injunction, order, decree or other material instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. 39 SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case enforceable against the Borrower in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its subsidiaries as of December 31, 1993 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal year then ended, reported on by Cooper's & Lybrand and set forth in the Borrower's 1993 Form 10-K, a copy of which has been delivered to each of the Banks, present fairly, in all material respects, the consolidated financial position of the Borrower and its subsidiaries as of such date and the consolidated results of their operations and cash flows for such fiscal year, in conformity with generally accepted accounting principles. (b) The unaudited consolidated balance sheet of the Borrower and its subsidiaries as of March 31, 1994 and the related unaudited consolidated statements of income and cash flows for the three months then ended, set forth in the Borrower's Latest Form 10-Q, a copy of which has been delivered to each of the Banks, present fairly, in all material respects, the consolidated financial position of the Borrower and its subsidiaries as of such date and the consolidated results of their operations and cash flows for such three-month period, in conformity with generally accepted accounting principles for interim financial information applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, subject to normal year-end adjustments. (c) From March 31, 1994 through the Closing Date there has been no material adverse change in the consolidated financial condition of the Borrower and its subsidiaries. 40 SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable probability of an adverse decision which would have a Material Adverse Effect, or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Subsidiaries. Each of the Borrower's Consolidated Subsidiaries which is a corporation is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except those which the failure to have would not have a Material Adverse Effect. SECTION 4.07. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.08. Full Disclosure. No written information heretofore furnished by the Borrower to the Agent or any Bank pursuant to Section 4.04 of this Agreement is, and no written information hereafter furnished by the Borrower to the Agent or any Bank pursuant to Section 5.01 of this Agreement contains or will contain any material misstatement of any material facts. ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) within 105 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its subsidiaries as of the end of such 41 fiscal year and the related consolidated statements of income, changes in stockholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Coopers & Lybrand or other independent public accountants of nationally recognized standing; (b) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its subsidiaries as of the end of such quarter and the related consolidated statements of income for such quarter and the related consolidated statements of income and cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income in comparative form the figures for the corresponding quarter and in the case of such statements of income and cash flows the corresponding portion of the Borrower's previous fiscal year, all certified as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Borrower, subject to normal year end adjustments; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 and 5.04, inclusive, on the date of the consolidated balance sheet included in such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) promptly after the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; and 42 (e) promptly after the filing thereof, copies of all reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission. SECTION 5.02. Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect its corporate existence except as otherwise permitted under Section 5.06. SECTION 5.03. Fixed Charge Coverage. The ratio of Consolidated EBIT to Consolidated Interest Expense will not, for any period of four consecutive fiscal quarters, be less than 1.15 to 1. SECTION 5.04. Debt. (a) Consolidated Debt determined at the end of any fiscal quarter will not exceed 850% of Consolidated Tangible Net Worth determined at the end of such fiscal quarter, and Consolidated Debt determined at the end of any fiscal month which is not the last month of a fiscal quarter will not exceed 850% of the greater of (i) Consolidated Tangible Net Worth determined at the end of the most recently ended fiscal quarter or (ii) Consolidated Tangible Net Worth determined at the end of such fiscal month. (b) Total Debt of all Restricted Subsidiaries determined at the end of any fiscal month (excluding Debt of a Restricted Subsidiary to the Borrower or to a Wholly-Owned Restricted Subsidiary) will not exceed 10% of Consolidated Net Tangible Assets determined at the end of such fiscal month. SECTION 5.05. Limitation on Secured Debt. The Borrower will not, nor will it permit any Restricted Subsidiary to, incur, issue, assume or guarantee any Debt secured by any Lien on any property or assets of the Borrower or any Restricted Subsidiary, or on any shares of stock or Debt of any Restricted Subsidiary, without effectively providing that the principal of, premium, if any, and interest, if any, on the Loans (together with, if the Borrower so determines, any other Debt of the Borrower or such Restricted Subsidiary, which is not subordinated to the Loans) shall be secured equally and ratably with (or prior to) such Debt, so long as any such Debt shall be so secured, unless, after giving effect thereto, the aggregate 43 amount of all such secured Debt of the Borrower and the Restricted Subsidiaries would not exceed 10% of Consolidated Net Tangible Assets of the Borrower and the Restricted Subsidiaries; provided, however, that no Asset Drop Down shall, in any event, constitute a Lien; and provided further that neither the satisfaction and discharge of any Debt pursuant to any indenture or instrument governing such Debt, nor the defeasance of any Debt pursuant to any indenture or instrument governing such Debt, shall be deemed the incurrence, issue, assumption or guarantee of Debt secured by a Lien for purposes of this Section. Notwithstanding the foregoing, this Section shall neither limit nor be deemed or construed as limiting the right of the Borrower or any Restricted Subsidiary to incur, issue, assume or guarantee any Debt secured by any one or more of the following: (1) Liens on property of, or on any shares of stock or Debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary of the Borrower; (2) Liens on property, shares of stock, other equity interests, or Debt existing at the time of acquisition or repossession thereof by the Borrower or any Restricted Subsidiary; (3) Liens on physical property (or any Accounts Receivable arising in connection with the lease thereof), shares of stock, other equity interests, or Debt acquired (or, in the case of physical property, constructed) after the date hereof by the Borrower or any Restricted Subsidiary, which Liens are created prior to, at the time of, or within one year after such acquisition (or, in the case of physical property, the completion of such construction or commencement of commercial operation of such property, whichever is later) to secure any Debt issued, incurred, assumed or guaranteed prior to, at the time of, or within one year after such acquisition (or such completion or commencement, whichever is later) or to secure any other Debt issued, incurred, assumed or guaranteed at any time thereafter for the purpose of refinancing all or any part of such Debt; (4) Liens on Accounts Receivable of the Borrower or any Restricted Subsidiary arising from or in connection with transactions entered into by the Borrower or such Restricted Subsidiary after the date hereof or on Accounts Receivable acquired by the Borrower or such Restricted Subsidiary after such date from others, which Liens are created prior to, at the time of, or within one year after such Accounts Receivable arise or are acquired or, if later, the completion of the delivery or installation of the equipment or goods or the rendering of the services or the advancement or loaning of funds relating thereto (i) as a 44 result of any guarantee, repurchase or other contingent (direct or indirect) or recourse obligation of the Borrower or such Restricted Subsidiary in connection with the discounting, sale, assignment, transfer or other disposition of such Accounts Receivable or any interest therein, or (ii) to secure or provide for the payment of all or any part of the investment of the Borrower or such Restricted Subsidiary in any such Accounts Receivable (whether or not such Accounts Receivable are the Accounts Receivable on which such Liens are created) or the purchase price thereof or to secure any debt (including, without limitation, Non-Recourse Debt) issued, incurred, assumed or guaranteed for the purpose of financing or refinancing all or any part of such investment or purchase price; (5) Liens in favor of the Borrower or any Restricted Subsidiary; (6) Liens in favor of the United States of America or any State thereof or the District of Columbia, or any agency, department or other instrumentality thereof, to secure progress, advance or other payments pursuant to any contract or provision of any statute; (7) Liens securing the performance of letters of credit, bids, tenders, sales contracts, purchase agreements, leases, surety and performance bonds, and other similar obligations not incurred in connection with the borrowing of money; (8) Liens to secure Non-Recourse Debt in connection with the Borrower or any Restricted Subsidiary engaging in any leveraged or single-investor or other lease transactions, whether (in the case of Liens on or relating to leases or groups of leases or the particular properties subject thereto) such Liens be on the particular properties subject to any leases involved in any of such transactions and/or the rental or other payments or rights under such leases or, in the case of any group of related or unrelated leases, on the properties subject to the leases comprising such group and/or the rental or other payments or rights under such leases, or on any direct or indirect interest therein, and whether (in any case) (i) such Liens be created prior to, at the time of, or at any time after the entering into of such lease transactions and/or (ii) such leases be in existence prior to, or be entered into by the Borrower or such Restricted Subsidiary at the time of or at any time after, the purchase or other acquisition by the Borrower or such Restricted Subsidiary of the properties subject to such leases; and (9) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any of the foregoing; provided, however, that any such extension, renewal or replacement shall be limited to all or a part of the property or assets which secured the 45 Lien so extended, renewed or replaced (plus any improvements on such property). SECTION 5.06. Consolidations, Mergers and Sales of Assets. The Borrower covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person (other than such a sale or conveyance to a Subsidiary or any successor thereto (such a sale or conveyance being called an "Asset Drop-Down")), unless (i) either the Borrower shall be the continuing corporation or the successor corporation or the person which acquires by sale or conveyance substantially all the assets of the Borrower (if other than the Borrower) shall be a corporation organized under the laws of the United States of America or any State thereof and shall expressly assume the due and punctual payment of the principal of and interest on all the Notes according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Agreement to be performed or observed by the Borrower, by one or more agreements, reasonably satisfactory in form to the Required Banks, executed and delivered to the Agent by such corporation, and (ii) the Borrower or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition. In the event of any Asset Drop-Down after the date of this Agreement, any subsequent sale or conveyance of assets by a Subsidiary to which assets were transferred in such Asset Drop-Down (a "Drop-Down Subsidiary") will be deemed to be a sale or conveyance of assets by the Borrower for purposes of this Section 5.06. SECTION 5.07. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes, including, without limitation, the repayment of maturing commercial paper and other Debt of the Borrower. None of such proceeds will be used for the purpose of buying or carrying any "margin stock" within the meaning of Regulation U. 46 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay within five Domestic Business Days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.02, 5.03, 5.04 or 5.06; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Agent at the request of the Required Banks; (d) any representation or warranty made by the Borrower in this Agreement or in any certificate delivered pursuant to this Agreement shall prove to have been materially incorrect when made (or deemed made pursuant to Section 3.02); (e) the Borrower shall fail to make any payment or payments, in the aggregate in excess of $300,000,000, on principal of Debt of the Borrower when due and such failure shall continue for 30 days after the due date thereof or, if longer, beyond any applicable grace periods; (f) any event or condition shall occur which results in the acceleration of the maturity of the principal of any Debt of the Borrower in the aggregate in excess of $300,000,000 which acceleration shall not have been rescinded within 30 days; (g) the Borrower shall commence a voluntary case seeking liquidation, reorganization or other relief with respect to itself or its debts under any 47 bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case seeking such relief commenced against it under any such law, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability generally to pay its debts as they become due; (h) an order for relief shall be entered against the Borrower under the federal bankruptcy laws as now or hereafter in effect in an involuntary case or other proceeding seeking liquidation, reorganization or other relief with respect to it or its debts or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such decree or order shall remain undismissed and unstayed for a period of 20 days; (i) both (i) a person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) other than AT&T shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 20% or more of the outstanding shares of common stock of the Borrower and (ii) the Borrower shall have ceased to be a Subsidiary of AT&T; provided that, notwithstanding clauses (i) and (ii) above, no Event of Default shall occur under this paragraph (i) if and for so long as both (x) officers, directors and employees of AT&T constitute a majority of the Board of Directors of the Borrower and (y) no person or group of persons has beneficial ownership of a greater percentage of the outstanding shares of common stock of the Borrower than does AT&T; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the 48 Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes (together with accrued interest thereon) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in paragraph (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by the Required Banks and shall thereupon notify all the Banks thereof. SECTION 6.03 Rescission. If at any time after termination of the Commitments and/or acceleration of the maturity of the Loans pursuant to Section 6.01, the Borrower shall pay all arrears of interest and all payments on account of principal of the Loans which shall have become due otherwise than by acceleration (with interest on principal at the rates specified in this Agreement) and all Defaults (other than nonpayment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 9.05 hereof, then upon the written consent of the Required Banks and notice to the Borrower, such termination of the Commitments and/or such acceleration and their consequences may be rescinded and annulled; but such action shall not affect any subsequent Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind the Banks to a decision which may be made at the election of the Required Banks; they are not intended to benefit the Borrower and do not give the Borrower the right to require the Banks to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. 49 ARTICLE VII THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this 50 Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower shall have the right to appoint a successor Agent from among the Banks. If no successor Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America 51 or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Agent. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any CD Loan, Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the CD Reference Banks or, under the circumstances contemplated by the final sentence of the definition of London Interbank Offered Rate, the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or more of the aggregate principal amount of the affected Loans advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such 52 suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to convert outstanding Loans into CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may 53 lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement with respect to which such Bank is entitled to compensation during the relevant Interest Period under Section 2.15, special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. 54 (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then pursuant to paragraph (c) below, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section. A certificate of the Bank setting forth such amount or amounts (including computation of such amount or amounts) as shall be necessary to compensate the Bank or its Parent as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrower and such amount or amounts may be reviewed by the Borrower. Unless the Borrower disagrees in good faith with the computation of the amount or amounts in such certificate, the Borrower shall pay to the Bank, within 30 days after receipt by the Borrower of such certificate delivered by the Bank, the amount shown as due on any such certificate. If the Borrower, after receipt of any such certificate from the Bank, disagrees with the Bank on the computation of the amount or amounts owed to the Bank pursuant to paragraph (a) or (b) above, the Bank and the Borrower shall negotiate in good faith to promptly resolve such disagreement. In either case, however, the Bank shall have a duty to mitigate the damages that may arise as a consequence of paragraph (a) or (b) above (including, without limitation, changing its Applicable Lending Office) to the extent that such mitigation will not, in the judgment of the Bank, entail any cost or disadvantage to the Bank that the Bank is not reimbursed or compensated for by the Borrower. 55 SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings imposed by the United States or any political subdivision or taxing authority thereof, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, taxes imposed on its net income, and franchise taxes imposed on it, by the United States or any political subdivision or taxing authority thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and reasonable out-of-pocket expenses) arising therefrom or with respect thereto (other than any such liability that results from the gross negligence or willful misconduct of each Bank and the Agent, whether or not such 56 Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other governmental authority). This indemnification shall be made within 30 days from the date such Bank or the Agent (as the case may be) makes written demand therefor. If any Bank or the Agent receives a refund in respect of any Taxes or Other Taxes for which such Bank or the Agent has received payment from the Borrower hereunder it shall promptly repay such refund (including any interest received by such Bank or the Agent from the taxing authority with respect to the refund with respect to such Taxes or Other Taxes) to the Borrower, net of all reasonable out-of-pocket expenses of such Bank; provided that the Borrower, upon the request of such Bank or the Agent, agrees to return such refund (plus penalties, interest or other charges) to such Bank or the Agent in the event such Bank or the Agent is required to repay such refund. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, duly executed by such Bank, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a). (e) Each Bank further agrees to promptly notify the Borrower if such Bank changes its Applicable Lending Office and, upon written request from the Borrower, deliver forms 1001 or 4224 required pursuant to Section 8.04(d) prior to the immediately following due date of any payment by the Borrower hereunder. 57 (f) The Borrower shall not be required to pay any additional amounts to any Bank or the Agent in respect of Taxes and Other Taxes pursuant to paragraphs (a), (b) and (c) above if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank or Agent to comply with the provisions of paragraphs (d) and (e) above unless such failure results from (i) a change in applicable law, regulation or official interpretation thereof or (ii) an amendment, modification or revocation of any applicable tax treaty or a change in official position regarding the application or interpretation thereof, in each case after the date hereof or after such Bank became a party hereto; provided, however, that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (g) Any Bank claiming any additional amounts payable under this Section 8.04 shall (i) to the extent legally able to do so, upon reasonable written request from the Borrower, file any certificate or document if such filing would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue, and the Borrower shall not be obligated to pay such additional amounts if, after the Borrower's request, any Bank could have filed such certificate or document and failed to do so; or (ii) consistent with legal and regulatory restrictions, use reasonable efforts to change the jurisdiction of its Applicable Lending Office if the making of such change would avoid the need for or reduce the amount of any additional amounts which may thereafter accrue and would not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: 58 (a) all Loans which would otherwise be made by such Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the first day of the next succeeding Interest Period applicable to the related CD Loans or Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Bank. If any Bank (i) has demanded compensation for increased costs pursuant to Section 8.03 or 8.04 or, (ii) has determined that the making or continuation of any Euro-Dollar Rate Loan has become unlawful or impermissible pursuant to Section 8.02 and similar additional interest or compensation has not been demanded by, or a similar determination has not been made by, all of the Banks, the Borrower shall have the right to designate an Assignee which is not an Affiliate of the Borrower to purchase for cash, pursuant to an Assignment and Assumption Agreement, the outstanding Loans and Commitment of such Bank and to assume all of such Bank's other rights and obligations hereunder without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans plus any accrued but unpaid interest thereon and the accrued but unpaid facility fees in respect of that Bank's Commitment hereunder plus such amount, if any, as would be payable pursuant to Section 2.13 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment. SECTION 8.07. Compensation. The Borrower shall not be liable for compensating any Bank under Sections 2.13, 59 8.03 and 8.04 for any funding losses, increased costs or taxes incurred by such Bank more than 30 days prior to such Bank's written notice of its intention to demand payment therefor. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address or telex or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telex or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when received at the address specified in this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the 60 preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Agent and each Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and reasonable out-of-pocket expenses of any kind (including, without limitation, the reasonable fees and disbursements of counsel) which were actually incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or 61 waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the scheduled maturity of any payment of principal of or interest on any Loan or any fees hereunder or for termination of any Commitment or (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits 62 of Sections 2.13 and 2.15 and Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower and the Agent; provided that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans; and provided further that the interest of the Assignee shall be in a minimum amount equivalent to an original Commitment of $15,000,000 and the collective interest of the transferor Bank and its affiliates shall be in a minimum amount equivalent to an original Commitment of $25,000,000 unless, in the case of the transferor Bank and its affiliates, they have no Commitment after giving effect to such assignment. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. 63 (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.06, disclose to the Assignee or Participant or proposed Assignee or Participant any information relating to the Borrower or its Subsidiaries furnished to such Bank by the Agent or by or on behalf of the Borrower; provided that, prior to any such disclosure, such Assignee or Participant or proposed Assignee or Participant shall agree to preserve in accordance with Section 9.11 the confidentiality of any confidential information described therein. SECTION 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 64 SECTION 9.09. Counterparts; Integration; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective on and as of July 11, 1994, provided that on or prior to such date, the Agent shall have received counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). On the Effective Date, the Borrower shall prepay or repay any loans outstanding under the Existing Credit Agreement, together with accrued interest thereon and shall pay all fees accrued thereunder to the Effective Date. The Borrower and the Banks which are parties to the Existing Credit Agreement, comprising the "Required Banks" as defined therein, agree that the commitments thereunder shall terminate in their entirety on and as of the Effective Date without further action by any party to the Existing Credit Agreement. SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 9.11. Confidentiality. Subject to Section 9.06(f) hereof, the Banks shall hold all nonpublic information obtained pursuant to the requirements of this Agreement and identified as such by the Borrower in accordance with such Bank's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure reasonably required by a bona fide offeree or transferee in connection with the contemplated transfer, or as required or requested by any governmental authority or representative thereof, or pursuant to legal process, or to its accountants, lawyers and other advisors, and shall require any such offeree or transferee to agree (and require any of its offerees, transferees or participants to agree) to comply with this Section 9.11. 65 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. AT&T CAPITAL CORPORATION By /s/ Nicholas S. Cyprus Title: Vice President and Controller 44 Whippany Road Morristown, New Jersey 07962 Fax: (201) 397-3106 Commitments $40,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Matthias Blumshein Title: Associate $25,000,000 BARCLAYS BANK PLC By /s/ Andrew Wynn Title: Director $25,000,000 THE CHASE MANHATTAN BANK, N.A. By /s/ Robert T. Smith Title: Vice President 66 Commitments $25,000,000 CHEMICAL BANK By /s/ Marion J. Henry Title: Vice President $25,000,000 CREDIT LYONNAIS NEW YORK BRANCH By /s/ R. Ivosevich Title: Senior Vice President $25,000,000 THE FUJI BANK, LIMITED By /s/ Y. Shitsugu Title: Vice President and Manager $16,250,000 THE FIRST NATIONAL BANK OF CHICAGO By /s/ Judith L. Mayberry Title: Vice President $16,250,000 CITIBANK, N.A. By /s/ James M. Walsh Title: Attorney-in-fact 67 Commitments $16,250,000 CREDIT SUISSE By /s/ Jay Chall Title: Member of Senior Management By /s/ Andrea Shkane Title: Associate $16,250,000 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By /s/ Bina R. Dabbah Title: Vice President By /s/ Alain M. Bolea Title: Director $16,250,000 THE INDUSTRIAL BANK OF JAPAN, LTD., NEW YORK BRANCH By /s/ Junri Oda Title: Senior Vice President and Senior Manager $16,250,000 MELLON BANK, N.A. By /s/ James S. Wolf Title: First Vice President 68 Commitments $16,250,000 NATIONSBANK OF NORTH CAROLINA, N.A. By /s/ Moses James Sawney Title: Vice President $16,250,000 PNC BANK, NATIONAL ASSOCIATION By /s/ Mark Williams Title: Vice President $16,250,000 ROYAL BANK OF CANADA By /s/ Thomas M. Byrne Title: Manager $16,250,000 SOCIETE GENERALE By /s/ Philippe de Rozieres Title: Vice President $16,250,000 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By /s/ Shuntaro Higashi Title: Joint General Manager 69 Commitments $16,250,000 SWISS BANK CORPORATION By /s/ Sean M. Harrigan Title: Executive Director Merchant Banking By /s/ Teresa A. Portela Title: Associate Director Merchant Banking $10,000,000 ABN AMRO BANK N.V. NEW YORK BRANCH By /s/ Ann K. Schwalbenberg Title: Vice President By /s/ James B. Sieger Title: Vice President $10,000,000 THE BANK OF NEW YORK By /s/ Edward F. Ryan, Jr. Title: Vice President $10,000,000 BANK OF HAWAII By /s/ J. Bryan Scearce Title: Assistant Vice President 70 Commitments $10,000,000 BANQUE PARIBAS By /s/ Richard G. Burrows Title: Vice President By /s/ Stanley P. Berkman Title: Senior Vice President $10,000,000 CIBC INC. By /s/ Leslie L. Rogers Title: Vice President $10,000,000 COMERICA BANK By /s/ Martin G. Ellis Title: Assistant Vice President $10,000,000 COMMERZBANK AKTIENGESELLSCHAFT NEW YORK BRANCH By /s/ Juergen Boysen Title: Senior Vice President By /s/ Michael D. Hintz Title: Vice President 71 Commitments $10,000,000 CONTINENTAL BANK By /s/ Kathryn N. Robinson Title: Vice President $10,000,000 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ Susan A. Hodge Title: Vice President By /s/ J. M. Leffler Title: First Vice President $10,000,000 THE FIRST NATIONAL BANK OF BOSTON By /s/ Heather R. Johnson Title: Vice President $10,000,000 THE NORTHERN TRUST COMPANY By /s/ Kristina V. L. Warland Title: Second Vice President 72 Commitments $10,000,000 TORONTO DOMINION (NEW YORK), INC. By /s/ C.A. Clause Title: Vice President $10,000,000 TRUST COMPANY BANK By /s/ Marion C. Shields Title: Vice President $10,000,000 WACHOVIA BANK OF GEORGIA, N.A. By /s/ Linda M. Harris Title: Senior Vice President _________________ $500,000,000 Total Commitments 73 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /s/ Matthias Blumschein Title: Associate 60 Wall Street New York, New York 10260-0060 Attention: Matthias Blumschein Telex number: 177615 74 EXHIBIT A NOTE New York, New York , 19 For value received, AT&T Capital Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. 75 This note is one of the Notes referred to in the $500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the mandatory and optional prepayment hereof and the acceleration of the maturity hereof. AT&T CAPITAL CORPORATION By________________________ Title: 76 Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL __________________________________________________________________ Amount of Amount of Type of Principal Notation Date Loan Loan Repaid Made By __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ 77 EXHIBIT B Form of Money Market Quote Request [Date] To: Morgan Guaranty Trust Company of New York (the "Agent") From: AT&T Capital Corporation Re: $500,000,000 Credit Agreement (the "Credit Agreement") dated as of July 11, 1994 among the Borrower, the Banks listed on the signature pages thereof and the Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount* Interest Period** $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. AT&T CAPITAL CORPORATION By________________________ Title: _____________________ *Amount must be $5,000,000 or a larger multiple of $1,000,000. **Not less than one month (LIBOR Auction) or not less than 14 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. 78 EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to AT&T Capital Corporation (the "Borrower") Pursuant to Section 2.03 of the $500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the Banks parties thereto and the undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [4:00 P.M.] [9:30 A.M.] (New York City time) on [date]. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By______________________ Authorized Officer 79 EXHIBIT D Form of Money Market Quote To: Morgan Guaranty Trust Company of New York, as Agent Re: Money Market Quote to AT&T Capital Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated _____________, 19__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]** __________ * As specified in the related Invitation. (Notes continued on following page) 80 ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the $500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the Banks listed on the signature pages thereof and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer __________ *** Not less than one month or not less than 14 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). 81 EXHIBIT E OPINION OF COUNSEL FOR THE BORROWER To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: I am [General Counsel] [Assistant General Counsel] of AT&T Capital Corporation (the "Borrower"), and as such, have acted as counsel for the Borrower in connection with the $500,000,000 Credit Agreement (the "Credit Agreement") dated as of July 11, 1994 among the Borrower, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the request of the Borrower pursuant to Section 3.01(b) of the Credit Agreement. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate power and all 82 governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except those which the failure to have would not have a Material Adverse Effect. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any material agreement, judgment, injunction, order, decree or other material instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. 3. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable against the Borrower in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). 4. There is no action, suit or proceeding pending against, or to the best of my knowledge threatened against, the Borrower or any of its Consolidated Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable probability of an adverse decision which would have a Material Adverse Effect or which in any manner draws into question the validity of the Credit Agreement or the Notes. 5. Each of the Borrower's Consolidated Subsidiaries which is a corporation is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except those which the failure to have would not have a Material Adverse Effect. 83 I am a member of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, I express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without my prior written consent. Very truly yours, 84 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENT To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the $500,000,000 Credit Agreement (the "Credit Agreement") dated as of July 11, 1994 among AT&T Capital Corporation, a Delaware corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate power and have been duly authorized by all necessary corporate action. 85 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable against the Borrower in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, 86 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), AT&T CAPITAL CORPORATION (the "Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the $500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the Assignor and the other Banks party thereto, as Banks, and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not 87 otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them. It is understood that commitment and/or facility fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest 88 therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower and the Agent. This Agreement is conditioned upon the consent of the Borrower and the Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower and the Agent is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By_________________________ Title: 89 [ASSIGNEE] By__________________________ Title: AT&T CAPITAL CORPORATION By__________________________ Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By__________________________ Title: EX-10 4 1 Exhibit 10(q) Form 10-K for 1994 File No. 1-11237 $1,500,000,000 CREDIT AGREEMENT dated as of July 11, 1994 among AT&T Capital Corporation The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Agent 2 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01 Definitions. . . . . . . . . . . . . . . . . . . . 1 1.02 Accounting Terms and Determinations. . . . . . . . 11 1.03 Types of Borrowings. . . . . . . . . . . . . . . . 12 ARTICLE II THE CREDITS SECTION 2.01 Commitments to Lend. . . . . . . . . . . . . . . . 12 2.02 Notice of Committed Borrowing. . . . . . . . . . . 13 2.03 Money Market Borrowings. . . . . . . . . . . . . . 13 2.04 Notice to Banks; Funding of Loans. . . . . . . . . 17 2.05 Notes. . . . . . . . . . . . . . . . . . . . . . . 18 2.06 Maturity of Loans; Termination of Commitments. . . . . . . . . . . . . . . . . . . 19 2.07 Interest Rates . . . . . . . . . . . . . . . . . . 19 2.08 Facility Fees. . . . . . . . . . . . . . . . . . . 22 2.09 Optional Termination or Reduction of Commitments . . . . . . . . . . . . 23 2.10 Method of Electing Interest Rates. . . . . . . . . 23 2.11 Optional Prepayments . . . . . . . . . . . . . . . 24 2.12 General Provisions as to Payments. . . . . . . . . 25 2.13 Funding Losses . . . . . . . . . . . . . . . . . . 26 2.14 Computation of Interest and Fees . . . . . . . . . 27 2.15 Regulation D Compensation. . . . . . . . . . . . . 27 ARTICLE III CONDITIONS SECTION 3.01 Closing. . . . . . . . . . . . . . . . . . . . . . 28 3.02 Borrowings . . . . . . . . . . . . . . . . . . . . 28 3 Page ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01 Corporate Existence and Power. . . . . . . . . . . 29 4.02 Corporate and Governmental Authorization; No Contravention. . . . . . . . . 29 4.03 Binding Effect . . . . . . . . . . . . . . . . . . 29 4.04 Financial Information. . . . . . . . . . . . . . . 30 4.05 Litigation.. . . . . . . . . . . . . . . . . . . . 30 4.06 Subsidiaries.. . . . . . . . . . . . . . . . . . . 31 4.07 Not an Investment Company. . . . . . . . . . . . . 31 4.08 Full Disclosure. . . . . . . . . . . . . . . . . . 31 ARTICLE V COVENANTS SECTION 5.01 Information. . . . . . . . . . . . . . . . . . . . 31 5.02 Maintenance of Existence . . . . . . . . . . . . . 32 5.03 Fixed Charge Coverage. . . . . . . . . . . . . . . 32 5.04 Debt . . . . . . . . . . . . . . . . . . . . . . . 32 5.05 Limitation on Secured Debt . . . . . . . . . . . . 33 5.06 Consolidations, Mergers and Sales of Assets. . . . . . . . . . . . . . . . . 35 5.07 Use of Proceeds. . . . . . . . . . . . . . . . . . 35 ARTICLE VI DEFAULTS SECTION 6.01 Events of Default. . . . . . . . . . . . . . . . . 36 6.02 Notice of Default. . . . . . . . . . . . . . . . . 38 6.03 Rescission . . . . . . . . . . . . . . . . . . . . 38 ARTICLE VII THE AGENT SECTION 7.01 Appointment and Authorization. . . . . . . . . . . 38 7.02 Agent and Affiliates.. . . . . . . . . . . . . . . 38 7.03 Action by Agent. . . . . . . . . . . . . . . . . . 39 7.04 Consultation with Experts. . . . . . . . . . . . . 39 7.05 Liability of Agent . . . . . . . . . . . . . . . . 39 7.06 Indemnification. . . . . . . . . . . . . . . . . . 39 7.07 Credit Decision. . . . . . . . . . . . . . . . . . 40 7.08 Successor Agent. . . . . . . . . . . . . . . . . . 40 7.09 Agent's Fee. . . . . . . . . . . . . . . . . . . . 40 4 Page ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair. . . . . . . . . . . . 40 8.02 Illegality . . . . . . . . . . . . . . . . . . . . 41 8.03 Increased Cost and Reduced Return. . . . . . . . . 42 8.04 Taxes. . . . . . . . . . . . . . . . . . . . . . . 44 8.05 Base Rate Loans Substituted for Affected Fixed Rate Loans. . . . . . . . . . . . 46 8.06 Substitution of Bank . . . . . . . . . . . . . . . 47 8.07 Compensation . . . . . . . . . . . . . . . . . . . 47 ARTICLE IX MISCELLANEOUS SECTION 9.01 Notices. . . . . . . . . . . . . . . . . . . . . . 47 9.02 No Waivers . . . . . . . . . . . . . . . . . . . . 48 9.03 Expenses; Indemnification. . . . . . . . . . . . . 48 9.04 Sharing of Set-Offs. . . . . . . . . . . . . . . . 49 9.05 Amendments and Waivers . . . . . . . . . . . . . . 49 9.06 Successors and Assigns . . . . . . . . . . . . . . 49 9.07 Collateral . . . . . . . . . . . . . . . . . . . . 51 9.08 Governing Law; Submission to Juris- diction. . . . . . . . . . . . . . . . . . . . . 51 9.09 Counterparts; Integration; Effectiveness. . . . . . . . . . . . . . . . . . 52 9.10 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 52 9.11 Confidentiality. . . . . . . . . . . . . . . . . . 52 Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote 5 Exhibit E - Opinion of Counsel for the Borrower Exhibit F - Opinion of Special Counsel for the Agent Exhibit G - Assignment and Assumption Agreement 6 CREDIT AGREEMENT AGREEMENT dated as of July 11, 1994 among AT&T CAPITAL CORPORATION, the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Accounts Receivable" shall mean (I) any accounts receivable (whether or not earned by performance), chattel paper, instruments, documents, general intangibles, trade acceptances, any other rights to receive installment, rental or other payments for, or relating to amounts due or to become due on account of equipment or goods sold or leased or to be sold or leased or services rendered or to be rendered or funds advanced or loaned or to be advanced or loaned and other rights to payment of any kind, (ii) any proceeds of any of the foregoing and (iii) any interest in any property or asset of any kind (whether of the obligor under such Accounts Receivable or any other Person) securing the payment of any item listed in clause (I) hereof. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as agent for the Banks hereunder, and its successors in such capacity. 7 "Applicable Lending Office" means, with respect to any Bank, (I) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Applicable Margin" has the meaning set forth in Section 2.07(h). "Assessment Rate" has the meaning set forth in Section 2.07(b). "Asset Drop-Down" has the meaning set forth in Section 5.06. "Assignee" has the meaning set forth in Section 9.06(c). "AT&T" means American Telephone and Telegraph Company, a New York corporation, and its successors. "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (I) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (I) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article VIII or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Borrower" means AT&T Capital Corporation, a Delaware corporation, and its successors. "Borrower's 1993 Form 10-K" means the Borrower's annual report on Form 10-K for 1993, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrower's Latest Form 10-Q" means the Borrower's quarterly report on Form 10-Q for the quarter ended March 31, 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. 8 "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means (I) a Committed Loan which bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately before it became overdue. "CD Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of an Adjusted CD Rate. "CD Reference Banks" means Chemical Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York. "Closing Date" means the date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.09. "Committed Loan" means a loan made by a Bank pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated EBIT" means, for any period, the sum of (I) the consolidated net income from continuing operations of the Borrower and its Consolidated Subsidiaries for such period before extraordinary items and without giving effect to unusual non-recurring events plus (ii) to the extent deducted in determining such consolidated net income from continuing operations, the sum of Consolidated Interest Expense and the provision for income tax for such period. 9 "Consolidated Interest Expense" means, for any period, the interest expense of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Net Tangible Assets" means, at the date of any determination, the total assets appearing on the consolidated balance sheet of the Borrower and its Restricted Subsidiaries as at the end of the most recent fiscal quarter of the Borrower for which such balance sheet is available, prepared in accordance with generally accepted accounting principles, less (a) all current liabilities (obligations whose liquidation is reasonably expected to occur within twelve months), (b) investments in and advances to Subsidiaries of the Borrower other than Restricted Subsidiaries or other entities accounted for on the equity method of accounting, and Intangible Assets. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Tangible Net Worth" means, at any date, the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries less Intangible Assets, all determined as of such date. "Debt" of any Person means at any date, without duplication, (I) all obligations of such Person for borrowed money and (ii) all obligations of others for borrowed money guaranteed by such Person; provided, however, that any recourse provided by any Person in connection with any sale, transfer or other disposition by such Person of Accounts Receivable or of any subsidiary of such Person substantially all the assets of which are Accounts Receivable which constitutes a "sale" under generally accepted accounting principles (as in effect at the time of such sale, transfer or other disposition) shall not, in any event, constitute Debt. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. 10 "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Drop-Down Subsidiary" has the meaning set forth in Section 5.06. "Effective Date" means the date this Agreement becomes effective in accordance with Section 9.09. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent. "Euro-Dollar Loan" means (I) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07 on the basis of a London Interbank Offered Rate. 11 "Euro-Dollar Reference Banks" means the principal London offices of The Fuji Bank, Limited, Royal Bank of Canada and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (I) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (I) all Committed Loans which are Base Rate Loans at such time or (ii) all Committed Loans which are Fixed Rate Loans of the same type having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a 12 Base Rate Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Indemnitee" has the meaning set forth in Section 9.03(b). "Intangible Assets", means the value (net of any applicable reserves), as shown on or reflected in the Borrower's balance sheet, of: (I) all trade names, trademarks, licenses, patents, copyrights and goodwill; (ii) organization and development costs; (iii) deferred charges (other than prepaid items such as insurance, taxes, interest, commissions, rents and similar items and tangible assets being amortized); and (iv) unamortized debt discount and expense, less unamortized premium. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause below, end on the last Euro-Dollar Business Day of a calendar month; and any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (2) with respect to each CD Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days 13 thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (3) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause below, be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause below, end on the last Euro-Dollar Business Day of a calendar month; and any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (4) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 14 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall, subject to clause (b) below, be extended to the next succeeding Euro-Dollar Business Day; and 14 (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means any mortgage, pledge, security interest or lien. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Adverse Effect" means a material adverse effect on the consolidated financial position of the Borrower and its subsidiaries. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Agent; provided that any Bank may from time to time by notice to the Borrower and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). 15 "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Non-Recourse Debt" of the Borrower or any Restricted Subsidiary means any indebtedness for borrowed money of the Borrower or any Restricted Subsidiary, as the case may be, which is secured by any Lien on or payable solely from the income and proceeds of any property (including, without limiting the generality of such term, any intangible assets), shares of stock, other equity interests or debt of the Borrower or such Restricted Subsidiary, as the case may be, and which is not a general obligation of the Borrower or such Restricted Subsidiary, as the case may be. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.10. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. 16 "Quarterly Date" means the last Euro-Dollar Business Day of each March, June, September and December. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 51% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 51% of the aggregate unpaid principal amount of the Loans. "Restricted Subsidiary" means each Subsidiary of the Borrower organized under the laws of any State of the United States or the District of Columbia no substantial portion of the business of which is carried on outside of the United States; provided that each Drop-Down Subsidiary (as defined in Section 5.06) shall be a Restricted Subsidiary. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower (or, if such term is used with reference to any other Person, by such other Person). "Termination Date" means July 10, 1995, or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. 17 SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes made in consultation with the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on the same date, all of which Loans are of the same type (subject to Article VIII) and, except in the case of Base Rate Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). 18 ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time prior to the Termination Date in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $50,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, prepay Loans to the extent permitted by Section 2.11, and reborrow at any time prior to the Termination Date. SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or at a CD Rate or a Euro-Dollar Rate, and (d) in the case of a Fixed Rate Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to 19 Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks to make offers to make Money Market Loans to the Borrower prior to the Termination Date. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:30 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (I) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $5,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Borrower and the Agent may agree) of any other Money Market Quote Request. Invitation for Money Market Quotes. Promptly 20 upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (I) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 4:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be 21 $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(I). (e) Notice to Borrower. The Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with 22 respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (I) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $5,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. 23 (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower by 3:00 P.M. (New York City time) on the date of such Borrowing at the Agent's aforesaid address. Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (I) in the case of the Borrower, a 24 rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. Upon receipt of each Bank's Note pursuant to Section 3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement or any error in making the same shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans; Termination of Commitments. (a) The Commitments shall terminate on the Termination Date, and all Committed Loans shall mature, and the principal amount thereof shall be due and payable, on such date. 25 (b) Each Money Market Loan included in any Money Market Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Date and on the Termination Date, and, with respect to the principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; provided that if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day. 26 The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a 27 member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. S 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means a rate of interest determined by the Agent on the basis of at least two offered rates for deposits in United States dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on the Reuters Screen LIBO Page as of 11:00 A.M. (London time) on the day that is two Euro-Dollar Business Days prior to the first day of such Interest Period. If at least two such offered rates appear on the Reuters Screen LIBO Page, the rate with respect to each Interest Period will be the arithmetic average (rounded upwards to the next 1/16th of 1%) of such offered rates. If fewer than two offered rates appear, the "London Interbank Offered Rate" in respect of any Interest Period will be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for 28 each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the rate applicable to Base Rate Loans for such day. (e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07 as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation necessary to determine an interest rate in accordance with this Section, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. (h) The "Applicable Margin" with respect to any Euro-Dollar Loan or CD Loan at any date is the applicable percentage amount set forth in the table below: 29 Euro-Dollar Loans 0.3000% CD Loans 0.4250% SECTION 2.08. Facility Fees. The Borrower shall pay to the Agent for the account of the Banks ratably a facility fee at the Facility Fee Rate. Such facility fee shall accrue from and including the Closing Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused). Accrued facility fees shall be payable quarterly on each Quarterly Date and upon the date of termination of the Commitments in their entirety. The "Facility Fee Rate" at any date is 0.0700%. SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Agent, (I) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows: (I) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue such Loans as CD Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans; and 30 (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Domestic Loans to Domestic Loans of the other type or continued as Domestic Loans of the same type for an additional Interest Period, in which case such notice shall be delivered to the Agent at least two Domestic Business Days before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (I) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $50,000,000 or any larger multiple of $5,000,000. (b) Each Notice of Interest Rate Election shall specify: (I) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Fixed Rate Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. 31 Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay the Group of Base Rate Loans (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)) in whole at any time, or from time to time in part in amounts aggregating $50,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) The Borrower may, upon at least three Domestic Business Days' notice to the Agent, in the case of a Group of CD Loans or upon at least three Euro-Dollar Business Days' notice to the Agent, in the case of a Group of Euro-Dollar Loans, prepay the Loans comprising such a Group on the last day of any Interest Period applicable to such Group, in whole at any time, or from time to time in part in amounts aggregating $50,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group. Except as provided in subsection (a) above, the Borrower may not prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (d) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, 32 and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans or the Money Market LIBOR Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Absolute Rate Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended pursuant to this Agreement or by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Base Rate Loan (pursuant to Article VI or VIII or otherwise) on any day prior to the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank in 33 accordance with Section 2.04(a) or 2.11(d), the Borrower shall reimburse each Bank as provided in the following paragraph for any resulting loss or expense incurred by it (or by a Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of the Applicable Margin or any other margin for the period after any such payment or conversion or failure to borrow or prepay. A certificate of each Bank setting forth such amount or amounts (including the computation of such amount or amounts) as shall be necessary to compensate such Bank or a Participant for the out-of-pocket expenses incurred by such Bank shall be delivered to the Borrower and such amount or amounts may be reviewed by the Borrower. If the Borrower, after receipt of any such certificate from such Bank, disagrees in good faith with such Bank on the computation of the amount or amounts owed to such Bank pursuant to this Section 2.13, the Bank and the Borrower shall negotiate in good faith to promptly resolve such disagreement. Any payment required to be paid to such Bank pursuant to this Section 2.13 shall be paid within 30 days after demand is made therefor (or if there is a disagreement, after such disagreement is resolved). Each Bank shall have a duty to mitigate the damages to such Bank that may arise as a consequence of such funding losses described above to the extent that such mitigation will not, in the judgment of such Bank, entail any cost or disadvantage to such Bank that such Bank is not reimbursed or compensated for by the Borrower. SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Regulation D Compensation. For so long as any Bank maintains reserves against "Eurocurrency liabilities" (or any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of such Bank to United States 34 residents), and as a result the cost to such Bank (or its Applicable Lending Office) of making or maintaining its Euro-Dollar Loans is increased, then such Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum up to but not exceeding the excess of (I)(A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the rate specified in clause (I)(A). Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the rate and place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans an officers' certificate setting forth the amount to which such Bank is then entitled under this Section 2.15 (which shall be consistent with such Bank's good faith estimate of the level at which the related reserves are maintained by it). ARTICLE III CONDITIONS SECTION 3.01. Closing. The closing hereunder shall occur upon receipt by the Agent of the following documents, each dated the Closing Date unless otherwise indicated: (a) a duly executed Note for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.05; (b) an opinion of the General Counsel or any Assistant General Counsel of the Borrower, substantially in the form of Exhibit E hereto; an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto; and (d) all documents the Agent may reasonably request relating to the existence of the Borrower, the 35 corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Borrower and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the Closing Date shall have occurred not later than the Effective Date; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (d) immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Section 4.04 and 4.05) shall be true in all material respects on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The 36 Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted except those which the failure to have would not have a Material Adverse Effect. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any material agreement, judgment, injunction, order, decree or other material instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case enforceable against the Borrower in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its subsidiaries as of December 31, 1993 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal year then ended, reported on by Cooper's & Lybrand and set forth in the Borrower's 1993 Form 10-K, a copy of which has been delivered to each of the Banks, present fairly, in all material respects, the consolidated financial position of the Borrower and its subsidiaries as of such date and the consolidated results of their operations and cash flows for such fiscal year, in conformity with generally accepted accounting principles. 37 (b) The unaudited consolidated balance sheet of the Borrower and its subsidiaries as of March 31, 1994 and the related unaudited consolidated statements of income and cash flows for the three months then ended, set forth in the Borrower's Latest Form 10-Q, a copy of which has been delivered to each of the Banks, present fairly, in all material respects, the consolidated financial position of the Borrower and its subsidiaries as of such date and the consolidated results of their operations and cash flows for such three-month period, in conformity with generally accepted accounting principles for interim financial information applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, subject to normal year-end adjustments. From March 31, 1994 through the Closing Date there has been no material adverse change in the consolidated financial condition of the Borrower and its subsidiaries. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable probability of an adverse decision which would have a Material Adverse Effect, or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Subsidiaries. Each of the Borrower's Consolidated Subsidiaries which is a corporation is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except those which the failure to have would not have a Material Adverse Effect. SECTION 4.07. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.08. Full Disclosure. No written information heretofore furnished by the Borrower to the Agent or any Bank pursuant to Section 4.04 of this Agreement is, and no written information hereafter furnished by the Borrower to the Agent or any Bank pursuant to Section 5.01 38 of this Agreement contains or will contain any material misstatement of any material facts. ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) within 105 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its subsidiaries as of the end of such fiscal year and the related consolidated statements of income, changes in stockholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Coopers & Lybrand or other independent public accountants of nationally recognized standing; (b) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its subsidiaries as of the end of such quarter and the related consolidated statements of income for such quarter and the related consolidated statements of income and cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income in comparative form the figures for the corresponding quarter and in the case of such statements of income and cash flows the corresponding portion of the Borrower's previous fiscal year, all certified as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Borrower, subject to normal year end adjustments; simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of the Borrower (I) 39 setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 and 5.04, inclusive, on the date of the consolidated balance sheet included in such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) promptly after the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; and (e) promptly after the filing thereof, copies of all reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission. SECTION 5.02. Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect its corporate existence except as otherwise permitted under Section 5.06. SECTION 5.03. Fixed Charge Coverage. The ratio of Consolidated EBIT to Consolidated Interest Expense will not, for any period of four consecutive fiscal quarters, be less than 1.15 to 1. SECTION 5.04. Debt. (a) Consolidated Debt determined at the end of any fiscal quarter will not exceed 850% of Consolidated Tangible Net Worth determined at the end of such fiscal quarter, and Consolidated Debt determined at the end of any fiscal month which is not the last month of a fiscal quarter will not exceed 850% of the greater of (I) Consolidated Tangible Net Worth determined at the end of the most recently ended fiscal quarter or (ii) Consolidated Tangible Net Worth determined at the end of such fiscal month. (b) Total Debt of all Restricted Subsidiaries determined at the end of any fiscal month (excluding Debt of a Restricted Subsidiary to the Borrower or to a Wholly-Owned Restricted Subsidiary) will not exceed 10% of Consolidated Net Tangible Assets determined at the end of such fiscal month. 40 SECTION 5.05. Limitation on Secured Debt. The Borrower will not, nor will it permit any Restricted Subsidiary to, incur, issue, assume or guarantee any Debt secured by any Lien on any property or assets of the Borrower or any Restricted Subsidiary, or on any shares of stock or Debt of any Restricted Subsidiary, without effectively providing that the principal of, premium, if any, and interest, if any, on the Loans (together with, if the Borrower so determines, any other Debt of the Borrower or such Restricted Subsidiary, which is not subordinated to the Loans) shall be secured equally and ratably with (or prior to) such Debt, so long as any such Debt shall be so secured, unless, after giving effect thereto, the aggregate amount of all such secured Debt of the Borrower and the Restricted Subsidiaries would not exceed 10% of Consolidated Net Tangible Assets of the Borrower and the Restricted Subsidiaries; provided, however, that no Asset Drop Down shall, in any event, constitute a Lien; and provided further that neither the satisfaction and discharge of any Debt pursuant to any indenture or instrument governing such Debt, nor the defeasance of any Debt pursuant to any indenture or instrument governing such Debt, shall be deemed the incurrence, issue, assumption or guarantee of Debt secured by a Lien for purposes of this Section. Notwithstanding the foregoing, this Section shall neither limit nor be deemed or construed as limiting the right of the Borrower or any Restricted Subsidiary to incur, issue, assume or guarantee any Debt secured by any one or more of the following: (1) Liens on property of, or on any shares of stock or Debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary of the Borrower; (2) Liens on property, shares of stock, other equity interests, or Debt existing at the time of acquisition or repossession thereof by the Borrower or any Restricted Subsidiary; (3) Liens on physical property (or any Accounts Receivable arising in connection with the lease thereof), shares of stock, other equity interests, or Debt acquired (or, in the case of physical property, constructed) after the date hereof by the Borrower or any Restricted Subsidiary, which Liens are created prior to, at the time of, or within one year after such acquisition (or, in the case of physical property, the completion of such construction or commencement of commercial operation of such property, whichever is later) to secure any Debt issued, incurred, assumed or guaranteed prior to, at the time of, or within one year after such acquisition (or such completion or commencement, whichever is later) or to secure any other Debt issued, incurred, assumed or guaranteed at any time thereafter for the purpose of refinancing all or any part of 41 such Debt; (4) Liens on Accounts Receivable of the Borrower or any Restricted Subsidiary arising from or in connection with transactions entered into by the Borrower or such Restricted Subsidiary after the date hereof or on Accounts Receivable acquired by the Borrower or such Restricted Subsidiary after such date from others, which Liens are created prior to, at the time of, or within one year after such Accounts Receivable arise or are acquired or, if later, the completion of the delivery or installation of the equipment or goods or the rendering of the services or the advancement or loaning of funds relating thereto (I) as a result of any guarantee, repurchase or other contingent (direct or indirect) or recourse obligation of the Borrower or such Restricted Subsidiary in connection with the discounting, sale, assignment, transfer or other disposition of such Accounts Receivable or any interest therein, or (ii) to secure or provide for the payment of all or any part of the investment of the Borrower or such Restricted Subsidiary in any such Accounts Receivable (whether or not such Accounts Receivable are the Accounts Receivable on which such Liens are created) or the purchase price thereof or to secure any debt (including, without limitation, Non-Recourse Debt) issued, incurred, assumed or guaranteed for the purpose of financing or refinancing all or any part of such investment or purchase price; (5) Liens in favor of the Borrower or any Restricted Subsidiary; (6) Liens in favor of the United States of America or any State thereof or the District of Columbia, or any agency, department or other instrumentality thereof, to secure progress, advance or other payments pursuant to any contract or provision of any statute; (7) Liens securing the performance of letters of credit, bids, tenders, sales contracts, purchase agreements, leases, surety and performance bonds, and other similar obligations not incurred in connection with the borrowing of money; (8) Liens to secure Non-Recourse Debt in connection with the Borrower or any Restricted Subsidiary engaging in any leveraged or single-investor or other lease transactions, whether (in the case of Liens on or relating to leases or groups of leases or the particular properties subject thereto) such Liens be on the particular properties subject to any leases involved in any of such transactions and/or the rental or other payments or rights under such leases or, in the case of any group of related or unrelated leases, on the properties subject to the leases comprising such group and/or the rental or other payments or rights under such leases, or on any direct or indirect interest therein, and whether (in any case) (I) such Liens be created prior to, at the time of, or at any time after the entering into of such lease transactions and/or (ii) such leases be 42 in existence prior to, or be entered into by the Borrower or such Restricted Subsidiary at the time of or at any time after, the purchase or other acquisition by the Borrower or such Restricted Subsidiary of the properties subject to such leases; and (9) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any of the foregoing; provided, however, that any such extension, renewal or replacement shall be limited to all or a part of the property or assets which secured the Lien so extended, renewed or replaced (plus any improvements on such property). SECTION 5.06. Consolidations, Mergers and Sales of Assets. The Borrower covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any person (other than such a sale or conveyance to a Subsidiary or any successor thereto (such a sale or conveyance being called an "Asset Drop-Down")), unless (I) either the Borrower shall be the continuing corporation or the successor corporation or the person which acquires by sale or conveyance substantially all the assets of the Borrower (if other than the Borrower) shall be a corporation organized under the laws of the United States of America or any State thereof and shall expressly assume the due and punctual payment of the principal of and interest on all the Notes according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Agreement to be performed or observed by the Borrower, by one or more agreements, reasonably satisfactory in form to the Required Banks, executed and delivered to the Agent by such corporation, and (ii) the Borrower or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition. In the event of any Asset Drop-Down after the date of this Agreement, any subsequent sale or conveyance of assets by a Subsidiary to which assets were transferred in such Asset Drop-Down (a "Drop-Down Subsidiary") will be deemed to be a sale or conveyance of assets by the Borrower for purposes of this Section 5.06. SECTION 5.07. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes, including, without limitation, the repayment of maturing commercial paper and other Debt of the Borrower. None of such proceeds will be used for the purpose of buying or carrying any "margin stock" within the meaning of Regulation U. 43 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay within five Domestic Business Days of the due date thereof any interest on any Loan, any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.02, 5.03, 5.04 or 5.06; the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Agent at the request of the Required Banks; (d) any representation or warranty made by the Borrower in this Agreement or in any certificate delivered pursuant to this Agreement shall prove to have been materially incorrect when made (or deemed made pursuant to Section 3.02); (e) the Borrower shall fail to make any payment or payments, in the aggregate in excess of $300,000,000, on principal of Debt of the Borrower when due and such failure shall continue for 30 days after the due date thereof or, if longer, beyond any applicable grace periods; (f) any event or condition shall occur which results in the acceleration of the maturity of the principal of any Debt of the Borrower in the aggregate in excess of $300,000,000 which acceleration shall not have been rescinded within 30 days; (g) the Borrower shall commence a voluntary case seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or 44 hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case seeking such relief commenced against it under any such law, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability generally to pay its debts as they become due; (h) an order for relief shall be entered against the Borrower under the federal bankruptcy laws as now or hereafter in effect in an involuntary case or other proceeding seeking liquidation, reorganization or other relief with respect to it or its debts or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such decree or order shall remain undismissed and unstayed for a period of 20 days; (I) both (I) a person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) other than AT&T shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 20% or more of the outstanding shares of common stock of the Borrower and (ii) the Borrower shall have ceased to be a Subsidiary of AT&T; provided that, notwithstanding clauses (I) and (ii) above, no Event of Default shall occur under this paragraph (I) if and for so long as both (x) officers, directors and employees of AT&T constitute a majority of the Board of Directors of the Borrower and (y) no person or group of persons has beneficial ownership of a greater percentage of the outstanding shares of common stock of the Borrower than does AT&T; then, and in every such event, the Agent shall (I) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes (together with accrued interest thereon) shall thereupon become, immediately due 45 and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in paragraph (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Agent shall give notice to the Borrower under Section 6.01 promptly upon being requested to do so by the Required Banks and shall thereupon notify all the Banks thereof. SECTION 6.03 Rescission. If at any time after termination of the Commitments and/or acceleration of the maturity of the Loans pursuant to Section 6.01, the Borrower shall pay all arrears of interest and all payments on account of principal of the Loans which shall have become due otherwise than by acceleration (with interest on principal at the rates specified in this Agreement) and all Defaults (other than nonpayment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 9.05 hereof, then upon the written consent of the Required Banks and notice to the Borrower, such termination of the Commitments and/or such acceleration and their consequences may be rescinded and annulled; but such action shall not affect any subsequent Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind the Banks to a decision which may be made at the election of the Required Banks; they are not intended to benefit the Borrower and do not give the Borrower the right to require the Banks to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. ARTICLE VII THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated 46 to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New York shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (I) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (I) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile 47 transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower shall have the right to appoint a successor Agent from among the Banks. If no successor Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. 48 SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Agent. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any CD Loan, Euro-Dollar Loan or Money Market LIBOR Loan: (a) the Agent is advised by the CD Reference Banks or, under the circumstances contemplated by the final sentence of the definition of London Interbank Offered Rate, the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or more of the aggregate principal amount of the affected Loans advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (I) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to convert outstanding Loans into CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (I) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such 49 Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by 50 any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (I) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement with respect to which such Bank is entitled to compensation during the relevant Interest Period under Section 2.15, special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (including any determination by any such authority, central bank or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less, which shall be deemed a change in the interpretation and administration of such requirements), has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a 51 consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then pursuant to paragraph below, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. Each Bank will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section. A certificate of the Bank setting forth such amount or amounts (including computation of such amount or amounts) as shall be necessary to compensate the Bank or its Parent as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrower and such amount or amounts may be reviewed by the Borrower. Unless the Borrower disagrees in good faith with the computation of the amount or amounts in such certificate, the Borrower shall pay to the Bank, within 30 days after receipt by the Borrower of such certificate delivered by the Bank, the amount shown as due on any such certificate. If the Borrower, after receipt of any such certificate from the Bank, disagrees with the Bank on the computation of the amount or amounts owed to the Bank pursuant to paragraph (a) or (b) above, the Bank and the Borrower shall negotiate in good faith to promptly resolve such disagreement. In either case, however, the Bank shall have a duty to mitigate the damages that may arise as a consequence of paragraph (a) or (b) above (including, without limitation, changing its Applicable Lending Office) to the extent that such mitigation will not, in the judgment of the Bank, entail any cost or disadvantage to the Bank that the Bank is not reimbursed or compensated for by the Borrower. SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings imposed by the United States or any political subdivision or taxing authority thereof, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, taxes imposed on its net income, and franchise taxes imposed on it, by the United States or any political subdivision or taxing authority thereof (all 52 such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (I) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). The Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and reasonable out-of-pocket expenses) arising therefrom or with respect thereto (other than any such liability that results from the gross negligence or willful misconduct of each Bank and the Agent, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other governmental authority). This indemnification shall be made within 30 days from the date such Bank or the Agent (as the case may be) makes written demand therefor. If any Bank or the Agent receives a refund in respect of any Taxes or Other Taxes for which such Bank or the Agent has received payment from the Borrower hereunder it shall promptly repay such refund (including any interest received by such Bank or the Agent from the taxing authority with respect to the refund with respect to such Taxes or Other Taxes) to the Borrower, net of all reasonable out-of-pocket expenses of such Bank; provided that the Borrower, upon the request of such Bank or 53 the Agent, agrees to return such refund (plus penalties, interest or other charges) to such Bank or the Agent in the event such Bank or the Agent is required to repay such refund. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, duly executed by such Bank, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a). (e) Each Bank further agrees to promptly notify the Borrower if such Bank changes its Applicable Lending Office and, upon written request from the Borrower, deliver forms 1001 or 4224 required pursuant to Section 8.04(d) prior to the immediately following due date of any payment by the Borrower hereunder. (f) The Borrower shall not be required to pay any additional amounts to any Bank or the Agent in respect of Taxes and Other Taxes pursuant to paragraphs (a), (b) and above if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank or Agent to comply with the provisions of paragraphs (d) and (e) above unless such failure results from (I) a change in applicable law, regulation or official interpretation thereof or (ii) an amendment, modification or revocation of any applicable tax treaty or a change in official position regarding the application or interpretation thereof, in each case after the date hereof or after such Bank became a party hereto; provided, however, that should a Bank, which is otherwise exempt from or subject to a reduced rate of 54 withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (g) Any Bank claiming any additional amounts payable under this Section 8.04 shall (I) to the extent legally able to do so, upon reasonable written request from the Borrower, file any certificate or document if such filing would avoid the need for or reduce the amount of any such additional amounts which may thereafter accrue, and the Borrower shall not be obligated to pay such additional amounts if, after the Borrower's request, any Bank could have filed such certificate or document and failed to do so; or (ii) consistent with legal and regulatory restrictions, use reasonable efforts to change the jurisdiction of its Applicable Lending Office if the making of such change would avoid the need for or reduce the amount of any additional amounts which may thereafter accrue and would not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (I) the obligation of any Bank to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. 55 If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the first day of the next succeeding Interest Period applicable to the related CD Loans or Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Bank. If any Bank (I) has demanded compensation for increased costs pursuant to Section 8.03 or 8.04 or, (ii) has determined that the making or continuation of any Euro-Dollar Rate Loan has become unlawful or impermissible pursuant to Section 8.02 and similar additional interest or compensation has not been demanded by, or a similar determination has not been made by, all of the Banks, the Borrower shall have the right to designate an Assignee which is not an Affiliate of the Borrower to purchase for cash, pursuant to an Assignment and Assumption Agreement, the outstanding Loans and Commitment of such Bank and to assume all of such Bank's other rights and obligations hereunder without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans plus any accrued but unpaid interest thereon and the accrued but unpaid facility fees in respect of that Bank's Commitment hereunder plus such amount, if any, as would be payable pursuant to Section 2.13 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment. SECTION 8.07. Compensation. The Borrower shall not be liable for compensating any Bank under Sections 2.13, 8.03 and 8.04 for any funding losses, increased costs or taxes incurred by such Bank more than 30 days prior to such Bank's written notice of its intention to demand payment therefor. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address or 56 telex or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telex or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower. Each such notice, request or other communication shall be effective (I) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when received at the address specified in this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (I) all reasonable out-of-pocket expenses of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Agent and each Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and reasonable out-of-pocket expenses of any kind (including, without limitation, the reasonable fees and disbursements of counsel) which were actually incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such 57 Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (I) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the scheduled maturity of any payment of principal of or interest on any Loan or any fees hereunder or for termination of any Commitment or (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure 58 to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (I), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Sections 2.13 and 2.15 and Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower and the Agent; provided that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans; and provided further that the interest of the Assignee shall be in a minimum amount equivalent to an original Commitment of $15,000,000 and the collective interest of the transferor Bank and its affiliates shall be 59 in a minimum amount equivalent to an original Commitment of $25,000,000 unless, in the case of the transferor Bank and its affiliates, they have no Commitment after giving effect to such assignment. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.06, disclose to the Assignee or Participant or proposed Assignee or Participant any information relating to the Borrower or its Subsidiaries furnished to such Bank by the Agent or by or on behalf of the Borrower; provided that, prior to any such disclosure, 60 such Assignee or Participant or proposed Assignee or Participant shall agree to preserve in accordance with Section 9.11 the confidentiality of any confidential information described therein. SECTION 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.09. Counterparts; Integration; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective on and as of July 11, 1994, provided that on or prior to such date, the Agent shall have received counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 61 SECTION 9.11. Confidentiality. Subject to Section 9.06(f) hereof, the Banks shall hold all nonpublic information obtained pursuant to the requirements of this Agreement and identified as such by the Borrower in accordance with such Bank's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure reasonably required by a bona fide offeree or transferee in connection with the contemplated transfer, or as required or requested by any governmental authority or representative thereof, or pursuant to legal process, or to its accountants, lawyers and other advisors, and shall require any such offeree or transferee to agree (and require any of its offerees, transferees or participants to agree) to comply with this Section 9.11. 62 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. AT&T CAPITAL CORPORATION By /s/ Nicholas S. Cyprus Title: Vice President and Controller 44 Whippany Road Morristown, New Jersey 07962 Fax: (201) 397-3106 Commitments $120,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Mathias Blumschein Title: Associate $75,000,000 BARCLAYS BANK PLC By /s/ Andrew Wynn Title: Director $75,000,000 THE CHASE MANHATTAN BANK, N.A. By /s/ Robert T. Smith Title: Vice President 63 Commitments $75,000,000 CHEMICAL BANK By /s/ Marion J. Henry Title: Vice President $75,000,000 CREDIT LYONNAIS NEW YORK BRANCH By /s/ R. Ivosevich Title: Senior Vice President $75,000,000 THE FUJI BANK, LIMITED By /s/ Y. Shitsugu Title: Vice President and Manager $48,750,000 THE FIRST NATIONAL BANK OF CHICAGO By /s/ Judith L. Mayberry Title: Vice President $48,750,000 CITIBANK, N.A. By /s/ James M. Walsh Title: Attorney-in-fact 64 Commitments $48,750,000 CREDIT SUISSE By /s/ Jay Chall Title: Member of Senior Management By /s/ Andrea Shkane Title: Associate $48,750,000 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By /s/ Bina R. Dabbah Title: Vice President By /s/ Alain M. Bolea Title: Director $48,750,000 THE INDUSTRIAL BANK OF JAPAN, LTD., NEW YORK BRANCH By /s/ Junri Oda Title: Senior Vice President and Senior Manager $48,750,000 MELLON BANK, N.A. By /s/ James S. Wolf Title: First Vice President 65 Commitments $48,750,000 NATIONSBANK OF NORTH CAROLINA, N.A. By /s/ Moses James Sawney Title: Vice President $48,750,000 PNC BANK, NATIONAL ASSOCIATION By /s/ Mark Williams Title: Vice President $48,750,000 ROYAL BANK OF CANADA By /s/ Thomas M. Byrne Title: Manager $48,750,000 SOCIETE GENERALE By /s/ Philippe de Rozieres Title: Vice President $48,750,000 THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH By /s/ Shuntaro Higashi Title: Joint General Manager 66 Commitments $48,750,000 SWISS BANK CORPORATION By /s/ Sean M. Harrigan Title: Executive Director Merchant Banking By /s/ Teresa A. Portela Title: Associate Director Merchant Banking $30,000,000 ABN AMRO BANK N.V. NEW YORK BRANCH By /s/ Ann K. Schwalbenberg Title: Vice President By /s/ James B. Sieger Title: Vice President $30,000,000 THE BANK OF NEW YORK By /s/ Edward F. Ryan, Jr. Title: Vice President $30,000,000 BANK OF HAWAII By /s/ J. Bryan Scearce Title: Assistant Vice President 67 Commitments $30,000,000 BANQUE PARIBAS By /s/ Richard G. Burrows Title: Vice President By /s/ Stanley P. Berkman Title: Senior Vice President $30,000,000 CIBC INC. By /s/ Leslie L. Rogers Title: Vice President $30,000,000 COMERICA BANK By /s/ Martin G. Ellis Title: Assistant Vice President 68 Commitments $30,000,000 COMMERZBANK AKTIENGESELLSCHAFT NEW YORK BRANCH By /s/ Juergen Boysen Title: Senior Vice President By /s/ Michael D. Hintz Title: Vice President $30,000,000 CONTINENTAL BANK By /s/ Kathryn N. Robinson Title: Vice President $30,000,000 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ Susan A. Hodge Title: Vice President By /s/ J. M. Leffler Title: First Vice President $30,000,000 THE FIRST NATIONAL BANK OF BOSTON By /s/ Heather R. Johnson Title: Vice President 69 Commitments $30,000,000 THE NORTHERN TRUST COMPANY By /s/ Kristina V. L. Warland Title: Second Vice President $30,000,000 TORONTO DOMINION (NEW YORK), INC. By /s/ C. A. Clause Title: Vice President $30,000,000 TRUST COMPANY BANK By /s/ Marion C. Shields Title: Vice President $30,000,000 WACHOVIA BANK OF GEORGIA, N.A. By /s/ Linda M. Harris Title: Senior Vice President _________________ Total Commitments $1,500,000,000 70 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /s/ Matthias Blumschein Title: Associate 60 Wall Street New York, New York 10260-0060 Attention: Matthias Blumschein Telex number: 177615 71 EXHIBIT A NOTE New York, New York , 19 For value received, AT&T Capital Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. 72 This note is one of the Notes referred to in the $1,500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the mandatory and optional prepayment hereof and the acceleration of the maturity hereof. AT&T CAPITAL CORPORATION By Title: 73 Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL __________________________________________________________________ Amount of Amount of Type of Principal Notation Date Loan Loan Repaid Made By __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ 74 EXHIBIT B Form of Money Market Quote Request [Date] To: Morgan Guaranty Trust Company of New York (the "Agent") From: AT&T Capital Corporation Re: $1,500,000,000 Credit Agreement (the "Credit Agreement") dated as of July 11, 1994 among the Borrower, the Banks listed on the signature pages thereof and the Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount* Interest Period** $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. AT&T CAPITAL CORPORATION By________________________ Title: ____________________ *Amount must be $5,000,000 or a larger multiple of $1,000,000. **Not less than one month (LIBOR Auction) or not less than 14 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. 75 EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to AT&T Capital Corporation (the "Borrower") Pursuant to Section 2.03 of the $1,500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the Banks parties thereto and the undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [4:00 P.M.] [9:30 A.M.] (New York City time) on [date]. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By______________________ Authorized Officer 76 EXHIBIT D Form of Money Market Quote To: Morgan Guaranty Trust Company of New York, as Agent Re: Money Market Quote to AT&T Capital Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated _____________, 19__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount** Period*** [Margin****] [Absolute Rate*****] $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]** __________ * As specified in the related Invitation. ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate (Notes continued on following page) 77 limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the $1,500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the Banks listed on the signature pages thereof and yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer __________ *** Not less than one month or not less than 14 days, as specified in the related Invitation. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%). 78 EXHIBIT E OPINION OF COUNSEL FOR THE BORROWER To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: I am [General Counsel] [Assistant General Counsel] of AT&T Capital Corporation (the "Borrower"), and as such, have acted as counsel for the Borrower in connection with the $1,500,000,000 Credit Agreement (the "Credit Agreement") dated as of July 11, 1994 among the Borrower, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent. Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the request of the Borrower pursuant to Section 3.01(b) of the Credit Agreement. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except those which the failure to have would not have a Material Adverse Effect. 79 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any material agreement, judgment, injunction, order, decree or other material instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. 3. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable against the Borrower in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). 4. There is no action, suit or proceeding pending against, or to the best of my knowledge threatened against, the Borrower or any of its Consolidated Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable probability of an adverse decision which would have a Material Adverse Effect or which in any manner draws into question the validity of the Credit Agreement or the Notes. 5. Each of the Borrower's Consolidated Subsidiaries which is a corporation is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except those which the failure to have would not have a Material Adverse Effect. I am a member of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, I express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any 80 Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without my prior written consent. Very truly yours, 81 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENT To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the $1,500,000,000 Credit Agreement (the "Credit Agreement") dated as of July 11, 1994 among AT&T Capital Corporation, a Delaware corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01 of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate power and have been duly authorized 82 by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable against the Borrower in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, 83 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), AT&T CAPITAL CORPORATION (the "Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the $1,500,000,000 Credit Agreement dated as of July 11, 1994 among the Borrower, the Assignor and the other Banks party thereto, as Banks, and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings 84 set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (I) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them. It is understood that commitment and/or facility fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower and the Agent. 85 This Agreement is conditioned upon the consent of the Borrower and the Agent pursuant to Section 9.06 of the Credit Agreement. The execution of this Agreement by the Borrower and the Agent is evidence of this consent. Pursuant to Section 9.06 the Borrower agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By_________________________ Title: [ASSIGNEE] By__________________________ Title: 86 AT&T CAPITAL CORPORATION By__________________________ Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By__________________________ Title: EX-10 5 1 Exhibit 10(v) Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION RETIREMENT AND SAVINGS PLAN HIGHLIGHTS OF THE RETIREMENT AND SAVINGS PLAN AT&T Capital Corporation adopted the AT&T Capital Corporation Retirement and Savings Plan (RSP) effective January 1, 1994 for its members and the members of its subsidiaries. This summary refers to AT&T Capital Corporation and its subsidiaries collectively as the "Company." The RSP is designed to help you build financial resources for the future. Here's how the RSP can help you achieve your retirement goals: A convenient, regular way to save up to 12% of your pay on a before-tax or after-tax basis using payroll deductions, . A matching contribution from the Company equal to 662/3 cents for every $l you save on the first 6% of your pay, . An overall uniform points contribution from the Company which is expected to be 9% of total payroll, . The uniform points contribution allocated to your account will be based on pay and service and will equal 6% to 13% of your pay, assuming the overall contribution is 9%, . A choice of investment options, . Vesting (ownership) in your contributions of 100% at all times, . Vesting in matching contributions of 100% after a maximum of 11/2 years of vesting service, . Vesting in uniform points contributions at the rate of 20% for each year of vesting service uniform points contributions are fully vested once you complete 5 years of vesting service, . A tax advantage for your savings while they grow current income taxes are not paid on your before-tax contributions, matching contributions, uniform points contributions, or any investment earnings while they remain in the RSP, . Access to your before-tax contributions in the event of an approved hardship or at any time after you reach age 591/2, . Access to your unmatched after-tax contributions at any time, . Access to your matched after-tax contributions, after they have been in the RSP for at least 24 months, . Access to your contributions and matching contributions through loans, and . A choice of payment options when you leave the Company. ELIGIBILITY AND PARTICIPATION Who Is Eligible You are eligible to participate in the RSP if you are a regular, full-time or part-time member of the Company. However, you are not eligible to participate in the RSP if you are a "leased member" (e.g., employed by a 2 temporary employment service), a nonresident alien with no U.S. source income, or a U.S. citizen residing outside the United States and covered by a retirement plan in the foreign country. You are eligible to participate in the RSP: with respect to your contributions and matching contributions on the first day of the month after you become employed by the Company, and . with respect to uniform points contributions on the January 1 following the year you become employed by the Company. For eligibility purposes, transferees from AT&T are treated the same as newly hired members. For rehired members, if you were eligible to participate in the RSP before you left the Company and are rehired before you have a break in service, you will be eligible to participate in the RSP once you complete an hour of service. However, if you are rehired after you have a break-in service, you must fulfill the eligibility requirements again, just as a new member would. If you are uncertain whether or not you are eligible to participate, ask your local Human Resources representative. How You Enroll Uniform Points Contributions Once you are eligible, you automatically begin to receive allocations of uniform points contributions. You don't have to do anything to enroll, except to select your investment options under the RSP. Your RSP investment elections will apply to all monies contributed under the RSP. For more information, please see "Your Investment Decisions". Your Contributions and Matching Contributions If you want to make before-tax or after-tax contributions and receive matching contributions from the Company, you must enroll in the RSP. When you are hired, you will receive an enrollment package containing all the information you will need to designate a beneficiary and to begin to make contributions. Your contributions will begin as soon as practicable after you enroll. If you do not elect to contribute to the RSP when you first become eligible, you may enroll later at any time by requesting an enrollment package from your local Human Resources office and following the enrollment procedures. Please note that your election to contribute to the RSP will not be effective unless you have chosen your investment options. 3 CONTRIBUTIONS TO YOUR ACCOUNT Your Contributions The RSP allows you to save in two ways before-tax and after-tax. Your total contributions can be up to 12% of your pay. When you enroll, you will be asked to specify what percentage of your contributions should be before-tax and what percentage should be after-tax. Under the RSP, "pay" means your cash compensation from the Company before reductions for taxes or before-tax contributions to any of the Company's member benefit plans, including your base pay, commissions, overtime, shift differentials, wages and awards and payments under the Company's Annual Incentive Plan (or any successor plan) to the extent includible in your taxable income. However, your "pay" under the RSP does not include awards or payments under the Company's long term incentive award programs such as the Share Performance Incentive Plan and the Long Term Incentive Plan. Before-Tax Contributions You may contribute from 1% to 12% of your pay on a before-tax basis, up to certain limits (see "Limits On Contributions" on page 6). Your before-tax contributions go into your account before federal income taxes are withheld from your pay. For many participants, this advantage extends to state and local income taxes too. You defer paying income taxes on before-tax savings dollars until you receive them from the RSP as a payment. And, just as important, these before-tax savings dollars reduce your salary for tax purposes. Because you pay less taxes, you have more money to save or spend. Please look at the example to see how this works. Social security taxes, by law, must be withheld from your unreduced pay whether you save on a before-tax or after-tax basis. But because social security taxes are based on your unreduced pay, your social security benefit will not be affected by your participation in the RSP. After-Tax Contributions You also may contribute from 1% to 12% of your pay on an after-tax basis. Remember, your total before-tax and after-tax contributions are limited to 12% of your pay. Your after-tax contributions are deducted automatically from your paycheck, but after federal income taxes have already been withheld from your pay. After-tax contributions are more readily available for withdrawal than before-tax contributions. Matching Contributions For every before-tax or after-tax dollar you contribute to the RSP up to the first 6% of your pay, the Company will contribute 662/3 cents to your account. The Company does not match your contributions above 6% of your pay. Also, matching contributions will not be made if you are under a withdrawal suspension (see the section entitled "Withdrawals While You Are Employed" beginning on page 19) or a loan penalty suspension (as described in the loan default section on page 17). 4 Matching contributions will be made to your account monthly as soon as practicable after each payroll period. Uniform Points Contributions Each year, the Company will contribute to the RSP a percentage of the total pay (see page 3) of all members participating in the RSP. The contribution is expected to be 9%, but will not be less than 5%, of total pay. Allocation of Uniform Points Contributions Once the total uniform points contribution to the RSP is determined, the contribution will be allocated to participants on a "uniform points" system. The uniform points system allocates the Company's contribution to each participant based upon years of service and pay. Under the uniform points system, you will be allocated: 1 point for each $200 of pay, and . 10 points for each full year of service and 5/6 of a point for each additional full month of service. Your allocation of the total uniform points contribution will equal the Company's total contribution multiplied by a fraction. The fraction will equal your points for the year divided by all participants' points for the year. If the uniform points contribution is 9% of total pay, your allocation will be at least 6% and no more than 13% of your pay regardless of the number of your points. Your account will receive 1/12 of the total annual allocation each month, provided you are actively employed by the Company on the last day of that month. The Company expects that the allocation for January March of each year will be made at one time generally by April 30; separate allocations will be made for the months of April through December generally by the end of the following month. For example, the allocation for April will be made by May 31 and the allocation for December will be made by January 31 of the next year or as soon as administratively feasible. Service In determining the uniform points contribution for a year, a participant's service will be determined as of the last day of February of that year and the total "pay" of all participants is based on the 12 months ending on that day. For example, the uniform points contribution for 1994 will be 9% of the total pay of all participants from March 1, 1993 through February 28, 1994 and each participant will receive an allocation based on his or her service as of February 28, 1994. All your years and months of service after December 31, 1993 with the Company is counted in determining your points. For members as of December 31, 1993, your service also includes: All service before January 1, 1994 with AT&T Capital Corporation, 5 All service before January 1, 1994 with a subsidiary of AT&T Capital Corporation after AT&T Capital Corporation acquired at least 50% ownership of the subsidiary, and . All service before January 1, 1994 with AT&T or any "affiliate" of AT&T while affiliated with AT&T. Two companies are "affiliated" if, under Internal Revenue Service rules, they are under common control generally, they are at least 80% commonly owned. Examples Let's look at some examples: Example 1: You have 5 years and 6 months of service as of the last day of February and your pay is $30,000 for the 12 months ending on that day. You will have 205 points: 5 years of service x 10 points = 50 6 months of service x 5/6 point = 5 $30,000 / $200 = 150 x 1 point = 150 Total: 205 Assume the Company's uniform points contribution equals 9% of pay and the Company's total pay for the 12 months ending March 31 is $100,000,000. The Company's total uniform points contribution for the year would equal $9,000,000. If the points for all participants equal 580,000, your account would receive an annual allocation of $3,181.03 calculated as follows: 205 points x $9,000,000 = $3,181.03 580,000 points Example 2: You have 19 years of service as of the last day of February and your pay is $70,000 for the 12 months ending on that day. You will have 540 points: 19 years of service x 10 points = 190 $70,000 / $200 = 350 x 1 point = 350 Total: 540 Assume the Company's total uniform points contribution for the year would equal $9,000,000. If the points for all participants equal 580,000, your account would receive an annual allocation of $8,379.31 calculated as follows: 540 points x $9,000,000 = $8,379.31 580,000 points Rollover Contributions You may also invest the taxable portion of an account you have accumulated under a prior employers' tax qualified retirement plan in the RSP. Rollover contributions are not eligible for matching contributions. If you transferred your money from a prior employer's plan to an individual retirement account (IRA), you may be able to transfer the value of that rollover IRA to the RSP. The Internal Revenue Service has specific guidelines on these "rollover" contributions. There are two types of rollovers: a 60-day rollover and a direct rollover. Under the 60-day rollover, the check from the distributing plan or rollover IRA is payable to you and you send a check to the RSP. 6 Please note that if you use a 60-day rollover, your distribution from the prior plan will be subject to 20% income tax withholding on the taxable portion of the prior plan's distribution. Under the direct rollover, the check from the distributing plan or rollover IRA is sent directly to the RSP and no federal taxes are withheld. You may invest your rollover contributions in the investment options available under the RSP. See "Your Investment Decisions" on page 9. If you have questions about rollover contributions, contact the Corporate Benefit Office. Transfers of Account Balances from AT&T Subsidiary Plans If you were a participant in the AT&T Long Term Savings Plan for Management Members, AT&T Long Term Savings and Security Plan, AT&T Retirement Savings and Profit Sharing Plan, AT&T Global Information Solutions Company Savings Plan, or Encore International, Inc. Tax Deferred Savings Plan and were eligible to participate in the RSP on January 1, 1994, you are fully vested in all contributions made to those plans as of December 31, 1993. Your account balances under those plans have been transferred to the RSP. You may invest these balances in the investment options available under the RSP. See "Your Investment Decisions" on page 9. If you were a participant in the Eaton Financial Corporation 401(k) Profit Sharing Plan and were eligible to participate in the RSP on January 1, 1994, you are fully vested in your Eaton Financial Corporation 401(k) Profit Sharing Plan and all contributions made to that plan as of December 31, 1992. Your account balances under the Eaton Financial Corporation 401(k) Profit Sharing Plan will be transferred as soon as administratively practical. Limits on Contributions The Internal Revenue Code places several restrictions on tax-qualified plans that may limit the amount of your benefit under the RSP. The RSP must: Ignore any of your pay that exceeds $150,000 in a year this limit will be adjusted from time to time for inflation, . Limit your before-tax contributions to a certain dollar limit that is set each year this dollar limit, which is $9,240 in 1994, is adjusted annually for inflation, and . Limit your contributions, matching contributions, and uniform points contributions to the lesser of $30,000 or 25% of your taxable pay in any calendar year. Once your before-tax contributions reach the dollar limit for a year, your designation of before-tax dollars for the remainder of the year will automatically be treated as an after-tax designation. So that you may save as much as possible for your retirement, the Company has established an additional plan known as an "Excess Benefit Plan" which will hold contributions in excess of the $30,000 or 25% of pay 7 limit. If the total contributions for the year would exceed the limit, the excess contributions the Company makes in your behalf will be credited under the Excess Benefit Plan, rather than to the RSP. The Company intends that, to the extent administratively practicable, contributions will be made to the RSP as follows: First, your before-tax contributions up to the limit will be made to the RSP, . Then, your after-tax contributions up to the limit will be made to the RSP, . Then, matching contributions up to the limit will be made to the RSP, and . Finally, uniform points contributions up to the limit will be made to the RSP. The Excess Benefit Plan is described in more detail in a separate section of this summary. Non-Discrimination Tests The Internal Revenue Code imposes several tests to assure that plans like the RSP are used by a balanced proportion of members at lower and higher pay levels. One test compares the average before-tax contributions of both groups of members. Another test compares the average after-tax contributions and matching contributions of both groups of members. If the before-tax contribution levels are not balanced, the before-tax savings for some higher-paid members may have to be reduced. If the after-tax and matching contribution levels are not balanced, then the RSP will refund amounts related to the excess after-tax contributions to the affected higher paid members and any matching contributions made with respect to refunded contributions will be forfeited. There are other Internal Revenue Code provisions that are designed to ensure that plans like the RSP do not discriminate in favor of highly compensated members. If the amount you decide to save in the RSP, or if the amount contributed in your behalf, is affected by any of these rules, you will be notified. Changing Your Savings You may change the percentage of pay you are saving at any time by calling the recordkeeper's voice response system (VRS) (see page 27). The changes will take effect as soon as administratively practical. Remember: your savings are based on a percentage of eligible pay. If your pay changes during the year, the Company will automatically change the dollar amount of your contribution in accordance with the percentage of pay you have elected. 8 If you need to stop saving through the RSP, you may do so at any time by calling the VRS (see page 27). Your savings will stop as soon as administratively possible, but no later than the end of the next month. If you decide to resume savings through the RSP again, you may do so at any time. WHAT THE BEFORE-TAX ADVANTAGE MEANS TO YOU Savings with before-tax dollars means that you can keep more of what you earn. The dollars and cents effect depends upon your situation: If you are not saving now, but would like to start, you can begin saving on a before-tax basis. The amount you actually save in the RSP will be more than the amount that your take home pay is reduced. If, for instance, you save $150 monthly before-tax to the RSP, your take home pay may decrease by less than $108 because of your tax reduction. . If you are already saving a portion of your pay on an after-tax basis, you can save the same amount through the RSP on a before-tax basis and actually increase your spendable income. (Please see the example below.) Or you could save more on a before-tax basis and keep your spendable income the same as it is today. The following example illustrates how much you can reduce the federal income tax you pay and increase your spendable income by saving before-tax rather than after-tax dollars in the RSP. Let's assume you earn $30,000 a year and you decide to contribute 6% of your annual salary ($1,800) to the RSP as before-tax savings. Here is how much you can reduce your taxes and increase your take-home pay. As this example illustrates, if you save $1,800 on a before-tax basis rather than on an after-tax basis, you can reduce your taxes by $504 for the year. The advantages of before-tax savings provide a valuable incentive to save in the RSP and work toward your long-term financial goals. Keep in mind, however, that your before-tax savings are not as readily available for withdrawal before age 591/2 as are your after-tax savings. Annual Before- Tax Savings Annual After- Tax Savings W-2 $30,000 $30,000 Before-Tax Savings - -1,800 - -0 W-2 Taxable Wages 28,200 30,000 Estimated 1994 Federal Income Taxes* - -3,330 - -3,834 Estimated 1994 Social Security Taxes - -2,295 - -2,295 Pay After Taxes 22,575 23,871 After-Tax Savings - -0 - -1,800 Spendable Income 22,575 22,071 Tax Reduction/Extra Take Home Pay $504 9 individual taking the standard deduction and claiming one exemption. The 1994 standard deduction for a single individual is $3,700 and each exemption in 1994 reduces gross income by $2,350 for purposes of calculating federal income taxes. Not shown are any additional tax savings from the deferral of state and local taxes. YOUR INVESTMENT DECISIONS When you become a participant in the RSP, the recordkeeper will establish an account for you. The recordkeeper will credit to your account your before-tax and after-tax contributions, the matching contributions and uniform points contributions made in your behalf, your rollover contributions, amounts transferred from other plans, and earnings on all of these. You decide how to invest your account among the investment options described below. However, the contributions must be directed among the investments in increments of 1%. Your contributions, matching contributions, and uniform points contributions will be allocated among the various options you have chosen in accordance with your current investment direction. You may change your investment direction as often as you like by calling the recordkeeper's voice response system (see page 27). You also may transfer past investment balances from one investment option to another, in increments of 1%, as often as you like. Each investment option is subject to a degree of risk. Selecting the appropriate option is your responsibility and the Company cannot advise you on how to invest. You may wish to consult with your own financial or investment advisor to assess risks associated with each option and to decide which of the investment options is better for you. To the extent that you exercise control over the investment of your accounts, the Company and other plan fiduciaries will not be liable for losses resulting from your investment decisions. The AT&T Shares Fund The AT&T Shares Fund is invested entirely in shares of common stock of AT&T Corp. ("AT&T"). Your interest in the AT&T Shares Fund will be in whole and fractional shares of AT&T common stock. Voting AT&T Shares Before each annual or special meeting of shareholders of AT&T, the trustee will send you a copy of the Annual Report to Shareowners if you are invested in AT&T shares. You also will receive the proxy soliciting material for the meeting and a form requesting instructions for the trustee on how to vote the AT&T shares represented by amounts credited to your account. The trustee will vote such shares based on your instructions. The trustee will not vote AT&T shares for which it does not receive voting instructions. 10 Merrill Lynch Basic Value Fund, Inc. According to its investment manager, the Merrill Lynch Basic Value Fund, Inc.'s objectives are to seek capital appreciation and, secondarily, income by investing in securities, primarily equities, that Fund management believes are undervalued. The Fund seeks to invest in stocks that possess one or more of the following characteristics: Are selling at a discount from per-share book value (that is, a company's assets, minus its liabilities, divided by the number of shares of common stock outstanding) or from historic price-to-earnings ratios, . Have dividends greater than the stock market average, . Seem capable of recovering from situations that caused the companies to become temporarily out of favor. Merrill Lynch Capital Fund, Inc. According to its investment manager, the Merrill Lynch Capital Fund, Inc. seeks the highest total investment return consistent with prudent risk. Total investment return is the aggregate of income and capital value changes over time. The Fund has a fully managed investment policy utilizing equity, debt and convertible securities. This allows management for the Fund to vary investment policy based on its evaluation of changes in economic and market trends. Consistent with this policy, the Fund's portfolio may, at any given time, be invested substantially in equity securities (stocks), corporate bonds or money market securities, although it is the expectation of management for the Fund that, over long periods, a major portion of the Fund's portfolio will consist of equity securities of larger market capitalization companies. Dividends are declared and reinvested semiannually. Merrill Lynch Federal Securities Trust According to its investment manager, the Merrill Lynch Federal Securities Trust seeks high current income. The Fund seeks a current return through investments in U.S. government and government agencies including the Government National Mortgage Association. The Fund may seek to enhance its return through the use of certain portfolio strategies involving options, and to hedge its portfolio through the use of options and futures transactions. Merrill Lynch Global Allocation Fund, Inc. According to its investment manager, the Merrill Lynch Global Allocation Fund, Inc. seeks high total investment return consistent with prudent risk. The Fund has a fully managed investment policy utilizing U.S. and foreign equity, debt, money market securities, the combination of which will be varied from time to time, both with respect to types of securities and markets in response to changing market and economic trends. This fully managed investment approach provides the Fund with the opportunity to benefit from anticipated shifts in the relative performance of different types of securities and different capital markets. Dividends are declared and reinvested semiannually. 11 investment return will be subject to fluctuations in foreign currency exchange rates. Merrill Lynch Phoenix Fund, Inc. According to its investment manager, the Merrill Lynch Phoenix Fund, Inc.'s objective is to seek long-term capital appreciation through investment in a diversified portfolio of equity and fixed income securities that Fund management believes are undervalued given current or future prospects. The Fund seeks to invest in securities of issuers that are in weak financial condition or are experiencing poor operating results but which Fund management believes are undervalued due to Fund management's assessment of the current or prospective condition of the market. The investment policy of the Fund is based upon the belief that the prices of troubled issuers are often depressed to a greater extent than warranted by the condition of the issuer and that, while investment in such securities involves a high degree of risk, such investments offer the opportunity for significant capital gains. The Stable Fund The Stable Fund consists of shares in the Merrill Lynch Retirement Preservation Trust and a portfolio of guaranteed investment contracts transferred from the AT&T Long Term Savings Plan for Management Members, the AT&T Long Term Savings and Security Plan, and the AT&T Retirement Savings and Profit Sharing Plan. In addition, a portion of the Stable Fund is held in the Merrill Lynch Government Fund. The rate of return for the Stable Fund will initially represent a blending of the respective earnings of the Merrill Lynch Retirement Preservation Trust, the Merrill Lynch Government Fund, and the transferred guaranteed investment contracts that have not yet matured. Any new contributions invested in the Stable Fund, and amounts transferred from other investment options, will be invested in the Merrill Lynch Retirement Preservation Trust. As the transferred guaranteed investment contracts mature, proceeds from those contracts will also be invested in the Merrill Lynch Retirement Preservation Trust. According to its investment manager, the Merrill Lynch Retirement Preservation Trust seeks to provide preservation of participant's investments, liquidity, and current income that is typically higher than money market funds. The Trust invests primarily in a broadly diversified portfolio of Guaranteed Investment Contracts in an obligations of U.S. government and U.S. government agencies' securities. The Trust also invests in high-quality money market securities. Participants purchase units which the Trust seeks to maintain at $1 per unit. Income is declared and reinvested daily. (Although the Trust purchases Guaranteed Investment Contracts, neither the Trust nor its units is guaranteed.) Self-Directed Option Some RSP participants may wish to pursue investment options beyond the core group of investment options previously described. These participants 12 may establish a self-directed Retirement Cash Management Account (RCMA Account) and invest in a wide array of investments available through Merrill Lynch, including: Other Merrill Lynch mutual funds at their net asset value, . Other mutual funds subject to their normal sales charges and/or fees, . Corporate bonds and bond funds, and . Most publicly traded securities (other than AT&T or AT&T Capital Corporation stock). No contributions will be invested directly in this option. However, you may transfer assets to the self-directed option from other investment options under the RSP. If you want more information about this option, your local Human Resources representatives will be able to direct you to a Merrill Lynch Financial Consultant designated to work with RSP participants. The Merrill Lynch Financial Consultant will be able to discuss the self-directed option in greater detail, including limitations on the amount of contributions or savings that may be invested in this option. The Financial Consultant will also be able to work with you to tailor an investment strategy in line with your specific investment objectives. UNDERSTANDING YOUR ACCOUNT Account Valuations Your account reflects your participation in the investment options under the RSP. The recordkeeper values your account in dollars on a daily basis and you can access your account by using the recordkeeper's voice response system. See page 27. Account Statements Four times a year you will receive a personal statement of account showing the value of your account as of March 31, June 30, September 30, and December 31. You may also receive the following statements: Distribution or Withdrawal Statement when you elect a payout from your account, . Confirmation Statement when you elect a fund or asset transfer, a change in your investment options, or a change in your before-tax or after-tax contribution percentages, and . Adjustment Statement when an adjustment/correction is made to your account. You should review all statements immediately to compare the information against your own records. If there is any discrepancy, you must report it within 30 days of receiving the statement. Your local Human Resources representatives will be able to direct you where and how to report the discrepancy. No adjustments will be made to your account for any discrepancy reported more than 30 days after receipt of the statement. 13 VESTING Your Contributions The value of your before-tax and after-tax contributions is always 100% vested. This means that you fully own those contributions and their earnings. Matching Contributions You will own the value of the matching contributions allocated to your account and their earnings after you become vested. Members as of January 1, 1994 If you were employed by the Company before 1994 and are a member on January 1, 1994, you are immediately 100% vested in the matching contributions allocated to your account and their earnings. New Members If you were first employed by the Company after December 31, 1993, you will vest in the matching contributions allocated to your account and their earnings within a maximum of 11/2 years of service. If you become employed by the Company or an "affiliate" (see page 13) before July 1 of any year, you vest 100% on December 31 of that year (provided you remain in service until December 31). However, if you become employed by the Company or an affiliate on or after July 1 of any year, you vest 100% on December 31 of the following year (again, provided you remain in service until December 31 of the following year). If you leave the Company or an affiliate before you become vested as described in the previous paragraph, you will vest 100% only after you return to the Company (or an affiliate) and complete a year and a half of "vesting service." Once you are 100% vested in your matching contributions and earnings, you are 100% vested in all future matching contributions and earnings made to your account. Uniform Points Contributions You will vest in uniform points contributions and their earnings gradually over 5 years. If you become employed by the Company or an affiliate before July 1 of any year, you vest 20% on December 31 of that year (provided you remain in service until December 31). However, if you become employed on or after July 1 of any year, you vest 20% on December 31 of the following year (again, provided you remain in service until December 31). Thereafter, you vest an additional 20% at the end of each calendar year of vesting service you complete. Once you become 100% vested, you are fully vested in all uniform points contributions and earnings that are made to your account, including future contributions and earnings made to your account. 14 Summary of Vesting Schedules: Hired Matching Contribution Uniform Points Contribution (100%) (20%) (40%) (60%) (80%) (100%) 3/1/94 12/31/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 9/1/94 12/31/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 Vesting Service You earn vesting service for all continuous periods of service at: The Company (including service at Encore International, Inc., Eaton Financial Corporation, United States Leasing International, Inc., and U.S. Instrument Rental before those companies were acquired by AT&T Capital Corporation), . AT&T, or at any company while it was "affiliated" with AT&T, before January 1, 1994, . AT&T Global Information Solutions Company (formerly, NCR Corporation) before it was acquired by AT&T, or . Any company while it is "affiliated" with AT&T Capital Corporation, after December 31, 1993. Two companies are "affiliated" if, under Internal Revenue Service rules, they are under common control generally, they are at least 80% commonly owned. Your vesting service includes periods beginning on the day(s) you are first entitled to payment for services and ending on the day(s) a break in service begins. Break In Service A break in service is a continuous period of at least 12 months during which you are not employed by the Company or an "affiliate" of the Company. A break will begin on the date you retire, quit, are discharged, or if earlier, the 12-month anniversary of the date on which you are otherwise first absent from service. If you weren't vested before your break and you return to work for the Company, your previous service will be counted for vesting purposes in the RSP after you complete one year of vesting service and only if the number of your consecutive one-year breaks in service was less than five years. If you are absent from work due to: Your pregnancy, . The birth of your child, or . Caring for your child immediately after birth or adoption, the 12-consecutive month period beginning on the first anniversary of the 15 maternity/paternity absence will not constitute a break in service. Event Vesting Your account automatically becomes 100% vested in the value of the Company and matching contributions and their earnings, regardless of how long you've been employed by the Company, if one of the following events occurs: You terminate employment because of "disability" as determined under the AT&T Capital Corporation Long Term Disability Plan, . You are laid off, . You reach age 65, or . You are assigned to an entity (other than a subsidiary participating in the RSP or a foreign affiliate) in which the Company has a direct or indirect equity interest. Amounts Transferred From AT&T Subsidiary Plans For members as of December 31, 1993, you are always fully vested in amounts transferred to your account from the AT&T Long Term Savings Plan for Management Members, AT&T Long Term Savings and Security Plan, AT&T Retirement Savings and Profit Sharing Plan, AT&T Global Information Solutions Company Savings Plan, Eaton Financial Corporation 401(k) Profit Sharing Plan, and the Encore International, Inc. Tax Deferred Savings Plan. For members who transfer from another AT&T company after 1993, you will continue to receive vesting credit under your prior plan for service with the Company as long as the Company and your prior employer are "affiliated." LOANS Eligibility If you are a member on the active payroll of the Company, the RSP allows you to borrow money from your contributions (plus earnings) and from matching contributions (plus earnings) that were made to the RSP. Term and Amount of Loan, Interest Rate You may only have one outstanding loan at a time one loan must be fully satisfied before another loan may be taken. You may take a loan for a term of up to 56 months. However, you may take a loan to purchase your principal residence for a term of up to 20 years. If you terminate employment for any reason, a loan will be due and payable three months following the termination date. The smallest amount you can borrow is $1,000. The largest amount you can borrow is the least of: 16 the vested portion of your account attributable to your contributions and matching contributions, . 50% of the vested portion of your entire account balance, or . $50,000 less your highest outstanding loan balance from the previous 12 months. In general, the outstanding balance of loans from any other qualified retirement plans maintained by the Company or an "affiliate" is included in determining the highest outstanding loan balance during the previous 12 months. Loans are made at an interest rate set by the Plan Administrator. The current rate is equivalent to the "prime rate" in effect on the 20th day of the month (or first business day following) prior to the month in which the loan is approved, plus 1%. The prime rate is the interest rate reported in the Wall Street Journal (Eastern Edition) in its general guide to money rates as the base rate on corporate loans at large United States money center commercial banks. The interest rate, once established for a loan, remains the same throughout the term of the loan. Security for the Loan A portion of your account balance, equal to the amount of the loan, will be considered as security for the loan. In no event will the security exceed 50% of your total vested account balance or your vested account balance attributable to your contributions and matching contributions at the time the loan is processed. The loan amount will be generated by the "liquidation" of an equal amount from your account balance. This amount will be transferred to a loan subaccount established under the RSP and the proceeds will be distributed to you. The transfer of funds equal to the loan amount, from your vested account balance to the loan subaccount, will be made in the following order: Profit sharing contributions transferred from the AT&T Retirement Savings and Profit Sharing Plan (AT&T RSPSP); . Your before-tax contributions to the RSP and before-tax contributions transferred from the AT&T Long Term Savings Plan for Management Members (AT&T LTSPME), AT&T Long Term Savings and Security Plan (AT&T LTSSP), AT&T RSPSP, and the AT&T Global Information Solutions Company Savings Plan (GIS Plan) and related earnings; . Matching contributions to the RSP and related earnings; . Matching contributions and related earnings transferred from the AT&T LTSPME, AT&T LTSSP, AT&T RSPSP, and the GIS Plan; . Your after-tax basic contributions and related earnings to the RSP and after-tax contributions transferred from the AT&T LTSPME, AT&T LTSSP, AT&T RSPSP, and the GIS Plan and related earnings; . Amounts rolled over from another qualified plan and earnings on the rolled over amounts; and . Your after-tax supplemental contributions to the RSP and after-tax contributions transferred from the AT&T LTSPME, AT&T LTSSP, AT&T RSPSP, and the GIS Plan and related earnings. 17 Repayment of Loan You repay the loan in equal monthly payments over the term of the loan through after-tax payroll deductions. Repayments will generally begin with the payroll period after the loan is processed. The loan repayment amount, which is a monthly amount, will be deducted according to your pay frequency. For example, one payment per month will be made if you are paid monthly, and two payments per month will be made if you are paid biweekly. In either case, repayments will be credited to your account monthly. Loan repayments have priority over your before-tax and after-tax basic and supplementary contributions to the Plan. If there are pay periods in which there is no pay, or pay is insufficient to collect the entire scheduled repayment amount, the missed payment(s) will be made up in subsequent pay periods; however, no more than two regular loan repayments will be collected in a given pay period, i.e., the normal loan repayment and the make-up loan repayment. Loan repayments are made according to "level amortization" over the term of the loan; each monthly repayment will be applied first as interest on the unpaid principal balance of the loan, and the remainder of the monthly repayment will be applied to reduce the unpaid principal balance. As the unpaid loan balance is reduced by the repayments, the remaining portion of your account balance is increased with repayments being invested according to your current investment direction (or last chosen investment direction, if you are not currently contributing). Loan repayments will be suspended during a formal leave of absence but not beyond 12 months of leave, at which time the loan will become due and payable in full. Payment in full will also be required at the time of retirement or other termination of employment, upon death, or upon default. A loan may be repaid, in full, at any time, without penalty. Early partial repayments are not permitted. Arrangements for early repayment must be made by telephoning the recordkeeper (see page 27). Renegotiation of Loan Loan renegotiation means that any of the loan terms have changed after the initial loan proceeds have been distributed. However, no renegotiation may extend the term of the loan beyond 56 months of the original loan date or, in the event the loan is for the purchase of your principal residence, 20 years. A loan may be renegotiated only upon: a demotion, where your basic salary or rate of pay has been reduced, or . sickness disability, where benefits have been reduced to less than full pay. . A loan renegotiation must be processed through the recordkeeper (see page 27). Once the circumstances of the renegotiation have been verified with the payroll office, a new loan package will be forwarded to you for review and signature. 18 Default A loan will be in default if any of the following circumstances occurs: The amount of repayment in arrears is equal to or in excess of the equivalent of three monthly repayments as originally scheduled on initiation of the loan. . The loan is not repaid within the five years required by law, except for loans used to purchase your principal residence when the term of the loan is longer than five years. . The loan is not repaid within three months following any termination of employment. . The loan is not repaid after 12 months during a leave of absence. . You enter into bankruptcy, insolvency, or receivership. You will be notified of the reason for the default, the amount that must be repaid to remedy the default (which is the entire outstanding balance and any accrued, but unpaid, interest), the due date and the designated location for the payment. If the loan is not paid in full, the unpaid balance will be considered a deemed distribution for tax purposes. The distribution will be reported to the Internal Revenue Service. If you are under age 591/2, the deemed distribution may result in a 10% early withdrawal penalty on the taxable portion, in addition to normal federal income tax. If the source of any part of the defaulted loan involves before-tax monies, the portion of your account balance representing the before-tax monies that is considered as security for the loan will be held in the loan sub-account until you attain age 591/2, terminate employment, or die, whichever is earlier. Upon the occurrence of any of those events, the before-tax portion of the defaulted loan will be distributed. However, because this distribution of the defaulted loan has no value, there will be no tax penalties resulting from its distribution. If you are an active member at the time of the default and the default is not remedied, your matching contributions will be suspended for 12 months and you will not be granted another loan for the same period. Applying for a Loan There is a $40 application fee each time you receive a loan. The fee is deducted from your account in addition to the proceeds of the loan. If you are interested in borrowing from your account under the RSP, please call the recordkeeper (see page 27) and speak to a Participant Service Representative (PSR). The PSR will direct you how to apply for the loan. During your call to the recordkeeper, you can model various loan scenarios by varying the dollar amount of the loan, repayment amount, interest rate, and/or total number of payments. The PSR will provide you with the current interest rate and the amount available to borrow. You will 19 then be asked to provide some of the variables required to model the loan: the loan amount, the repayment period, the interest rate, and the repayment amount. The PSR will provide you with the dollar amount of the loan, repayment amount, total number of payments, interest rate, total finance charge, and the total of all repayments over the term of the loan. Please note that if you are married and were a participant in the AT&T Global Information Solutions Company Savings Plan or Eaton Financial Corporation 401(k) Profit Sharing Plan whose account balance was transferred to the RSP, you must apply for a loan on a written application provided by the Company. Your spouse must consent in writing to the use of your account balance as security for the loan. The consent must be witnessed by a plan representative or a notary public, and must specifically acknowledge the effect of the loan on your account balance. No consent shall be required if it is established to the satisfaction of the Company that it cannot be obtained because you have no spouse or your spouse cannot be located, or under such other circumstances as may be prescribed by Internal Revenue Service regulations. WITHDRAWALS WHILE YOU ARE EMPLOYED The RSP is designed to help you save for retirement. However, you may take certain withdrawals during your working years. Withdrawals while you are employed are subject to the following restrictions: The minimum withdrawal amount is $500, . No uniform points contributions and related earnings are available for an in-service withdrawal, and . Nonvested matching contributions and related earnings are not available for an in-service withdrawal. The circumstances under which you may withdraw your after-tax contributions, before-tax contributions, and vested matching contributions are described below. First, however, you need to understand how the RSP treats your contributions and amounts transferred from other plans. Basic and Supplemental Contributions Under the RSP, your contributions are recorded in two ways: On a before-tax and after-tax basis, and . On a basic and supplemental contribution basis. The part of your contribution up to the first 6% of your pay is considered your basic contribution and is what is matched by the Company. Your contribution in excess of 6% of your pay is your supplemental contribution. If you are making both before-tax and after-tax contributions, your before-tax contributions count toward your basic contribution first. 20 For example, assume your annual pay is $92,400 and you want to contribute 12% to the RSP ($11,088) and you want to make the largest permissible before-tax contribution ($9,240 for 1994, which equals 10% of your pay). The RSP will treat your contribution as follows: The first 6% of your pay ($5,544) will be a before-tax basic contribution, . The next 4% of your pay ($3,696) will be a before-tax supplemental contribution, and . The next 2% of your pay ($1,848) will be an after-tax supplemental contribution. Transfers from Other Plans The RSP keeps track of amounts transferred from another plan and those contributions are subject to the same withdrawal restrictions as if they had been made directly to the RSP. Your before-tax contributions to the other plan will be treated as before-tax contributions (basic or supplemental depending on how much of the contribution was matched under the prior plan) to the RSP. Similarly, your after-tax contributions to the other plan will be treated as after-tax contributions (basic or supplemental) to the RSP. Withdrawals After You Reach Age 59-1/2 or Upon Becoming Disabled The funds available for withdrawal after age 591/2, or after you become disabled, and the order in which they will be taken out of the RSP are as follows: Your after-tax contributions and related earnings, . Any amounts rolled over from another qualified plan and related earnings note amounts transferred from other plans (see page 6) are not considered a rollover . Any vested matching contributions and related earnings, and . Your before-tax contributions and related earnings. Withdrawals Before You Reach Age 59-1/2 The funds available for withdrawal before age 591/2 and the order in which they will be taken out of the RSP are as follows: Your after-tax supplemental contributions and related earnings, . Your after-tax basic contributions that have been in the RSP (or prior plan) for at least 24 months and any earnings on after-tax basic contributions, . Any amounts rolled over from another qualified plan note amounts transferred from other plans (see page 6) are not considered a rollover and related earnings, . Vested matching contributions that have been in the RSP (or prior plan) for at least 24 months and earnings on vested matching contributions, and . Your after-tax basic contributions that have been in the RSP (or prior plan) for less than 24 months if these amounts are withdrawn you will be unable to contribute to the RSP (and receive matching contributions) for 12 months after the withdrawal. 21 Please note that amounts transferred from other AT&T and Company plans may be withdrawn before you reach age 591/2 subject to the following rules: 1992 vested matching contributions, after-tax basic contributions, and related earnings transferred from the AT&T Long Term Savings Plan for Management Employees (AT&T LTSPME), AT&T Long Term Savings and Security Plan (AT&T LTSSP), and AT&T Retirement Savings and Profit Sharing Plan (AT&T RSPSP) may be withdrawn however, if these transferred amounts are withdrawn before January 1, 1995, you will be unable to contribute to the RSP (and receive matching contributions) for 12 months after the withdrawal, and . 1993 vested matching contributions, after-tax basic contributions, and related earnings transferred from the AT&T LTSMPME, AT&T LTSSP, and AT&T RSPSP and all your after-tax basic contributions, vested matching contributions, and related earnings transferred from the AT&T Global Information Solutions Company Savings Plan (GIS Plan) may be withdrawn however, if these transferred amounts are withdrawn before January 1, 1996, you will be unable to contribute to the RSP (and receive matching contributions) for 12 months after the withdrawal. Hardship Withdrawals (Your Before-Tax Contributions) Because of the tax advantage of before-tax contributions, the Internal Revenue Service has strict regulations regarding withdrawals from your account. In general, if you are not yet age 591/2 you may make an in-service withdrawal from your before-tax contributions only if you have a financial hardship that creates an immediate and heavy financial need that cannot be relieved by all other readily available financial resources, including other available withdrawals and loans from the RSP. You also may be able to make a hardship withdrawal of company contributions and related earnings transferred from the Eaton Financial Corporation 401(k) Profit Sharing Plan. NOTE: As of September 1994, the Eaton Financial Corporation 401(k) Profit Sharing Plan account balances have not been transferred, but will be transferred to the RSP as soon as administratively practical. For all hardship withdrawals, the following applies: The amount requested cannot be greater than the amount necessary to meet your financial hardship, . You may not use the hardship withdrawal funds for any purpose other than the purpose for which you submitted the request, and . You cannot contribute to the RSP (and receive matching contributions) for at least 12 months after the withdrawal. . Reasons for financial hardships under the RSP are: . To make a down payment and pay closing costs for the purchase of your principal residence, . To make payments to avoid eviction from your principal residence, or foreclosure on the mortgage of your principal residence, . Extensive home repairs or renovations related to fire, natural disaster, or other unforeseeable event, . To pay heavy legal expenses, . To purchase or repair the vehicle you or your spouse use to commute to and from work (your primary transportation vehicle) the purchase or 22 To pay for tuition and other related education expenses after high school for you or your dependents for the next 12 months, . To pay unreimbursed medical expenses for you or your dependents, or . To pay funeral expenses for a dependent. You will be required to supply proof of the hardship event such as a home purchase contract, foreclosure or eviction notice, doctor or hospital bills, or tuition bill, and provide documentation as to the amount necessary to satisfy the hardship. You must also sign a statement attesting that any other sources of funds, e.g., bank accounts, have been reasonably exhausted, and that the financial need cannot be relieved except through the exercise of a hardship withdrawal. In addition, you must have taken all available withdrawals and loans from the RSP in order to receive a hardship withdrawal. The funds available for a hardship distribution are your before-tax contributions for all Plan Years and related earnings on before-tax contributions made to a prior plan before January 1, 1989. Applying for an In-Service Withdrawal If you want to apply for an in-service withdrawal, you must submit the appropriate forms which are available from your local Human Resources representative. For a before-tax hardship withdrawal, your application will be reviewed by the local Human Resources representative and if complete, forwarded to the Corporate Benefit Office for approval. You will be informed in writing of the approval or denial by the Corporate Benefit Office. PAYMENTS FROM THE RSP AFTER EMPLOYMENT ENDS When you leave the Company, you are entitled to a distribution from your account (unless you transfer to an "affiliated" company). You will need to decide how and when you want to receive payment. If the total vested value of your account is equal to or less than $3,500, the Company may elect to pay your benefit immediately. If the total vested value of your account is more than $3,500: You may begin payment of your account immediately, or . You may defer payment of your account until you reach age 701/2. While your account is deferred, it remains invested in the funds you select. In addition, you can transfer fund balances to other investment options under the RSP. See "Your Investment Decisions" on page 9. For a discussion about the RSP benefit payable if you die before payments begin, please see page 24. How to Request a Distribution To receive benefits from the RSP when you leave, you must submit the 23 appropriate forms which are available from the Corporate Benefits Office. How Your Account Is Paid Generally, all withdrawals and distributions from the RSP will be made in cash. However, you may choose to receive the value of your account invested in the AT&T Shares Fund in cash, or in full shares of AT&T common stock and cash for partial shares, or a combination of shares and cash. If the total vested value of your account is equal to or less than $3,500, you will be paid in a single lump sum. If the vested value of your account is greater than $3,500, you choose how the vested value of your account is paid. Your Contributions, Matching Contributions, Rollover Contributions, and Their Earnings You may choose to have your contributions, matching contributions, rollover contributions, and earnings on these amounts distributed to you in either: A single lump sum, . A direct rollover, where your before-tax contributions, matching contributions, rollover contributions, and related earnings are paid directly to your IRA or to another employer plan that accepts your rollover, or . A self-directed annual withdrawal of any amount in your account provided you have completed at least 10 years of service when you leave the Company. Uniform Points Contributions and Their Earnings If you are not married on the date your benefits are to begin, the Company will use the vested value of your uniform points contribution account to buy a single life annuity for you. The annuity will provide you with monthly payments for as long as you live. If you are married on the date your benefits are to begin, the Company will use the vested value of your uniform points contribution account to buy a joint and 50% survivor annuity for you. The annuity will provide you with monthly payments for as long as you live. If you die and are survived by a spouse, your spouse will receive a monthly benefit for the remainder of his or her life equal to 50% of the benefit you were receiving at the time of your death. Throughout this booklet any reference to spouse refers only to a lawful spouse. You may, however, elect to waive this form of payment. Before you receive your distribution, the Corporate Benefits Office will provide a detailed explanation of the life annuity or joint and survivor annuity option. You will be given the option of waiving the life annuity or joint and survivor annuity form of payment during the 90-day period before the annuity is to begin. 24 If you are married, your spouse must consent in writing to the waiver in the presence of a notary or a plan representative. You may revoke any prior waiver. The Corporate Benefits Office will provide you with forms to make this election. Since your spouse participates in this election, you must immediately inform the Corporate Benefits Office of any change in your marital status. If you and your spouse elect not to take a joint and survivor annuity, or if you are not married when your benefits are scheduled to begin and have elected not to take a life annuity, you may elect an alternative form of payment. This payment may be made in one of the following methods: A single lump sum, . A direct rollover, where before-tax contributions, matching contributions, rollover contributions, and related earnings are paid directly to your IRA or to another employer plan that accepts your rollover, or . A self-directed annual withdrawal of any amount in your account if you have at least 10 years of service when you leave the Company. Amounts Transferred from Other Plans In addition to the other forms of benefit available under the RSP, the following special provisions apply to amounts transferred from certain plans: Annuities (account balances transferred from the AT&T Global Information Solutions Company Savings Plan or the Eaton Financial Corporation 401(k) Profit Sharing Plan) All or part of your transferred account balance will be paid as a joint and 50% survivor annuity, unless you elect to receive another form of benefit with your spouse's consent. Other annuity forms may also be available for your transferred account balance. . Installments (account balances transferred from the AT&T Global Information Solutions Company Savings Plan or the Encore International, Inc. Tax Deferred Savings Plan) You may be able to receive all or part of your transferred account balance in a self-directed annual withdrawal even if you have less than 10 years of service. If you are eligible for the annuity or installment forms of distribution, you will receive the information necessary to make the elections when you are ready to receive your distribution. Forfeitures If you leave the Company (unless you transfer to an affiliated company) before you are fully vested, you will be entitled to receive payment of the vested portion of uniform points contributions and matching contributions, and related earnings. However, you will forfeit the nonvested portion of these contributions and earnings. If you return to work for the Company before you have five consecutive 25 one-year breaks in service (see page 14) and you repay the amount of any payment you received, the amounts that were forfeited will be restored to your account. If you do not repay the value of any payment that was made to you, or if you are rehired after you have five consecutive one-year breaks in service, the amount forfeited will not be restored. Forfeited balances will be used first to restore account balances of rehired members who have met the conditions for restoring their forfeited balances and then to decrease future Company contributions. DEATH BENEFITS BEFORE YOU BEGIN TO RECEIVE YOUR BENEFIT Before-Tax Contributions, After-Tax Contributions, Matching Contributions, Rollover Contributions, and Amounts Transferred from Certain Other Plans When you enroll, you will be asked to name a beneficiary the person or persons who will receive the benefits from your account if you die. Upon your death, your beneficiary will be entitled to a distribution of 100% of your before-tax and after-tax contributions, matching contributions, rollover contributions, amounts transferred from the AT&T Long Term Savings Plan for Management Members, AT&T Long Term Savings and Security Plan, AT&T Retirement Savings and Profit Sharing Plan, or Encore International, Inc. Tax Deferred Savings Plan, and their related earnings. Your beneficiary will receive a lump sum distribution unless he or she elects any other form of benefit to which you would have been entitled if you had terminated employment before you died. You may name anyone as your beneficiary. However, if you are married and name someone other than your spouse as your beneficiary, the law requires that your spouse consent to the designation showing his or her understanding that if you die he or she will receive no benefits. If you have not designated a beneficiary and you are married, your spouse will be considered your beneficiary. If you are not married, your account will be paid to your estate if you have not designated a beneficiary or if your beneficiary dies before you do. Uniform Points Contributions and Amounts Transferred from Certain Other Plans If you die while you are employed by the Company, you will become 100% vested in the uniform points contributions in your account and their earnings. If you die after you leave the Company, your vested percentage in these amounts will not be changed upon your death. If you are not married when you first become a participant, you will be asked to name a beneficiary. If you have a vested interest in the uniform points contributions, amounts transferred from the AT&T Global Information Solutions Company Savings Plan or Eaton Financial Corporation 401(k) Profit Sharing Plan, and their related earnings and die before you receive a distribution of these amounts, then your beneficiary will be entitled to distribution of 100% of these amounts. Your beneficiary will 26 receive a lump sum distribution unless he or she elects any other form of benefit (other than an annuity form of benefit) to which you would have been entitled if you had terminated employment before you died. If you have not designated a beneficiary or if your beneficiary dies before you, then your account will be paid to your estate. If you are married, have a vested interest in the uniform points contributions, amounts transferred from the AT&T Global Information Solutions Company Savings Plan or Eaton Financial Corporation 401(k) Profit Sharing Plan, and their related earnings allocated to your account, and you die before you receive a distribution of these amounts, then your legal spouse will be covered by a preretirement survivor annuity. The amount of the survivor annuity will be the actuarial equivalent of 100% of the vested portion of your account balance attributable to these contributions and earnings. Your spouse will be able to elect any other form of benefit under the RSP. Once you have reached age 35, you will be able, with your spouse's consent, to waive the preretirement survivor annuity and designate another form of benefit or beneficiary. Your local Human Resources Representative will provide you with forms to make this election. Since your spouse participates in this election, you must immediately inform the local Human Resources representative of any change in your marital status. Changes In Beneficiaries You may change beneficiaries at any time. To do so, you (and your spouse, when required) should complete the appropriate beneficiary designation form and return it to your local Human Resources Representative. TAX CONSIDERATIONS The following discussion of tax considerations is intended to provide guidelines only. Tax laws are complex and subject to change. Before you make decisions about receiving money from your RSP account, you should consult a qualified tax expert. Under current law, you do not pay federal income taxes on your before-tax contributions. For most participants, this advantage also applies to state income taxes. You also don't pay any federal or state income taxes on matching contributions, uniform points contributions, or any earnings as long as they stay in the RSP. You will be required to pay federal and state income taxes on these amounts when they are withdrawn or distributed. You won't owe any taxes on your after-tax contributions when they are withdrawn or distributed since you already paid taxes on those contributions when they were deposited in your account. However, you will owe taxes on earnings on your after-tax contributions when withdrawn or distributed. Shares If you receive AT&T shares in a distribution, the value of what you receive will not include any increase in value over the amount paid for the 27 shares by the RSP. The increase will be taxable to you as a capital gain when you sell the shares. 10% Excise Tax on Early Withdrawals There may be a 10% excise (penalty) tax on the taxable portion of an in-service withdrawal or distribution if you receive the withdrawal or distribution before age 591/2. This 10% excise tax is in addition to the regular income tax you must pay on the taxable portion of the withdrawal. However, the excise tax does not apply if: You are least age 591/2, . You terminate employment after reaching age 55, . You become disabled or die, . You use the distribution for medical expenses that are deductible on your tax return, or . The distribution is part of a qualified domestic relations order (see page 31). 20% Withholding If you choose to have your RSP benefit paid to you, the Plan Administrator is required to withhold 20% of the payment and send it to the IRS as income tax withholding to be credited against your taxes. You can avoid this 20% withholding if you choose a direct rollover that is, having your RSP benefits paid directly to your IRA or to another employer plan that accepts your rollover. If you choose to have the RSP benefit paid to you, you can still decide, within 60 days after you receive payment, to rollover all or a part of it to an IRA or another employer plan that accepts rollovers. You can rollover up to 100% of the taxable portion of your distribution, including an amount equal to the 20% that was withheld. If you choose to rollover 100%, you must find other money within the 60-day period to contribute to the IRA or the employer plan to replace the 20% that was withheld. On the other hand, if you rollover only the 80% that you received, you will be taxed on the 20% that was withheld. NONTRANSFERABILITY OF BENEFITS You or your beneficiary may not assign or transfer amounts under the RSP. Similarly, amounts credited to your account may not be used to pay your debts or obligations unless you first elect a withdrawal from your account. However, the RSP will comply with a court-issued "qualified domestic relations order" or a qualified tax levy. If you become divorced or separated, certain court orders, referred to as a domestic relations order, could require that part of your benefits be paid to someone else your former spouse or children, for example. AT&T Capital Corporation has established guidelines for processing domestic relations orders. As soon as you are aware of any court proceedings which may affect your benefits, contact the Corporate Benefit Office. 28 CONTACTING THE RECORDKEEPER After you've enrolled in the RSP, you may want updates on your accounts, or want to make changes to your investment decisions. You'll be able to access your account virtually 24 hours a day, seven days week including holidays. Here's how the recordkeeper's voice response system (VRS) works: To reach the VRS line, dial: . 1-800-228-401K . To access the VRS system, you'll use the same Personal Identification Number (PIN) you received when you enrolled in the RSP. . When you dial the VRS number, you'll be asked to enter your 5-digit PIN, and your social security number. . If you don't know your PIN, you'll need to speak to a Participant Service Representative (PSR); PSRs are available Monday through Friday, 8:00 a.m. to 7:00 p.m., Eastern Standard Time. . Once you're in the VRS system, you'll be able to: Change before-tax and after-tax savings percentages, Obtain current account balances, including totals by investment, Obtain current investment direction, Change investment direction of future contributions, Transfer existing assets among funds, and Receive investment information and performance history. At any time during your call, you'll be able to press "0" to speak with a PSR (providing you call during the hours listed above). If your request is received before 3:00 PM Eastern Standard Time, it will be processed that day; if the request is received after 3:00 p.m. Eastern Standard Time, it will be processed the next business day. If you have any questions on how to use the VRS or how to contact a service representative, please call your local Human Resources representative. CLAIM AND APPEAL PROCEDURES Claim Procedures Please see "Applying For An In-Service Withdrawal" on page 21 and "How To Request A Distribution" on page 22 for information on filing a claim for benefits under the RSP. If a claim for benefits is denied, either in whole or in part, you or your dependents will receive written notification from the Administrative Committee. If a claim for benefits is denied, either in whole or in part, you or your dependents will receive written notification from the Corporate Benefit Office. This written notification will include: 29 The specific reason or reasons for the denial, . Specific reference to pertinent RSP provisions on which the denial was based, . A description of any additional material or information necessary to perfect the claim and an explanation of why the material or information is necessary, and . Appropriate information about the steps to be taken if you, your dependent, or a person authorized to represent you or your dependent wishes to submit the claim for review. The Corporate Benefit Office will respond to your claim within 90 days after it receives your claim submitted according to the procedures described in this section. This 90-day period may be extended up to an additional 90 days if the Corporate Benefit Office notifies you before the original 90-day period expires. If a claim for benefits is denied, in whole or in part, or if you or your dependents believe that benefits under the RSP to which you or your dependents are entitled have not been provided, you, your dependents or authorized representative may appeal this denial or other action by the Corporate Benefit Office. Appeal Procedures Please note that the RSP requires that you pursue all your claim and appeal rights described in this section before you seek any other legal recourse regarding claims for benefits. You must appeal in writing within 60 days after you receive notification of the Corporate Benefit Office's decision or, if you didn't receive notification, within 60 days after the 90-day period has lapsed. Send your written request for review of any denied claim or other disputed matter directly to the Administrative Committee at the address listed on page 32. The person sending the request has the right to: Review pertinent plan documents. You can obtain them by following the procedures described under "Plan Documents," page 33, and . Send to the Administrative Committee a written statement of the issues and any other documents in support of the claim for benefits or other matter under review. The Administrative Committee will provide a written response to the appeal within 60 days after it is received. The 60-day period may be extended up to an additional 60 days if the Administrative Committee notifies you before the original 60-day period expires. If the Administrative Committee does not respond within 60 (or 120) days, the claimant may consider the claim denied. The Administrative Committee serves as the final review committee under the RSP and has sole and complete discretionary authority to determine conclusively for all parties, and in accordance with the terms of the documents or instruments governing the RSP, any and all questions arising from administration of the RSP and interpretation of all plan provisions, determination of all questions relating to participation of 30 eligible members and eligibility for benefits, determination of all relevant facts, the amount and type of benefits payable to any participant, spouse or beneficiary, and construction of all terms of the RSP. Notwithstanding the foregoing, AT&T Capital Corporation has sole and complete discretionary authority to determine questions relating to eligibility of participants for membership in the RSP and to amend or terminate the RSP at any time. Respective decisions by the Administrative Committee and AT&T Capital Corporation shall be conclusive and binding on all parties and not subject to further review. In any case, as a participant or dependent of a participant in the RSP, you may have further rights under the Member Retirement Income Security Act of 1974, as amended (ERISA) (see page 31). FAMILY AND MEDICAL LEAVE ACT OF 1993 The Family and Medical Leave Act of 1993 (FMLA) requires covered employers to provide up to 12 weeks of unpaid, job-protected leave to "eligible" members for certain family and medical reasons. Members are eligible if they have worked for the Company for at least 1 year and for at least 1,250 hours over the previous 12 months. Under the FMLA, an eligible member may take an unpaid leave for any of the following reasons: To care for the member's child after birth, or placement for adoption or foster care; . To care for the member's spouse, child, or parent, who has a serious health condition, or . For a serious health condition that makes the member unable to perform his or her job. The member may be required to provide advance leave notice and medical certification. Taking of leave may be denied if requirements are not met. The member ordinarily must provide 30 days' advance notice when the leave is "foreseeable." . The Company may require medical certification to support a request for leave because of a serious health condition, and may require second or third opinions (at the Company's expense) and a fitness for duty report to return to work. . During the FMLA leave, the Company must maintain the member's health coverage for up to 12 weeks of leave (up to the amount normally paid by the Company, under the same terms and conditions as apply to active members who are not on a FMLA leave). Members must continue to pay any required member contributions in order to continue coverage. . Upon return from FMLA leave, most members must be restored to their original or equivalent positions with equivalent pay, and other terms and conditions of employment. . The use of FMLA leave cannot result in the loss of any employment benefit that accrued before the start of any member's leave. 31 FMLA makes it unlawful for any employer to: . Interfere with, restrain, or deny the exercise of any right provided under the FMLA, and . Discharge or discriminate against any person for opposing any practice made unlawful by the FMLA or for involvement in any proceeding under or relating to the FMLA. FMLA does not affect any federal or state law prohibiting discrimination, or supersede any state or local law or collective bargaining agreement which provides greater family or medical leave rights. RIGHTS OF A PLAN PARTICIPANT OR BENEFICIARY UNDER ERISA As a participant in the AT&T Capital Corporation Retirement and Savings Plan, you have these rights and protections under ERISA: You can examine, without charge, all plan documents, including the contracts with claims administrators and trustee, and the copies of all documents filed by the plan with the U.S. Department of Labor, such as detailed annual reports. You may examine these documents at the Corporate Benefit Office. See the "Administrative Information" section for information about where you can examine these documents. . You can obtain copies of all plan documents and other plan information upon written request to the Corporate Benefit Office. You will be charged a reasonable fee for copies of the documents requested unless federal law requires that they be furnished without charge. See the "Administrative Information" section to learn where to direct correspondence. . You can receive a summary of the RSP's annual financial report a copy of this summary annual report is furnished to each participant once a year. In addition to creating rights for plan participants, ERISA imposes duties upon the people who are responsible for the operation of the member benefit plans. These people, called fiduciaries of the plan, have a duty to operate the plans prudently and in the interest of plan participants and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for benefits is denied in whole or in part, you will receive a written explanation of the reason for the denial. If you do not hear from the appropriate party within the designated time frame, your claim or appeal is considered denied. You have the right to have the appropriate party review and reconsider your claim. (See the "Claim and Appeal Procedures" section.) Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file suit in a federal court. In such cases, the court may require the Company to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent for reasons beyond the control of the Company. If you have a claim 32 for benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If plan fiduciaries misuse the plan's money, or if you are discriminated against for asserting your rights under ERISA, you may seek assistance from the U.S. Department of Labor, or you may file suit in federal court. The court will decide who will pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay costs and fees, for example, if it finds your claim to be frivolous. For answers to questions about the RSP, contact the Corporate Benefit Office or the recordkeeper, as appropriate. See the "Administrative Information" section for information about whom to contact. If you have any questions about this statement of your rights, or about your rights under ERISA, contact the nearest area office of the Pension and Welfare Benefits Administration, U.S. Department of Labor. ADMINISTRATIVE INFORMATION Plan Name The official plan name is the AT&T Capital Corporation Retirement and Savings Plan. Recordkeeper The recordkeeper is Merrill Lynch Group Member Services, 265 Davidson Avenue, Somerset, New Jersey 08873. 800-228-401K Trustee The trustee is Merrill Lynch Trust Company, 300 Davidson Avenue, Somerset, New Jersey 08873. Plan Administrator The Plan Administrator for the AT&T Capital Corporation Retirement and Savings Plan is AT&T Capital Corporation. An Administrative Committee appointed by the Compensation Committee of AT&T Capital Corporation's Board of Directors administers the RSP on AT&T Capital Corporation's behalf. Administrative Committee The Administrative Committee is located at AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. The current members of the Administrative Committee are the Corporate Resource Officer and the General Counsel of AT&T Capital Corporation. 33 Legal Service Direct process of legal service to AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962 (Attn: General Counsel). Corporate Benefit Office AT&T Capital Corporation Attn: Corporate Benefit Office 44 Whippany Road Morristown, New Jersey 07962 201-397-3000 Type of Plan, Plan Records, and Plan Year The AT&T Capital Corporation Retirement and Savings Plan is considered a pension plan and an individual account plan under the Member Retirement Income Security Act of 1974, as amended (ERISA). As an individual account plan, contributions to and benefits under the RSP are not guaranteed by the Pension Benefit Guaranty Corporation. The RSP and all records are kept on a calendar-year basis beginning January 1 and ending December 31. Employer and Plan Identification Numbers AT&T Capital Corporation and the RSP are identified by the following numbers under Internal Revenue Service rules: Description Number Employer Identification 22-3211453 Number (assigned by the IRS) Plan Identification 001 Number (assigned by AT&T Capital Corporation) Plan Documents The information contained in this summary plan description provides only the highlights of the AT&T Capital Corporation Retirement and Savings Plan. It does not attempt to cover all details. RSP details are contained in the official plan documents. These documents legally govern the operation of the RSP. You can review the plan documents, as well as the annual report of the RSP as filed with the federal government, at the Corporate Benefit Office during normal working hours. You must submit your request to review documents in writing and allow 10 days for your request to be processed. If you submit a written request to the Corporate Benefit Office, you can obtain copies of these documents within 30 days. You will be charged a reasonable fee for the copies unless federal law requires that the documents be furnished without charge. Submit all requests in writing to the Corporate Benefit Office. 34 Payment of Benefits and Plan Funding Your contributions, matching contributions, and uniform points contributions to the RSP go into a trust fund managed under the terms of a trust agreement by the RSP's trustee: Merrill Lynch. The Trustee pays all benefits under the RSP from the available funds in the trust. Funds are held in the trust exclusively for participants in the RSP and their beneficiaries. Plan Expenses Certain expenses incurred in administering the RSP are paid from the trust fund, including some recordkeeping fees, confirmation fees, asset transfer expenses, proxy fees, check processing fees, enrollment and communication expenses, and similar expenses. Expenses that relate to a particular participant's account such as loan application fees are allocated to that account. All other expenses are allocated among the accounts of all the participants If you have any questions about the allocation of these expenses, please contact the recordkeeper or the Corporate Benefits Office. Plan Continuation The Compensation Committee of the Board of Directors of AT&T Capital Corporation (or its delegate) reserves the right to amend, suspend, or terminate the RSP at any time. If the RSP is terminated, if there is a partial termination affecting you, or if the Company permanently ceases contributions to the RSP, you will immediately be 100% vested in the value of all uniform points contributions as of the date of termination. AT&T Capital Corporation does not guarantee the continuation of any benefits during employment, nor does it guarantee any specific level of benefits. Also, benefits are provided at AT&T Capital Corporation's discretion and do not create a contract of employment. AT&T Capital Corporation EXCESS BENEFIT PLAN Purpose of the Excess Benefit Plan The Internal Revenue Code imposes certain limits on the amount of contributions that may be made on your behalf to the AT&T Capital Corporation Retirement and Savings Plan. The AT&T Capital Corporation Excess Benefit Plan is designed to allow you to save as much as possible for your retirement by allowing AT&T Capital Corporation and its subsidiaries to credit contributions in excess of certain Internal Revenue Code limits to this plan on your behalf. This summary refers to AT&T Capital Corporation and its subsidiaries collectively as the "Company." The Excess Benefit Plan is considered an "unfunded" plan under the Member Retirement Income Security Act of 1974, as amended (see "Payment of Benefits and Plan Funding" on page 41). One advantage of the "unfunded" nature of the Excess Benefit Plan is that you will not have to pay taxes on 35 amounts credited to your account until those accounts are paid to you. Internal Revenue Code Limits The Internal Revenue Code limits the amount of your contributions, matching contributions, and uniform points contributions that may be made to the Retirement and Savings Plan on your behalf. In general, these contributions may not exceed the lesser of $30,000 or 25% of your taxable pay in any calendar year. Participation If the total contributions for a year to the Retirement and Savings Plan would exceed the $30,000 or 25% of pay (pay still includes only compensation up to the 401(a)(17) limits this limit is $150,000 in 1994) Internal Revenue Code limit, you will automatically become a participant in this Excess Benefit Plan. You won't have to do anything to enroll. The Corporate Benefit Office will notify you if you become a participant. CONTRIBUTIONS TO YOUR ACCOUNT When you become a participant in the Excess Benefit Plan, the Company will establish an account on your behalf. No contributions to the Retirement and Savings Plan will be made in excess of the $30,000 or 25% of pay Internal Revenue Code limit. However, in any year in which the total contributions on your behalf would exceed either of these limits, the Company will credit to your account under this Excess Benefit Plan uniform points contributions and matching contributions in excess of the Internal Revenue Code ($30,000/25% of pay) limit. Pay still includes only compensation up to the Internal Revenue Code limit of $150,000 in 1994. If the Internal Revenue Code limit is still exceeded, then your after-tax and before-tax contributions in excess of the limit will be refunded to you. Example: Let's assume the following: Your pay is $25,000 before reduction for before-tax contributions, . You make the maximum before-tax contribution . permitted under the Retirement and Savings Plan of 12% (i.e., $3,000), . A matching contribution of 4% is allocated to your account under the Retirement and Savings Plan, and . An uniform points contribution of 9% of pay before reduction for before-tax contributions would be allocated to your account under the Retirement and Savings Plan if there were no Internal Revenue Code limits. The total contributions under the Retirement and Savings Plan are calculated as follows: $25,000 x 9% (uniform points contribution) = $2,250 $25,000 x 12% (your before-tax contribution) = $3,000 $25,000 x 4% (matching contribution) = $1,000 $6,250 Even though these percentages (9% + 12% + 4%) add up to only 25%, the Internal Revenue Code limit would still affect you. This is because in computing the Internal Revenue Code limit, your before-tax contributions to 36 the Retirement and Savings Plan (and to the Company's flexible benefits program) are deducted from your pay first. Therefore, in applying the limitation, your "pay" would be only: $ 25,000 - 3,000 (before-tax contributions) $ 22,000 The Internal Revenue Code limitation would then equal $5,500 ($22,000 x 25%). Because total contributions of $6,250 exceed the Internal Revenue Code limitation of $5,500, the excess amount ($750) cannot be contributed to the Retirement and Savings Plan. However, $750 will be credited to your Excess Benefit Plan account. EARNINGS ON YOUR ACCOUNT Excess Plan Investments All amounts credited under the Excess Benefit Plan for an eligible active member will be credited to an account on the Company's or recordkeeper's books. The amounts in your account will be deemed to be periodically invested and reinvested in designated investment fund shares identified by the Company. . Your account will be adjusted to reflect gains, losses, and earnings as though the amounts were in fact invested and reinvested in investment fund shares. At present it is not clear whether allowing members to direct their own investments is practicable or may jeopardize the plan's "unfunded" status. Consequently your investment directions will not be applied to your account at this time. The Administrative Committee will instead credit your account with interest at a rate no less than the rate of return on investments in the Merrill Lynch Government Fund, or a similar investment option. VESTING You vest in contributions and earnings credited to your account in the same manner as under the Retirement and Savings Plan. (See pages 12 through 14 for information about vesting.) NONTRANSFERABILITY OF BENEFITS You or your beneficiary may not assign or transfer amounts under the Excess Benefit Plan. Similarly, amounts credited to your account may not be used to pay your debts or obligations. 37 PAYMENT OF YOUR EXCESS BENEFIT PLAN BENEFIT The vested portion of your Excess Benefit Plan account will be paid to you in 60 monthly installments beginning as of the later of the first day of the month after: You reach age 65, or . You terminate employment with the Company (or any affiliate). However, you may ask the Company to pay your account at any time after you terminate employment or in another form. The Company, in its sole discretion, may elect to: Pay your benefit to you in any form available under the Retirement and Savings Plan that it considers appropriate, and . Begin to pay your benefit as of the first day of any month after termination of your employment it you terminate before your 65th birthday. If you die before you have received your vested Excess Benefit Plan account, the vested balance will be paid in a lump sum to your spouse or, if not married, your beneficiary under the AT&T Capital Corporation Retirement and Savings Plan. Forfeitures If you leave the Company (unless you transfer to an affiliated company) before you are fully vested, you will forfeit the nonvested portion of your Excess Benefit Plan account when you have a five-year break in service. CLAIM AND APPEAL PROCEDURES Claim Procedures If you are vested when you leave the Company, your Excess Benefit Plan benefit will be paid automatically upon termination of your employment from the Company or your 65th birthday. If you believe you are eligible and you don't receive an Excess Benefit Plan benefit, you have a right to file a written application for benefits. If your claim for benefits is denied, either in whole or in part, you will receive written notification from the Corporate Benefit Office. This written notification will include: The specific reason or reasons for the denial, . Specific reference to pertinent Excess Benefit Plan provisions on which the denial was based, . A description of any additional material or information necessary to perfect the claim and an explanation of why the material or information is necessary, and . Appropriate information about the steps to be taken if you or a person authorized to represent you wishes to submit the claim for review. 38 after receiving your claim submitted according to the procedures described in this section. This 90-day period may be extended up to an additional 90 days if the Corporate Benefit Office notifies you before the original 90-day period expires. If a claim for benefits is denied, in whole or in part, or if you believe that benefits under the Excess Benefit Plan to which you are entitled have not been provided, you or your authorized representative may appeal this denial or other action by the Corporate Benefit Office. Appeal Procedures Please note that the Excess Benefit Plan requires that you pursue all your claim and appeal rights described in this section before you seek any other legal recourse regarding claims for benefits. You must appeal in writing within 60 days after you receive notification of the Corporate Benefit Office's decision or, if you didn't receive notification, within 60 days after the 90-day period has lapsed. Send your written request for review of any denied claim or other disputed matter directly to the Administrative Committee at the address listed on page 40. The person sending the request has the right to: Review pertinent plan documents. You can obtain them by following the procedures described under "Plan Documents," page 41, and . Send to the Administrative Committee a written statement of the issues and any other documents in support of the claim for benefits or other matter under review. The Administrative Committee will provide a written response to the appeal within 60 days after it is received. The 60-day period may be extended up to an additional 60 days if the Administrative Committee notifies you before the original 60-day period expires. If the Administrative Committee does not respond within 60 (or 120) days, you may consider the claim denied. The Administrative Committee serves as the final review committee under the Excess Benefit Plan and has sole and complete discretionary authority to determine conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Excess Benefit Plan, any and all questions arising from administration of the Excess Benefit Plan and interpretation of all plan provisions, determination of all questions relating to participation of eligible members and eligibility for benefits, determination of all relevant facts, the amount and type of benefits payable to any participant, and construction of all terms of the Excess Benefit Plan. Notwithstanding the foregoing, AT&T Capital Corporation has sole and complete discretionary authority to determine questions relating to eligibility for participation in the Excess Benefit Plan and to amend or terminate the Excess Benefit Plan at any time. Respective decisions by the Administrative Committee and AT&T Capital Corporation shall be conclusive and binding on all parties and not subject to further review. 39 ADMINISTRATIVE INFORMATION Plan Name The official plan name is the AT&T Capital Corporation Excess Benefit Plan. Recordkeeper The recordkeeper is Merrill Lynch Group Member Services, 265 Davidson Avenue, Somerset, New Jersey 08873. Trustee The trustee is Merrill Lynch Trust Company, 300 Davidson Avenue, Somerset, New Jersey 08873. Plan Administrator The Plan Administrator for the AT&T Capital Corporation Excess Benefit Plan is AT&T Capital Corporation. An Administrative Committee appointed by the Compensation Committee of the Board of Directors of AT&T Capital Corporation administers the Excess Benefit Plan on AT&T Capital Corporation's behalf. Administrative Committee The Administrative Committee is located at AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. Currently the Administrative Committee members are the Corporate Resource Officer and the General Counsel of AT&T Capital Corporation. Legal Service Direct process of legal service to AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962 (Attn: General Counsel). Corporate Benefit Office The Corporate Benefit Office AT&T Capital Corporation Attn: Corporate Benefit Office 44 Whippany Road Morristown, NJ 07962 201-397-3000 Type of Plan, Plan Records, and Plan Year The AT&T Capital Corporation Excess Benefit Plan is exempt from most of the requirements under the Member Retirement Income Security Act of 1974, as amended ("ERISA"). It is a nonqual-ified pension plan under the Internal Revenue Code. Benefits under the Excess Benefit Plan are not guaranteed by the Pension Benefit Guarantee Corporation The Excess Benefit Plan and all records are kept on a calendar-year basis beginning January 1 and ending December 31. 40 Employer and Plan Identification Numbers AT&T Capital Corporation and the Excess Benefit Plan are identified by the following numbers under Internal Revenue Service rules: Description Number Employer Identification 22-3211453 Number (assigned by the IRS) Plan Identification Number 002 (assigned by AT&T Capital Corporation) Plan Documents The information contained in this summary plan description provides only the highlights of the AT&T Capital Corporation Excess Benefit Plan. It does not attempt to cover all details. Excess Benefit Plan details are contained in the official plan documents. These documents legally govern the operation of the Excess Benefit Plan. You can review the Excess Benefit Plan documents at the Corporate Benefit Office during normal working hours. You must submit your request to review in writing and allow 10 days for your request to be processed. If you submit a written request to the Corporate Benefits Office, you can obtain copies of these documents within 30 days. You will be charged a reasonable fee for the copies unless federal law requires that the documents be furnished without charge. Submit all requests in writing to the Corporate Benefit Office. Payment of Benefits and Plan Funding The Excess Benefit Plan is considered an "unfunded" deferred compensation plan under ERISA and the Internal Revenue Code. However, AT&T Capital Corporation has established a trust to which it intends to make regular contributions to fund its obligations under the Excess Benefit Plan. Funds are held in the trust to pay benefits for Excess Benefit Plan participants. However, if the Company becomes insolvent, the trust may be used to pay benefits to the general creditors of the Company. Excess Benefit Plan benefits will be paid primarily from this trust. If there are insufficient assets in the trust, Excess Benefit Plan benefits will then be paid from the general assets of the Company. Plan Continuation The Compensation Committee of the Board of Directors of AT&T Capital Corporation (or its delegate) reserves the right to modify, suspend, change, or terminate the Excess Benefit Plan at any time. AT&T Capital Corporation does not guarantee the continuation of any benefits during employment, nor does it guarantee any specific level of benefits. Also, benefits are provided at AT&T Capital Corporation's discretion and do not create a contract of employment. EX-10 6 1 EXHIBIT 10(w) Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION 1995 MEMBER ANNUAL INCENTIVE PLAN February 23, 1995 SECTION 1: PURPOSE The purpose of the Plan is to provide incentive payments for certain eligible employees of the Company and certain of its subsidiaries and to: i. support the Company's belief that its success is built through sharing ideas, people, and resources; ii. build teamwork and collaboration; iii. provide distinctions in rewards based on performance; and iv. reinforce the importance of the Company's performance. SECTION 2: DEFINITIONS The following terms, as used herein, will have the meaning specified below: a. "Adjusted Target Pool" means a Target Pool adjusted pursuant to Section 3(b). b. "Award" means a cash payment made pursuant to the Plan (whether or not deferred pursuant to any deferred compensation plan of the Company). c. "Board" means the Board of Directors of the Company. d. "Cause" means (i) a conviction of a Participant of a felony (whether or not such conviction is subject to appeal), (ii) a determination by the Board or the Committee that the Participant has defrauded the Company or any of its subsidiaries, (iii) a determination by the Board or the Committee that a Participant has misappropriated any property or business of the Company or any of its subsidiaries with a value in excess of $100 or intentionally damaged any property or business of the Company or any of its subsidiaries, or (iv) a determination by the Board or the Committee that a Participant has engaged in willful and serious misconduct. e. "Change in Control" means any of the following: i. an acquisition (other than in a Non-control Transaction, as defined in clause (iii) below) of any shares of capital stock or other securities of the Company generally entitled to vote in elections for directors ("Voting Securities") by a "Person" or "Group" (as such terms are used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Company, any 2 subsidiary of the Company or any employee benefit plan (or a trust forming a part thereof) maintained by the Company or any subsidiary of the Company, as a result of which such person or group becomes the "Beneficial Owner" (as such term is used in Section 13 of the Exchange Act) of Voting Securities representing fifteen percent (15%) or more of the combined voting power of all Voting Securities then outstanding; provided that no such acquisition shall be deemed to give rise to a Change in Control so long as, after giving effect to such acquisition, AT&T Corp. ("AT&T") remains the Beneficial Owner of Voting Securities representing a greater percentage of the combined voting power of all Voting Securities then outstanding than is represented by the Voting Securities beneficially owned by such Person or Group; provided, further, that an acquisition of Voting Securities directly from the Company or any subsidiary of the Company shall not be deemed to give rise to a Change in Control if, immediately prior to such acquisition, no Person or Group is directly or indirectly in "Control" of the Company (as such term is defined in Rule 405 under the Securities Act of 1933, as amended); ii. the individuals who, as of the effective date of the Plan, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least two-thirds of the Board; provided, however, that if the election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for the purposes of this definition, be considered a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of any person or group other than the Board (a "Proxy Contest"), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or iii. The approval by the requisite vote of the Company's stockholders of: A. a merger, consolidation or reorganization involving the Company, unless (1) the stockholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly immediately following such merger, consolidation or reorganization, at least sixty percent (60%) of the combined voting power of the outstanding voting securities of the corporation surviving such merger, consolidation, or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities of the Company immediately prior to such merger, consolidation or reorganization, (2) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation and (3) no Person (other than the Company, any subsidiary of the Company, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any subsidiary thereof, or any Person who, immediately prior to such merger, consolidation or reorganization had beneficial ownership of fifteen percent (15%) or more of the then outstanding Voting Securities of the Company) has beneficial ownership of fifteen percent (15%) or more of 3 the combined voting power of the Surviving Corporation's then outstanding voting securities (a transaction meeting the criteria set forth in the foregoing clauses (1) through (3) being sometimes referred to herein as a "Non-control Transaction"); B. a complete liquidation or dissolution of the Company; or C. an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a subsidiary of the Company). Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred solely because any Person or Group becomes the Beneficial Owner of more than the permitted amount of the outstanding Voting Securities of the Company as a result of an acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of Voting Securities owned by such Person or Group, provided that if (i) a Change in Control would have been deemed to have occurred but for the operation of this sentence as a result of such acquisition of Voting Securities by the Company and (ii) such Person or Group thereupon or thereafter becomes the Beneficial Owner of any additional Voting Securities resulting in an increase in the percentage of the then outstanding Voting Securities beneficially owned by such Person or Group (and which percentage is in excess of fifteen percent (15%)), then a Change in Control shall be deemed to have occurred at the time of such acquisition of beneficial ownership of such additional Voting Securities by such Person or Group. f. "Committee" means the Compensation Committee of the Board. g. "Company" means AT&T Capital Corporation, a Delaware corporation, and its successors. h. "Corporate Leadership Team" or "CLT" means the Corporate Leadership Team of the Company or any successor strategic committee of the Company. i. "Corporate Support Leader" or "CSL" means the head, regardless of title, of the Corporate Resources, Finance and Risk Management CSUs (other than on a designated interim basis) or such other individuals or positions designated from time to time by the CLT. j. "Corporate Support Unit" or "CSU" means a unit of the Company involved in supporting the Strategic Business Units as designated by the CLT from time to time. k. "Disability" means "disability" within the meaning of the Company's long-term disability plan, as in effect at the time. l. "IPO Date" means August 4, 1993. m. "Member" means a non-probationary, active regular full-time or regular part-time employee of the Company or any subsidiary of the Company. 4 n. "Net Income" means the consolidated net after-tax income of the Company, after adjustment to omit the effects of any extraordinary items and the cumulative effects of changes in accounting principles as shown in the Company's audited consolidated statement of income. o. "Participant" means a Member who satisfies the eligibility requirements in Section 3(a) and who has been selected by the CLT to participate in the Plan. p. "Performance Criteria" means the criteria to measure performance for a Plan Year from among one or more of the following: i. Net Income; ii. Return to Equity; iii. any other criteria related to Company performance, CSU or SBU performance, individual performance or any other category of performance as designated by the CLT from time to time. q. "Performance Goal" means the level of performance as established by the CLT with respect to a Performance Criterion. r. "Plan" means the AT&T Capital Corporation 1995 Annual Incentive Plan. s. "Plan Year" means the calendar year. t. "Discretionary Fund" means the fund established pursuant to Section 3(f). u. "Qualifying Termination" of the employment of a Participant with the Company and any of its subsidiaries in connection with a Change in Control means any of the following: i. a termination of such employment by the Company and such subsidiaries within two (2) years after such Change in Control, other than a termination for Cause or in a case of Retirement, death, or Disability; ii. A termination of such employment by such Participant within two (2) years after a Change in Control for one or more of the following reasons: A. The assignment to such Participant of any duties inconsistent, in a way significantly adverse to such Participant, with such Participant's positions, duties, responsibilities and status with the Company and such subsidiaries immediately prior to such Change in Control, or a significant reduction in the duties and responsibilities held by such Participant immediately prior to such Change in Control; a change in such Participant's reporting responsibilities, title or offices as in effect immediately prior to such Change in Control that is significantly adverse to the Participant; or any removal of such Participant from or any failure to re-elect such Participant to any position with the Company or any such subsidiary that such Participant held immediately prior to such Change in 5 Control except in connection with such Participant's promotion or a termination of employment for Cause or in a case of Retirement, death, or Disability; or B. a reduction by the Company or such subsidiaries in such Participant's base annual salary as in effect immediately prior to such Change in Control; the failure by the Company and such subsidiaries to continue in effect any employee benefit plan or compensation plan in which such Participant was participating immediately prior to such Change in Control unless such Participant is permitted to participate in other plans providing substantially comparable benefits to such Participant; or the taking of any action by the Company or such subsidiaries that would adversely affect such Participant's participation in or materially reduce such Participant's benefits under any such plan; or C. the Company or such subsidiaries requiring such Participant to be based anywhere other than such Participant's present work location or a location within twenty-five (25) miles from such present location; or the Company requiring such Participant to travel on company business to an extent substantially more burdensome than such Participant's travel obligations immediately prior to such Change in Control; provided that, in the case of any such termination of employment by the Participant, such termination shall not be deemed to be a Qualifying Termination unless such termination occurs within ninety (90) days after the occurrence of the events constituting the reason for such termination; or iii. a termination of such employment by the Company and such subsidiaries within one (1) year prior to a Change in Control, other than a termination for Cause or in a case of Retirement, death, or Disability, if the Participant can demonstrate that such termination (A) was at the request of a third party with which AT&T or its subsidiaries (other than the Company and the subsidiaries of the Company to the extent that they are not directly or indirectly controlled by AT&T at the time) had entered into negotiations or an agreement with regard to such Change in Control or (B) otherwise occurred in connection with, or in anticipation of, such Change in Control, provided that, in either such case, such Change in Control actually occurs. v. "Retirement" means the voluntary retirement of a Member pursuant to a retirement plan of the Company or any subsidiary of the Company. o. "Return to Equity" means Net Income divided by the average of the Company's consolidated shareholder equity, as of the end of each month in the twelve-month period ending on December 31 of a Plan Year. w. "Strategic Business Unit" or "SBU" means a strategic business unit of the Company as designated by the CLT from time to time. x. "SBU Head" means the head, regardless of title, of an SBU (other than on a designated interim basis). 6 y. "Target Award" means, with respect to a Participant for any Plan Year, the base salary earned by such Participant for such Plan Year multiplied by the percentage established for such Participant for purposes of calculating his Target Award, provided that such percentage may not exceed 43% without the Committee's approval. z. "Target Pool" means a Target Pool established pursuant to Section 3(b). aa. "Unit Head Fund" means the fund established pursuant to Section 3(g). SECTION 3: AWARDS a. Eligibility. All Members, other than Members who are part of the Corporate Leadership Team or who participate in an incentive plan designated by the CLT as a substitute for this Plan, will be eligible to participate in the Plan. If the effective date of a Participant's participation in the Plan is after January 1 but prior to October 1 of a Plan Year, the Participant will be entitled to receive only that portion of the Award that he would have otherwise been entitled to receive for such Plan Year determined by multiplying the amount of such Award by a fraction, the numerator of which is the number of days of the Participant's active service during such Plan Year and the denominator of which is 365. No Participant whose effective date of participation in the Plan is after September 30 of a Plan Year may receive an Award for such Plan Year. b. Target Pools and Adjusted Target Pools. Each Plan Year, the CLT will establish a Target Pool with respect to the CSUs and each SBU. Each such Target Pool will be adjusted by the CLT based on the extent to which applicable Performance Goals have been attained (an "Adjusted Target Pool"). Except to the extent paid from the Discretionary Fund or the Unit Head Fund, Awards paid to Members of a CSU or SBU may not, in the aggregate, exceed the Adjusted Target Pool for the CSUs or applicable SBU. c. Performance Criteria and Performance Goals. Each Plan Year, Performance Criteria and Performance Goals will be established by, or in accordance with guidelines established by, the CLT. The CLT shall also determine the extent to which such Performance Criteria shall be weighted in determining Awards. Performance Criteria, Performance Goals and weightings may vary from Participant to Participant and SBU to SBU, between the CSUs and one or more SBUs and from Plan Year to Plan Year. The CLT may in its sole discretion, during or after any Plan Year, increase or decrease the amount of any Performance Goal and/or the weighting of any Performance Criteria for such Plan Year to reflect (i) extraordinary, unusual or non-recurring items or events or (ii) material differences between any significant assumptions used by the CLT in establishing a Performance Goal and/or the weighting of a Performance Criteria and actual events or conditions experienced during such Plan Year. d. Target Awards. Target Awards will be established for each Participant by, or in accordance with guidelines established by, the CLT. 7 Schedules will also be established by, or in accordance with guidelines established by, the CLT setting forth the percentage of the Target Award for each group of Participants payable at specified levels of performance, based on the Performance Goal for each Performance Criteria and the weighting established for such Performance Criteria. e. Determination of Awards. Subject to Section 3(b), (i) actual Awards payable to Participants will be based upon the extent to which Performance Goals have been achieved, and (ii) all such determinations regarding the achievement of Performance Goals and the calculation of Awards will be made and/or approved by the CLT. f. Discretionary Fund. A Discretionary Fund will be established for each Plan Year. Such fund will be in addition to, and will be equal to ten percent (10%) of, the aggregate of the Adjusted Target Pools for such Plan Year. Awards may be made from the Discretionary Fund in the sole and absolute discretion of the CLT. Such Awards may be made without regard to the extent to which any Performance Goals have been met. g. Unit Head Fund. A Unit Head Fund will be established with respect to the CSUs and each SBU for each Plan Year. Such fund will be in addition to, and will be equal to ten percent (10%) of, the Adjusted Target Pool applicable to the CSUs or such SBU, as the case may be, for such Plan Year. Subject to any rules and guidelines established with respect thereto, Awards may be made from the Unit Head Fund in the sole and absolute discretion of the applicable CSL or SBU Head. Such Awards may be made without regard to whether any Performance Criteria have been met. h. Payment of Awards. Awards will be paid in a lump sum cash payment as soon as practicable after the close of the Plan Year to which such Awards relate but in no event later than March 15 of the Plan Year immediately following such Plan Year. i. If a Participant ceases to be employed by the Company and its subsidiaries prior to the Company's last regular business day in any Plan Year, including without limitation by reason of transferring to AT&T or a subsidiary thereof other than the Company and its subsidiaries (if such transfer takes place more than three (3) years after the IPO Date), then the Participant's participation in the Plan shall terminate forthwith and such Participant will not be eligible to receive an Award for such Plan Year. ii. Notwithstanding clause (i) above, if prior to December 31st of any Plan Year (x) a Participant who has completed during such Plan Year at least three (3) months full-time or regular part-time active service ceases to be employed by the Company and any of its subsidiaries by reason of death, Disability or Retirement or (y) a Participant transfers to an employment position with the Company or a subsidiary of the Company in which he is no longer eligible to participate in the Plan or (z) a Participant transfers to AT&T or a subsidiary thereof other than the Company and its subsidiaries within three (3) years after the IPO Date, the Participant will receive that portion, and only that portion, of the Award that he would otherwise have been entitled to receive for such Plan Year determined by multiplying the amount of such Award by a fraction, the 8 numerator of which is the number of days of the Participant's active service during such Plan Year through the date of his termination or transfer and the denominator of which is 365. In the event a Participant ceases to be employed by the Company and its subsidiaries by reason of death, the CLT may elect to pay such a pro rata Award based on an estimate of performance for such Plan Year. iii. In the event a Participant transfers from a CSU or SBU to another CSU or SBU during a Plan Year, the Participant's Award, if any, with respect to such Plan Year will be determined based on his relative participation in each such unit determined by the application of fractions, the numerators of which are the numbers of days of the Participant's active service in each such unit and the denominators of which are 365; provided, however, that such numerators will only include active service in units with respect to which the Participant was eligible to participate in the Plan. i. Acceleration Upon Change in Control. In the event of a Qualifying Termination of the employment of any Member with the Company prior to the end of any Plan Year in connection with a Change in Control, such Member shall become irrevocably vested with the right to receive an Award for such Plan Year equal to the higher of (i) 110% of such Member's Target Award for such Plan Year and (ii) such Member's Award for the Plan Year immediately preceding such Change in Control. Similarly, in the event of such a Qualifying Termination between the end of any Plan Year and March 15 of the immediately following Plan Year, such Member shall become irrevocably vested with the right to receive an Award with respect to such Plan Year equal to the highest of (i) the Award for such Plan Year, to the extent already determined, (ii) 110% of such Member's Target Award for such Plan Year, and (iii) such Member's Award for the Plan Year immediately preceding such Change in Control. The Company shall pay the Member such amount no later than March 15 of the Plan Year immediately following the Plan Year to which such Award relates. SECTION 4: ADMINISTRATION a. Authority. Except as otherwise provided in the Plan, the Plan will be administered by the CLT, who will have full and complete authority, in its sole and absolute discretion, (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret, and implement the Plan and any related document, (iii) to prescribe, amend, and rescind rules and guidelines relating to the Plan, (iv) to make all determinations necessary or advisable in administering the Plan, and (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan. b. Determinations. The actions and determinations of the CLT, the CSL or an SBU Head, as the case may be, will, within the scope of their respective authority on all matters relating to the Plan and any Awards be final and conclusive. Such determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or who are eligible to receive, Awards, whether or not such persons are similarly situated. 9 c. Expenses. The Company will pay all costs and expenses of administering the Plan, including but not limited to the payment of expert fees. d. Delegation. The CLT may delegate the authority to execute and deliver such instruments and documents, to do all such acts and things, and to take all such other steps deemed necessary, advisable or convenient for the effective administration of the Plan in accordance with its terms and purpose. SECTION 5: MISCELLANEOUS a. Award Confers No Right to Employment. No Member or other person shall have any right or claim to any Award under the Plan except in accordance with the provisions of the Plan. The Plan shall not be construed as creating any contract of employment or otherwise conferring upon any Member any legal right to continuation of employment, nor as limiting or qualifying the right of the Company and its subsidiaries to discharge any Member without regard to the effect that such discharge might have upon such Member's rights under the Plan. b. Unfunded Plan. Nothing in this Plan shall be interpreted as requiring the Company or any subsidiary of the Company to fund or otherwise set aside or earmark any assets for the purposes of satisfying any obligations under this Plan. The Company's obligations hereunder shall constitute general unsecured obligations, payable out of the Company's general assets, and no Member shall have any right to any specific assets of the Company or any subsidiary of the Company. c. Withholding Taxes. The Company will deduct any withholding taxes applicable to the payment of an Award hereunder (i) from the amount to be paid under such Award or (ii) from any other amount then or thereafter payable by the Company or any subsidiary of the Company to the relevant Member. d. Successors. Awards granted hereunder shall be binding upon any successor or successors to the Company or any relevant subsidiary of the Company. e. Non-Assignability of Rights. No interest, right or claim in or to any Award payable hereunder shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution, or levy of any kind, and the Company will not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute or anticipate the same, except to the extent required by law. f. Facility of Payments. In the event that the CLT or its designee determines that any Member to whom an Award is payable under the Plan is unable to care for his affairs because of illness or accident, or otherwise, the CLT or its designee may direct that any payment due shall be paid to the duly appointed legal representative of such person, or if there 10 be no duly appointed legal representative, to the spouse, a child, a parent or other blood relative of the person, or to any person deemed by the CLT or its designees to have incurred expense for the benefit of such person, and any such payments so made shall be a complete discharge of the liabilities of the Company therefor. g. Applicability of Employee Compensation Adjustment Plan. The rights of a Participant under any Award granted to such Participant under the Plan shall be subject to the provisions of the AT&T Capital Corporation Employee Compensation Adjustment Plan, as in effect from time to time, to the extent applicable to such Participant. h. Governing Law. This Plan and the Awards granted hereunder shall be governed in accordance with the laws of the State of New Jersey without regard to the conflicts of law rules thereof. i. Number and Gender. Where from the context it appears appropriate, each term used in this Plan in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine, and neuter. j. Captions. Captions of this Plan are inserted for convenience of reference only, and the Plan is not to be construed by interpretation thereof. k. Amendments. The Plan may be amended or terminated by the Board or the Committee in any respect except that (i) no amendment may be made which would adversely affect the rights of a Participant under an Award granted and outstanding prior to the date such amendment is adopted and (ii) following any Change in Control, no such amendment may be made which would adversely affect the rights of Participants in the event of a Qualifying Termination of their employment (including, without limitation, the definition of what constitutes a "Qualifying Termination"). l. Effective Date. The Plan shall be effective January 1, 1995. EX-10 7 1 EXHIBIT 10(y) Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION EXECUTIVE BENEFIT PLAN This is a summary of the benefits available to eligible members under the AT&T Capital Corporation Executive Benefit Plan. More detailed information is provided in the official plan documents. If there is a conflict between statements in this summary and the terms of the plan documents, the plan documents will control and govern the operation of the Executive Benefit Plan. AT&T Capital Corporation reserves the right to modify, suspend, change, or terminate the Executive Benefit Plan at any time. Questions about your benefits should be addressed to the Corporate Benefit Office. Because of the many detailed provisions of the Executive Benefit Plan, no one other than the Corporate Benefit Office is authorized to advise you about your benefits. AT&T Capital Corporation cannot be bound by statements made by unauthorized personnel. PURPOSE The AT&T Capital Corporation Executive Benefit Plan is designed to provide deferred compensation benefits to certain members of the Corporate Leadership Forum of AT&T Capital Corporation by: Providing an additional source of income at retirement based on a percentage of your final pay if you meet certain requirements upon termination of your employment, and Allowing you to defer receipt of up to 4% of your pay until you terminate employment. [Chairman/CEO only] In addition, this summary describes additional benefits that AT&T Capital Corporation will provide to replace your benefits under AT&T's Senior Management Plans and Programs. [Continue for all participants] This summary refers to AT&T Capital Corporation and its subsidiaries collectively as the "Company." The Executive Benefit Plan is considered an "unfunded" plan under the Employee Retirement Income Security Act of 1974, as amended, (see the "Payment Of Benefits And Plan Funding" section). One advantage of the "unfunded" nature of the Executive Benefit Plan is that you will not have to pay taxes on amounts credited to your account until paid to you. 2 PARTICIPATION You are a participant in the Executive Benefit Plan, if you are: An employee of the Company on or after January 1, 1994, who is eligible to participate in the AT&T Capital Corporation Retirement and Savings Plan, and A member of AT&T Capital Corporation's Corporate Leadership Team or Strategic Business Leaders, as of January 1, 1994, or you are a member of the AT&T Capital Leadership Forum, and Designated to be eligible by the Compensation Committee of AT&T Capital Corporation's Board of Directors. EXECUTIVE RETIREMENT BENEFIT ELIGIBILITY AND AMOUNT [Chairman/CEO benefits] You will be eligible to receive your executive retirement benefit if your employment with the Company terminated after you reach age 55. If you are eligible, the amount of your annual executive retirement benefit (less any applicable reductions see below) will be a percentage of your "final pay" determined as follows: Termination of Employment at Age: Percentage of Final Pay 55 35% 56 36% 57 37% 58 38% 59 39% 60 or later 40% [CLT benefits] If you became a member of the CLT before January 1, 1994, you will be eligible to receive your executive retirement benefit if your employment with the Company is terminated after completing 10 years of service and reaching age 58. If you are eligible, the amount of your annual executive retirement benefit (less any applicable reductions see below) will be a percentage of your "final pay" determined as follows: Termination of Employment at Age: Percentage of Final Pay 58 38% 59 39% 60 or later 40% If you became a member of the CLT after December 31, 1993, you will be eligible to receive your executive retirement benefit if you terminate employment with the Company after completing 15 years of service and after reaching age 58. If you are eligible, the amount of your annual executive 3 retirement benefit (less any applicable reductions see below) will be a percentage of your "final pay" determined as follows: Termination of Employment at Age: Percentage of Final Pay 58 35% 59 36.5% 60 or later 38% [SBU Head benefits] You are eligible to receive your executive retirement benefit if you terminate employment with the Company after completing 20 years of service and reaching age 58. If you are eligible, your annual executive retirement benefit (less any applicable reductions see below) will be a percentage of your "final pay" determined as follows: Termination of Employment at Age: Percentage of Final Pay 58 35% 59 36.5% 60 or later 38% Under the Executive Benefit Plan, all your years and months of service include: service with AT&T Capital Corporation; service before January 1, 1994 with AT&T or and "affiliate" of AT&T will affiliated with AT&T; and service with a subsidiary of AT&T Capital Corporation after AT&T Capital Corporation acquired at least 50% ownership of the subsidiary. Service with a subsidiary before AT&T Capital Corporation acquired at least 50% ownership of the subsidiary is not counted unless the Compensation Committee (or its delegate) specifically resolves to count pre-acquisition service. Two companies are "affiliated" if, under Internal Revenue Service rules, they are under common control - generally, they are at least 80% commonly owned. [All participants] Unless the Compensation Committee (or its delegate) specifically determines otherwise, you will be eligible for an executive retirement benefit only if you are a member of AT&T Capital Corporation's Corporate Leadership Forum when you leave the Company. The amount of your executive retirement benefit will be reduced by amounts payable to you under: The AT&T Capital Corporation Retirement and Savings Plan, the AT&T Capital Corporation Excess Benefit Plan, and the AT&T Capital Corporation Compensation Limit Excess Plan, to the extent attributable to "uniform points contributions" under those plans, The AT&T Capital Corporation Supplemental Executive Retirement Plan, 4 The AT&T Management Pension Plan, and Any other nonqualified pension plan sponsored by AT&T or the Company in which you participate or had participated. Under the Executive Benefit Plan, "pay" means your cash compensation from the Company before reductions for taxes or before-tax contributions to any of the Company's employee benefit plans, including your base salary, any applicable commissions, short term bonuses, and awards and payments under the Company's Annual Incentive Plan (or any successor plan) to the extent includible in your taxable income. However, your "pay" under the Executive Benefit Plan does not include awards or payments under the Company's long term incentive award programs such as the AT&T Capital Corporation Share Performance Incentive Plan and Long Term Incentive Plan. "Final Pay" means your pay during the 12 calendar months immediately preceding the date you leave the Company, or if greater, one-third of your pay during the 36 calendar months immediately preceding the date you leave the Company. PAYMENT OF EXECUTIVE RETIREMENT BENEFIT Your executive retirement benefit will be paid in monthly installments beginning as of the first day of the month after you terminate employment with the Company. In general, your benefit will be paid in the form of a: Life annuity if you are not married, or Joint and 45% survivor annuity with your spouse as your contingent annuitant if you are married. However, the Company, in its sole discretion, may elect to pay your executive retirement benefit to you in any form available under the Retirement and Savings Plan that it considers appropriate. If you are married and you die after you have become eligible for, but before you have begun to receive, your executive retirement benefit, a survivor annuity will be paid to your surviving spouse equal to 45% of the benefit that would have been payable had you terminated employment and begun to receive your benefit. SUPPLEMENTAL SAVINGS The AT&T Capital Corporation Retirement and Savings Plan allows participants to contribute on a before-tax or after-tax basis up to 12% of pay. Under certain prior AT&T plans, participants were allowed to contribute up to 16% of pay. So that you may save as much as possible for your retirement, the Executive Benefit Plan allows you to have the Company deduct, on a before-tax basis, up to 4% of your pay from your paycheck and to have the deduction credited to an account established by the Company on your behalf. To defer up to 4% of your pay for any year, you must file a written 5 election with the Compensation Committee by December 31 of the prior year. For example, You must make your election to defer your 1994 pay by December 31, 1993. EARNINGS ON YOUR ACCOUNT Your supplemental savings under the Executive Benefit Plan will be credited to an account on the Company's or recordkeeper's books. The amounts in your account will be deemed to be periodically invested and reinvested in designated investment fund shares identified by the Company. Your account will be adjusted to reflect gains, losses, and earnings as though the amount were in fact invested and reinvested in investment fund shares. At present it is not clear whether allowing members to direct their own investments is practicable or may jeopardize the plan's "unfunded" status. Consequently your investment directions will not be applied to your supplemental savings at this time. The Administrative Committee will instead credit your account with interest at a rate no less than the rate of return on investments in the Merrill Lynch Government Fund, or a similar investment option. PAYMENT Of YOUR SUPPLEMENTAL SAVINGS Your supplemental savings account will be paid to you in 60 monthly installments beginning as of the later of the first day of the month after: You reach age 65, or You terminate employment with the Company (or any affiliate). However, the Company, in its sole discretion, may elect to: Pay your benefit to you in any form available under the Retirement and Savings Plan that it considers appropriate, and/or Begin to pay your benefit as of the first day of any month after termination of your employment if you terminate before your 65th birthday. If you die before you have received your supplemental savings account, the balance will be paid in a lump sum to your spouse or, if not married, your beneficiary under the Retirement and Savings Plan. OTHER BENEFITS [Chairman/CEO only] In addition to the other benefits described in this summary, AT&T Capital Corporation will provide you with the following benefits to which 6 you were previously entitled under AT&T's Senior Management Plans and Programs: AT&T intends to continue your coverage under, and AT&T Capital Corporation will pay AT&T for premiums associated with, the: Senior Management Basic Life Insurance Program, and Senior Management Individual Life Insurance Program AT&T Capital Corporation also will create a program, through insurance or otherwise: To duplicate the benefits you would have been entitled to receive under the AT&T Senior Management Long-Term Disability and Survivor Protection Plan ("SMLTDSPP"), except that you will be eligible for the "Minimum Retirement Benefit" under that plan if you terminate employment on or after your 60th birthday; To duplicate the "Surviving Spouse Benefit" that would have been payable under the SMLTDSPP if you die before your 55th birthday; To provide a benefit equal to the greater of (i) the "Surviving Spouse Benefit" that would have been payable under the SMLTDSPP or (ii) the normal survivor benefit payable under the Executive Benefit Plan, if you die on or after your 55th birthday; and To duplicate the accident, sickness, pensioner death, and other post-retirement death benefits under the "Death Benefits" provisions for Senior Managers in the AT&T Non-Qualified Pension Plan if you terminate employment on or after your 60th birthday or if you become disabled. CLAIM AND APPEAL PROCEDURES CLAIM PROCEDURES If you are eligible, your Executive Benefit Plan benefit will be paid automatically upon termination of your employment from the Company. If you believe you are eligible and you don't receive a Executive Benefit Plan benefit, you have a right to file a written application for benefits to the Compensation Committee at the address listed in the "Administrative Information" section. If your claim for benefits is denied, either in whole or in part, you will receive written notification from the Compensation Committee. This written notification will include: The specific reason or reasons for the denial, Specific reference to pertinent Executive Benefit Plan provisions on which the denial was based, A description of any additional material or information necessary to 7 perfect the claim and an explanation of why the material or information is necessary, and Appropriate information about the steps to be taken if you or a person authorized to represent you wishes to submit the claim for review. The Compensation Committee will respond to your claim within 90 days after it receives your claim submitted according to the procedures described in this section. This 90-day period may be extended up to an additional 90 days if the Compensation Committee notifies you before the original 90-day period expires. If a claim for benefits is denied, in whole or in part, or if you believe that benefits under the Executive Benefit Plan to which you are entitled have not been provided, you or your authorized representative may appeal this denial or other action by the Compensation Committee. APPEAL PROCEDURES You must appeal in writing within 60 days after you receive notification of the Compensation Committee's decision or, if you didn't receive notification, within 60 days after the 90-day period has lapsed. Send your written request for review of any denied claim or other disputed matter directly to the Board of Directors at the Company's address listed in the "Administrative Information" section. The person sending the request has the right to: Review pertinent plan documents. You can obtain them by following the procedures described under the "Plan Documents" section, and Send to the Board of Directors a written statement of the issues and any other documents in support of the claim for benefits or other matter under review. The Board of Directors will provide a written response to the appeal within 60 days after it is received. The 60-day period may be extended up to an additional 60 days if the Board of Directors notifies you before the original 60-day period expires. If the Board of Directors does not respond within 60 (or 120) days, you may consider the claim denied. The Board of Directors serves as the final review committee under the Executive Benefit Plan and has sole and complete discretionary authority to determine conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Executive Benefit Plan, any and all questions arising from administration of the Executive Benefit Plan and interpretation of all plan provisions, determination of all questions relating to participation of eligible members and eligibility for benefits, determination of all relevant facts, the amount and type of benefits payable to any participant, and construction of all terms of the Executive Benefit Plan. Notwithstanding the foregoing, AT&T Capital Corporation has sole and complete discretionary authority to determine questions relating to 8 eligibility of participants for membership in the Executive Benefit Plan and to amend or terminate the Executive Benefit Plan at any time. Respective decisions by the Compensation Committee and the Board of Directors shall be conclusive and binding on all parties and not subject to further review. Please note that the Executive Benefit Plan requires that you pursue all your claim and appeal rights described in this section before you seek any other legal recourse regarding claims for benefits. RIGHTS OF A PLAN PARTICIPANT OR BENEFICIARY UNDER ERISA As a participant in the AT&T Capital Corporation Executive Benefit Plan, you have these rights and protections under ERISA: You can examine, without charge, all plan documents and the copies of all documents filed by the plan with the U.S. Department of Labor. You may examine these documents at the Plan Administrator's office. See the "Administrative Information" section for information about where you can examine these documents. You can obtain copies of all plan documents and other plan information upon written request to the Plan Administrator. You will be charged a reasonable fee for copies of the documents requested unless federal law requires that they be furnished without charge. See the "Administrative Information" section to learn where to direct correspondence. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for benefits is denied in whole or in part, you will receive a written explanation of the reason for the denial. If you do not hear from the appropriate party within the designated time frame, your claim or appeal is considered denied. You have the right to have the appropriate party review and reconsider your claim. (See the "Claim and Appeal Procedures" section.) Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file suit in a federal court. In such cases, the court may require the Company to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent for reasons beyond the control of the Company. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If you are discriminated against for asserting your rights under ERISA, you may seek assistance from the U.S. Department of Labor, or you may file suit in federal court. The court will decide who will pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order 9 you to pay costs and fees, for example, if it finds your claim to be frivolous. For answers to questions about the Executive Benefit Plan, contact the Compensation Committee. See the "Administrative Information" section for information about whom to contact. If you have any questions about this statement of your rights, or about your rights under ERISA, contact the nearest area office of the Pension and Welfare Benefits Administration, U.S. Department of Labor. ADMINISTRATIVE INFORMATION PLAN NAME The official plan name is the AT&T Capital Corporation Executive Benefit Plan. PLAN ADMINISTRATOR The Plan Administrator for the AT&T Capital Corporation Executive Benefit Plan is AT&T Capital Corporation. The Compensation Committee of AT&T Capital Corporation's Board of Directors administers the Executive Benefit Plan on AT&T Capital Corporation's behalf. COMPENSATION COMMITTEE The Compensation Committee may be contacted in writing at AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. LEGAL SERVICE Direct process of legal service to AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962 (Attn: General Counsel). CORPORATE BENEFIT OFFICE AT&T Capital Corporation Attn: Corporate Benefit Office 44 Whippany Road Morristown, New Jersey 07962 201-397-3256 PLAN RECORDS, PLAN YEAR, AND TYPE OF PLAN The AT&T Capital Corporation Executive Benefit Plan is considered a "top hat plan" under ERISA, established for a select group of management or highly compensated members. The Executive Benefit Plan is a nonqualified pension plan under the Internal Revenue Code. Benefits under the Executive Benefit Plan are not guaranteed by the Pension Benefit Guarantee Corporation. The Executive Benefit Plan and all records are kept on a calendar-year basis--beginning January 1 and ending December 31. 10 EMPLOYER AND PLAN IDENTIFICATION NUMBERS AT&T Capital Corporation and the Executive Benefit Plan are identified by the following numbers under Internal Revenue Service rules: Description Number Employer Identification Number (assigned by the IRS) 22-3211453 Plan Identification Number (assigned by AT&T Capital Corporation) 005 PLAN DOCUMENTS The information contained in this summary provides only the highlights of the AT&T Capital Corporation Executive Benefit Plan. It does not attempt to cover all the details in the official plan documents. These documents legally govern the operation of the Executive Benefit Plan. You can review the plan documents at the Corporate Benefit Office during normal working hours. You must submit your request to review in writing and allow 10 days for your request to be processed. If you submit a written request to the Corporate Benefit Office, you can obtain copies of these documents within 30 days. You will be charged a reasonable fee for the copies unless federal law requires that the documents be furnished without charge. Submit all requests in writing to the Corporate Benefit Office. NONTRANSFERABILITY OF BENEFITS You or your beneficiary may not assign or transfer amounts under the Executive Benefit Plan. Similarly, amounts credited to your account may not be used to pay your debts or obligations. However, the Executive Benefit Plan will comply with a qualified federal tax levy. PAYMENT OF BENEFITS AND PLAN FUNDING The Executive Benefit Plan is considered an "unfunded" deferred compensation plan under ERISA and the Internal Revenue Code. However, AT&T Capital Corporation may establish a trust to which it may make contributions to fund its obligations under the Executive Benefit Plan. Funds are held in the trust to pay benefits for Executive Benefit Plan participants. However, if the Company becomes insolvent, the trust may be used to pay benefits to the general creditors of the Company. Executive Benefit Plan benefits will be paid primarily from this trust. If there are insufficient assets in the trust, Executive Benefit Plan benefits will then be paid from the general assets of the Company. TRUSTEE The trustee is Merrill Lynch Trust Company, 300 Davidson Avenue, Somerset, New Jersey 08873. 11 PLAN CONTINUATION The Compensation Committee of the Board of Directors of AT&T Capital Corporation (or its delegate) reserves the right to modify, suspend, change, or terminate the Executive Benefit Plan at any time. AT&T Capital Corporation does not guarantee the continuation of any benefits during employment, nor does it guarantee any specific level of benefits. Also, benefits are provided at AT&T Capital Corporation's discretion and do not create a contract of employment. EX-10 8 1 EXHIBIT 10(z) Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN This is a summary of the benefits available to eligible members under the AT&T Capital Corporation Supplemental Executive Retirement Plan. More detailed information is provided in the official plan documents. If there is a conflict between statements in this summary and the terms of the plan documents, the plan documents will control and govern the operation of the Supplemental Executive Retirement Plan. AT&T Capital Corporation reserves the right to modify, suspend, change, or terminate the Supplemental Executive Retirement Plan at any time. Questions about your benefits should be addressed to the Corporate Benefit Office. Because of the many detailed provisions of the Supplemental Executive Retirement Plan, no one other than the Corporate Benefit Office is authorized to advise you about your benefits. AT&T Capital Corporation cannot be bound by statements made by unauthorized personnel. PURPOSE The AT&T Capital Corporation Supplemental Executive Retirement Plan ("SERP") is designed to provide supplemental retirement benefits to certain members of AT&T Capital Corporation and its subsidiaries. This summary refers to AT&T Capital Corporation and its subsidiaries collectively as the "Company." The SERP is intended to ease the transition for eligible members from coverage under the AT&T Management Pension Plan, the AT&T Pension Plan, or the NCR Corporation Pension Plan to coverage under the AT&T Capital Corporation Retirement and Savings Plan. PARTICIPATION You are a participant in the SERP if you were a participant in the AT&T Management Pension Plan, the AT&T Pension Plan, or the NCR Corporation Pension Plan as of December 31, 1993, and You were a member of the AT&T Capital Corporate Leadership Forum on December 31, 1993, or On December 31, 1993, you were employed by the Company and had at least 10 years of AT&T and/or AT&T Capital Corporation or NCR service or you were within 10 years of service pension eligibility (under the terms of the AT&T Management Pension Plan as of December 31, 1993) (For this purpose, service with a company acquired by AT&T or AT&T Capital Corporation is included.), and - your total pay for 1993 was at least $115,200, or - the average of your pay for the 36 months immediately before you terminate employment with the Company is at least twice the Social Security Wage Base in effect in the year you terminate. 2 Under the SERP, "pay" means your cash compensation from the Company before reductions for taxes or before-tax contributions to any of the Company's employee benefit plans, including your base salary, any applicable commissions, short term bonuses, and awards and payments under the Company's Annual Incentive Plan (or any successor plan) to the extent includible in your taxable income. However, your "pay" under the SERP does not include awards or payments under the Company's long term incentive award programs such as the Share Performance Incentive Plan and the Long Term Incentive Plan. SERP BENEFITS ELIGIBILITY You will be eligible for a SERP benefit if, when you leave the Company: You meet the eligibility requirements for a service pension under the AT&T Management Pension Plan under the terms of the AT&T Management Pension Plan as in effect in the year you leave the Company, assuming you were covered by the AT&T Management Pension Plan from the date of your hire by the Company (or by a company acquired by the Company), and Your Company Benefit is less than the 95% of your Assumed Retirement Benefit at age 60. COMPANY BENEFIT Your Company Benefit is comprised of two pieces: Your monthly benefit attributable to the uniform points contributions credited to your AT&T Capital Corporation Retirement and Savings Plan and AT&T Capital Corporation Excess Benefit Plan accounts as of the date you leave the Company, plus interest on those contributions credited at the annual yield rate on long-term U.S. government bonds, and Your monthly benefit payable under the AT&T Management Pension Plan, the AT&T Pension Plan, and/or the NCR Corporation Pension Plan. Interest credited on uniform points contributions in any year is based on the annual yield rate on long-term U.S. government bonds for the prior calendar year. Your Company Benefit is calculated as the monthly benefit payable under the particular plan in the form of a single life annuity. ASSUMED RETIREMENT BENEFIT Your Assumed Retirement Benefit is equal to the monthly benefit that would have been payable in the form of a single life annuity under the AT&T Management Pension Plan, the AT&T Pension Plan, or the NCR Corporation Pension Plan, had you remained covered by the plan you were in as of December 31, 1993 until you terminated employment with the Company except 3 that your Assumed Retirement Benefit will disregard any special enhancements to any such plan such as, for example, an early retirement window program or a "5 & 5" benefit. AMOUNT OF SERP BENEFIT Your monthly SERP benefit equals the difference between your Company Benefit payable for that month and 95% of your Assumed Retirement Benefit, multiplied by an actuarial equivalence factor. The actuarial equivalence factor reflects the commencement of benefits before age 60 and is based on an 8% interest rate and the Unisex (50/50) AT&T Retiree Mortality Table. EARLY RETIREMENT FACTORS The following table illustrates the early retirement factors under the SERP: Age at Early Retirement Early Retirement Reduction Factor 50 0.3804 51 0.4172 52 0.4578 53 0.5029 54 0.5529 55 0.6085 56 0.6704 57 0.7394 58 0.8166 59 0.9030 60 1.0000 Your monthly SERP benefit takes into account the frozen AT&T or NCR pension that is actually payable when you leave employment. If you leave the Company before you are eligible to begin receiving your benefit under the AT&T Management Pension Plan, the AT&T Pension Plan, or the NCR Corporation Pension Plan, your Company Benefit will not include your frozen AT&T or NCR pension in calculating your initial SERP benefit. When you become eligible to begin receiving your AT&T or NCR pension, your SERP benefit will be reduced by the amount of your AT&T or NCR pension payable in the form of a single life annuity. Please look at the example of Employee C below to see how this works. PAYMENT OF SERP BENEFIT Your SERP benefit will begin as of the first day of the month after you terminate employment with the Company. In general, your SERP benefit will be paid each month for the rest of your life. CLAIM AND APPEAL PROCEDURES CLAIM PROCEDURES If you are eligible, your SERP benefit will be paid automatically upon 4 termination of your employment from the Company. If you believe you are eligible and you don't receive a SERP benefit, you have a right to file a written application for benefits. If your claim for benefits is denied, either in whole or in part, you will receive written notification from the Corporate Benefit Office. This written notification will include: The specific reason or reasons for the denial, Specific reference to pertinent SERP provisions on which the denial was based, A description of any additional material or information necessary to perfect the claim and an explanation of why the material or information is necessary, and Appropriate information about the steps to be taken if you or a person authorized to represent you wishes to submit the claim for review. The Corporate Benefit Office will respond to your claim within 90 days after it receives your claim submitted according to the procedures described in this section. This 90-day period may be extended up to an additional 90 days if the Corporate Benefit Office notifies you before the original 90-day period expires. If a claim for benefits is denied, in whole or in part, or if you believe that benefits under the SERP to which you are entitled have not been provided, you or your authorized representative may appeal this denial or other action by the Corporate Benefit Office. APPEAL PROCEDURES You must appeal in writing within 60 days after you receive notification of the Corporate Benefit Office's decision or, if you didn't receive notification, within 60 days after the 90-day period has lapsed. Send your written request for review of any denied claim or other disputed matter directly to the Administrative Committee at the Company's address listed in the "Administrative Information" section. The person sending the request has the right to: Review pertinent plan documents. You can obtain them by following the procedures described under the "Plan Documents" section, and Send to the Administrative Committee a written statement of the issues and any other documents in support of the claim for benefits or other matter under review. The Administrative Committee will provide a written response to the appeal within 60 days after it is received. The 60-day period may be extended up to an additional 60 days if the Administrative Committee notifies you before the original 60-day period expires. If the Administrative Committee does not respond within 60 (or 120) days, you may consider the claim denied. 5 The Administrative Committee serves as the final review committee under the SERP and has sole and complete discretionary authority to determine conclusively for all parties, and in accordance with the terms of the documents or instruments governing the SERP, any and all questions arising from administration of the SERP and interpretation of all plan provisions, determination of all questions relating to participation of eligible members and eligibility for benefits, determination of all relevant facts, the amount and type of benefits payable to any participant, and construction of all terms of the SERP. Notwithstanding the foregoing, AT&T Capital Corporation has sole and complete discretionary authority to determine questions relating to eligibility of participants for membership in the SERP and to amend or terminate the SERP at any time. Respective decisions by the Administrative Committee and AT&T Capital Corporation shall be conclusive and binding on all parties and not subject to further review. Please note that the SERP requires that you pursue all your claim and appeal rights described in this section before you seek any other legal recourse regarding claims for benefits. RIGHTS OF A PLAN PARTICIPANT OR BENEFICIARY UNDER ERISA As a participant in the AT&T Capital Corporation Supplemental Executive Retirement Plan, you have these rights and protections under ERISA: You can examine, without charge, all plan documents and the copies of all documents filed by the plan with the U.S. Department of Labor. You may examine these documents at the Corporate Benefit Office. See the "Administrative Information" section for information about where you can examine these documents. You can obtain copies of all plan documents and other plan information upon written request to the Corporate Benefit Office. You will be charged a reasonable fee for copies of the documents requested unless federal law requires that they be furnished without charge. See the "Administrative Information" section to learn where to direct correspondence. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for benefits is denied in whole or in part, you will receive a written explanation of the reason for the denial. If you do not hear from the appropriate party within the designated time frame, your claim or appeal is considered denied. You have the right to have the appropriate party review and reconsider your claim. (See the "Claim and Appeal Procedures" section.) Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file suit in a federal court. In such cases, 6 the court may require the Company to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent for reasons beyond the control of the Company. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If you are discriminated against for asserting your rights under ERISA, you may seek assistance from the U.S. Department of Labor, or you may file suit in federal court. The court will decide who will pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay costs and fees, for example, if it finds your claim to be frivolous. For answers to questions about the SERP, contact the Corporate Benefit Office. See the "Administrative Information" section for information about whom to contact. If you have any questions about this statement of your rights, or about your rights under ERISA, contact the nearest area office of the Pension and Welfare Benefits Administration, U.S. Department of Labor. ADMINISTRATIVE INFORMATION PLAN NAME The official plan name is the AT&T Capital Corporation Supplemental Executive Retirement Plan. PLAN ADMINISTRATOR The Plan Administrator for the AT&T Capital Corporation Supplemental Executive Retirement Plan is AT&T Capital Corporation. An Administrative Committee appointed by the Compensation Committee of AT&T Capital Corporation's Board of Directors administers the SERP on AT&T Capital Corporation's behalf. ADMINISTRATIVE COMMITTEE The Administrative Committee is located at AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. The current members of the Administrative Committee are the Chief Financial Officer, the General Counsel, and the Corporate Resource Officer of AT&T Capital Corporation. LEGAL SERVICE Direct process of legal service to AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962 (Attn: General Counsel). 7 CORPORATE BENEFIT OFFICE AT&T Capital Corporation Attn: Corporate Benefit Office 44 Whippany Road Morristown, New Jersey 07962 201-397-3256 TYPE OF PLAN, PLAN RECORDS, AND PLAN YEAR The AT&T Capital Corporation Supplemental Executive Retirement Plan is considered a "top hat plan" under ERISA, established for a select group of management or highly compensated members. The SERP is a nonqualified pension plan under the Internal Revenue Code. Benefits under the SERP are not guaranteed by the Pension Benefit Guarantee Corporation. The SERP and all records are kept on a calendar-year basis - beginning January 1 and ending December 31. EMPLOYER AND PLAN IDENTIFICATION NUMBERS AT&T Capital Corporation and the SERP are identified by the following numbers under Internal Revenue Service rules: Description Number Employer Identification Number (assigned by the IRS) 22-3211453 Plan Identification Number (assigned by AT&T Capital Corporation) 004 PLAN DOCUMENTS The information contained in this summary provides only the highlights of the AT&T Capital Corporation Supplemental Executive Retirement Plan. It does not attempt to cover all the details. SERP details are contained in the official plan documents. These documents legally govern the operation of the SERP. You can review the plan documents at the Corporate Benefit Office during normal working hours. You must submit your request to review documents in writing and allow 10 days for your request to be processed. If you submit a written request to the Corporate Benefit Office, you can obtain copies of these documents within 30 days. You will be charged a reasonable fee for the copies unless federal law requires that the documents be furnished without charge. Submit all requests in writing to the Corporate Benefit Office. NONTRANSFERABILITY OF BENEFITS You or your beneficiary may not assign or transfer amounts under the SERP. Similarly, amounts credited to your account may not be used to pay your debts or obligations. However, the SERP will comply with a qualified federal tax levy. 8 PAYMENT OF BENEFITS AND PLAN FUNDING The SERP is considered an "unfunded" deferred compensation plan under ERISA and the Internal Revenue Code. However, AT&T Capital Corporation may establish a trust to which it may make contributions to fund its obligations under the SERP. Funds are held in the trust to pay benefits for SERP participants. However, if the Company becomes insolvent, the trust may be used to pay benefits to the general creditors of the Company. SERP benefits will be paid primarily from this trust. If there are insufficient assets in the trust, SERP benefits will then be paid from the general assets of the Company. TRUSTEE The trustee is Merrill Lynch Trust Company, 300 Davidson Avenue, Somerset, New Jersey 08873. PLAN CONTINUATION The Compensation Committee of the Board of Directors of AT&T Capital Corporation (or its delegate) reserves the right to modify, suspend, change, or terminate the SERP at any time. AT&T Capital Corporation does not guarantee the continuation of any benefits during employment, nor does it guarantee any specific level of benefits. Also, benefits are provided at AT&T Capital Corporation's discretion and do not create a contract of employment. EX-10 9 1 EXHIBIT 10(aa) Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION COMPENSATION LIMIT EXCESS PLAN This is a summary of the benefits available to eligible members under the AT&T Capital Corporation Compensation Limit Excess Plan. More detailed information is provided in the official plan documents. If there is a conflict between statements in this summary and the terms of the plan documents, the plan documents will control and govern the operation of the Compensation Limit Excess Plan. AT&T Capital Corporation reserves the right to modify, suspend, change, or terminate the Compensation Limit Excess Plan at any time. Questions about your benefits should be addressed to the Corporate Benefit Office. Because of the many detailed provisions of the Compensation Limit Excess Plan, no one other than the Corporate Benefit Office is authorized to advise you about your benefits. AT&T Capital Corporation cannot be bound by statements made by unauthorized personnel. PURPOSE AT&T Capital Corporation's retirement program is designed to help members build financial resources for the future. This is accomplished primarily through the AT&T Capital Corporation Retirement and Savings Plan (the "RSP"). However, the Internal Revenue Code requires that the RSP ignore any portion of a member's pay that exceeds $150,000 in a year. This compensation limit, which may be adjusted by the Internal Revenue Service from time to time, caps the amount a member may elect to contribute to the RSP and the amount of Company matching and uniform points contributions that may be made to the RSP. To help members affected by the compensation limit attain their retirement goals, AT&T Capital Corporation adopted the AT&T Capital Corporation Compensation Limit Excess Plan (the "Plan") effective January 1, 1995 for certain of its members and members of its subsidiaries employed on or after January 1, 1995. Under the plan, "Compensation" means cash compensation from the AT&T Capital Corporation or its Subsidiaries (collectively, the "Company") as defined in the RSP; "Excess Compensation" means compensation in excess of the $150,000 Internal Revenue Code limit. The plan provides for a uniform points allocation for eligible members on Excess Compensation received during the fiscal year beginning on March 1 and ending on the last day of February in the current year. The plan also allows eligible members to defer from 1% to 6% of Excess Ccompensation received during a calendar year on a before-tax basis and to receive a matching allocation from the Company with respect to the deferred Excess Compensation. The first year in which you may defer Excess Compensation is 1995. 2 ELIGIBILITY AND PARTICIPATION Who is eligible Uniform points allocations You will automatically participate in the uniform points portion of this plan if during the year: You are eligible to receive a uniform points contribution under the RSP, and you had excess compensation during the fiscal year ending on the last day of February in the current year. You won't have to do anything to receive this benefit. For example, if you earned $175,000 between March 1, 1993 and February 28, 1994, your uniform points contribution to the RSP was based on $150,000 and the uniform points allocation under this Plan will be based on your Excess Compensation ($50,000) you received in that period. Please note that to receive a uniform points allocation for 1994 (that is, with respect to Excess Compensation earned between March 1, 1993 and February 28, 1994), you must be employed by the Company on January 1, 1995. For 1995 and later years, please see "Allocations Under the Plan-Uniform Points Allocation" below. For more information about the uniform points system, please see the summary plan description for the RSP. Member before-tax deferrals and Company matching contributions You are eligible to defer Excess Compensation under the Plan and receive an allocation of a Company match only if: You are eligible to contribute to the RSP in the current calendar year, You have Excess Compensation in the current calendar year, and You had Excess Compensation in the prior calendar year. For example, to defer your 1995 Excess Compensation, your 1994 compensation must have exceeded $150,000. To defer any of your Excess Compensation in a calendar year, you must file a written election with the Corporate Benefit Office of AT&T Capital Corporation. You may elect to defer your 1995 Excess Compensation by filing 3 your election by January 30, 1995. Your election will become irrevocable on January 30, 1995 and cannot be changed after that date. For 1996 and later years, you must file your irrevocable election by the prior December 31. ALLOCATIONS UNDER THE PLAN Uniform Points Allocations Under the RSP, your allocation of the total uniform points contribution equals the Company's total contribution multiplied by a fraction your points for the year divided by all participants' points for the year. Your account receives 1/12 of the total annual uniform points allocation each month, provided you are employed on the last day of that month. The Company generally expects that the allocation for January March of each year will be made at one time by April 30 and separate allocations for the months of April through December will be made quarterly by the end of the month following the quarter. Under this plan, your uniform points allocation for a calendar year equals your uniform points percentage under the RSP multiplied by your Excess Compensation (i.e., compensation in excess of $150,000) for the 12-months ending on the last day of February in that year. Your uniform points allocation for 1994 will be made as soon as practicable in 1995. For 1995 and later years, it is intended that your account will be credited under this Plan at the same time that your account under the RSP receives the uniform points allocations. How Much Can I Defer Under the Plan? The Plan allows you to save on a before-tax basis from 1% to 6% (in 1% increments) of your Excess Ccompensation received during a calendar year. These before-tax savings are in addition to any of your before-tax and after-tax savings under the RSP. How Much Does the Company Allocate in Matching Contributions? For every dollar you defer under the Plan up to the first 6% of your Excess Compensation, the Company will allocate 66-2/3 cents to your account. The Company does not match contributions above 6% of Excess Compensation. Matching contributions are allocated monthly to participant accounts. VESTING The value of your before-tax deferrals is always 100% vested. If you were employed by the Company before January 1, 1994, you are immediately 100% vested in the matching contributions credited to your account and their earnings. If you were first employed by the Company after December 31, 1993, you will vest in the matching contributions and their earnings within a maximum of 11/2 years of service. 4 You will vest in uniform points contributions and their earnings gradually over 5 years. You will vest 20% at the end of each year of "vesting service" you complete. At the end of five years you will be 100% vested. After completing five years of service, you will be 100% vested in all uniform points contributions and earnings that are credited to your account, including future contributions and earnings credited to that account. The Company's rules for crediting service are described in the summary plan description for the RSP. If you leave the Company (unless you transfer to an affiliate (for example, AT&T) of the Company) before becoming fully "vested" in matching and uniform points contributions you will receive payment of the vested portion of your Plan account. However, you will forfeit the nonvested portion. EARNINGS ON YOUR ACCOUNT Your savings and uniform points contributions under the Compensation Limit Excess Plan will be credited to an account on the Company's or recordkeeper's books. The amounts in your account will be deemed to be periodically invested and reinvested in designated investment fund shares identified by the Company. Your account will be adjusted to reflect gains, losses, and earnings as though the amount were in fact invested and reinvested in investment fund shares. At present it is not clear whether allowing members to direct their own investments is practicable or may jeopardize the plan's "unfunded" status. Consequently your investment directions will not be applied to your account at this time. The administrative committee will instead credit your account with interest at a rate no less than the rate of return on investments in the Merrill Lynch Government Fund, or a similar investment option. The recordkeeper values each account in dollars on a daily basis. You can obtain information about your account by using the recordkeeper's voice response system or by calling a service representative of the recordkeeper. Instructions on how to use the voice response system and how to contact a service representative are available from the Corporate Benefit Office of AT&T Capital Corporation. You will receive periodic personal statements showing the value of your accounts under the Plan. 5 DISTRIBUTIONS FROM THE PLAN The Plan does not permit loans from participant accounts and the Plan does not permit withdrawals before termination of employment. PAYMENT OF PLAN ACCOUNTS The vested portion of your Plan account will be paid in cash to you in 60 monthly installments beginning as of the later of: the first day of the month after your 65th birthday, or the first day of the month after termination of your employment with the Company (or any affiliate). However, AT&T Capital Corporation in its sole discretion may elect to: pay your benefit in any form available under the RSP that it considers appropriate, and/or begin to pay your benefit as of first day of any month after termination of your employment if you terminate employment before age 65. DEATH BENEFITS If you die while employed by the Company, you will become 100% vested in the matching and uniform points contributions allocated to your account and their earnings. If you die after leaving the Company, your vested percentage in these amounts will not be changed upon the death. If you die before you have received your vested Plan account, the vested balance will be paid in a lump sum to your spouse or, if you are not married, to your beneficiary under the RSP. CLAIM AND APPEAL PROCEDURES CLAIM PROCEDURES If you are eligible, your Compensation Limit Excess Plan benefit will be paid automatically upon termination of your employment from the Company. If you believe you are eligible and you don't receive a Compensation Limit Excess Plan benefit, you have a right to file a written application for benefits to the Corporate Benefit Office at the address listed in the "administrative information" section. If your claim for benefits is denied, either in whole or in part, you will receive written notification from the Corporate Benefit Office. This written notification will include: the specific reason or reasons for the denial, 6 specific reference to pertinet Compensation Limit Excess Plan provisions on which the denial was based, a description of any additional material or information necessary to perfect the claim and an explanation of why the material or information is necessary, and appropriate information about the steps to be taken if you or a person authorized to represent you wishes to submit the claim for review. The Corporate Benefit Office will respond to your claim within 90 days after it receives your claim submitted according to the procedures described in this section. This 90-day period may be extended up to an additional 90 days if the Corporate Benefit Office notifies you before the original 90-day period expires. If a claim for benefits is denied, in whole or in part, or if you believe that benefits under the Compensation Limit Excess Plan to which you are entitled have not been provided, you or your authorized representative may appeal this denial or other action by the Corporate Benefit Office. APPEAL PROCEDURES You must appeal in writing within 60 days after you receive notification of the corporate benefit office's decision or, if you didn't receive notification, within 60 days after the 90-day period has lapsed. Send your written request for review of any denied claim or other disputed matter directly to the administrative committee at the company's address listed in the "administrative information" section. The person sending the request has the right to: review pertinent plan documents. You can obtain them by following the procedures described under the "plan documents" section, and send to the administrative committee a written statement of the issues and any other documents in support of the claim for benefits or other matter under review. The administrative committee will provide a written response to the appeal within 60 days after it is received. The 60-day period may be extended up to an additional 60 days if the administrative committee notifies you before the original 60-day period expires. If the administrative committee does not respond within 60 (or 120) days, you may consider the claim denied. The administrative committee serves as the final review committee under the Compensation Limit Excess Plan and has sole and complete discretionary authority to determine conclusively for all parties, and in accordance with the terms of the documents or instruments governing the Compensation Limit Excess Plan, any and all questions arising from administration of the Compensation Limit Excess Plan and interpretation of all Plan provisions, determination of all questions relating to participation of eligible members and eligibility for benefits, 7 determination of all relevant facts, the amount and type of benefits payable to any participant, and construction of all terms of the Compensation Limit Excess Plan. Notwithstanding the foregoing, AT&T Capital Ccorporation shall have sole and complete discretionary authority to determine questions relating to eligibility of participants for membership in the Compensation Limit Excess Plan and to amend or terminate the Compensation Limit Excess Plan at any time. Respective decisions by the administrative committee and AT&T Capital Corporation shall be conclusive and binding on all parties and not subject to further review. Please note that the Compensation Limit Excess Plan requires that you pursue all your claim and appeal rights described in this section before you seek any other legal recourse regarding claims for benefits. Rights of a Plan Participant or Beneficiary Under ERISA As a participant in the AT&T Capital Corporation Compensation Limit Excess Plan, you have these rights and protections under erisa: you can examine, without charge, all Plan documents and the copies of all documents filed by the Plan with the U.S. Department of Labor. You may examine these documents at the Plan Administrator's office. See the "Administrative Information" section for information about where you can examine these documents. you can obtain copies of all Plan documents and other Plan information upon written request to the Plan Administrator. You will be charged a reasonable fee for copies of the documents requested unless federal law requires that they be furnished without charge. See the "Administrative Information" section to learn where to direct correspondence.No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA. If your claim for benefits is denied in whole or in part, you will receive a written explanation of the reason for the denial. If you do not hear from the appropriate party within the designated time frame, your claim or appeal is considered denied. You have the right to have the appropriate party review and reconsider your claim. (see the "claim and appeal procedures" section.) Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the plan and do not receive them within 30 days, you may file suit in a federal court. In such cases, the court may require the Company to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent for reasons beyond the control of the Company. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If you are discriminated against for asserting your rights under ERISA, you may seek assistance from the U.S. Department of Labor, or you may file suit in federal court. The court will decide who will pay court costs and legal fees. If you are successful, the court may order the person 8 you have sued to pay these costs and fees. If you lose, the court may order you to pay costs and fees, for example, if it finds your claim to be frivolous. For answers to questions about the Compensation Limit Excess Plan, contact the Corporate Benefit Office. See the "Administrative Information" section for information about whom to contact. If you have any questions about this statement of your rights, or about your rights under ERISA, contact the nearest area office of the Pension and Welfare Benefits Administration, U.S. Department of Labor. ADMINISTRATIVE INFORMATION Plan Name The official plan name is the AT&T Capital Corporation Compensation Limit Excess Plan. PLAN ADMINISTRATOR The Plan Administrator for the Plan is AT&T Capital Corporation. An Administrative Committee appointed by the Compensation Committee of AT&T Capital Corporation administers the Plan on AT&T Capital Corporation's behalf. ADMINISTRATIVE COMMITTEE The Administrative Committee is located at AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. The current members of the Administrative Committee are the Chief Financial Officer, the General Counsel, and the Corporate Resource Officer of AT&T Capital Corporation. LEGAL SERVICE Direct process of legal service to AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962 (attn: General Counsel). CORPORATE BENEFIT OFFICE AT&T Capital COrporation ATTN: Corporate Benefit Office 44 Whippany Road Morristown, New Jersey 07962 201-397-3256 PLAN RECORDS, PLAN YEAR, AND TYPE OF PLAN The AT&T Capital Corporation Compensation Limit Excess Plan is considered a "top hat plan" under ERISA, established for a select group of 9 management or highly compensated members. The Compensation Limit Excess Plan is a nonqualified pension plan under the Internal Revenue Code. Benefits under the Compensation Limit Excess Plan are not guaranteed by the Pension Benefit Guarantee Corporation. The Compensation Limit Excess Plan and all records are kept on a calendar-year basis beginning January 1 and ending December 31. NONTRANSFERABILITY OF BENEFITS You or your beneficiary may not assign or transfer amounts under the Compensation Limit Excess Plan. Similarly, amounts credited to your account may not be used to pay your debts or obligations. However, the Compensation Limit Excess Plan will comply with a qualified federal tax levy. EMPLOYER AND PLAN IDENTIFICATION NUMBERS AT&T Capital Corporation and the Compensation Limit Excess Plan are identified by the following numbers under Internal Revenue Service rules: Description Number Employer Identification Number (assigned by the IRS) 22-3211453 Plan Identification Number (assigned by AT&T Capital Corporation) 006 PLAN DOCUMENTS The information contained in this summary plan description provides only the highlights of the AT&T Capital Corporation Compensation Limit Excess Plan. It does not attempt to cover all details. Plan details are covered in the official plan documents. These documents legally govern the operation of the Compensation Limit Excess Plan. You can review the Compensation Limit Excess Plan documents at the Corporate Benefit Office during normal working hours. You must submit your request to review in writing and allow 10 days for your request to be processed. If you submit a written request to the Corporate Benefit Office, you can obtain copies of these documents within 30 days. You will be charged a reasonable fee for the copies unless federal law requires that the documents be furnished without charge. Submit all requests in writing to the Corporate Benefit Office. PAYMENT OF BENEFITS AND PLAN FUNDING The Compensation Limit Excess Plan is considered an "unfunded" deferred compensation plan under ERISA and the Internal Revenue Code. However, AT&T Capital Corporation has established a trust to which it will 10 make contributions to fund its obligations under the Compensation Limit Excess Plan. Funds are held in the trust to pay benefits for Compensation Limit Excess Plan participants. However, if the Company becomes insolvent, the trust may be used to pay benefits to the general creditors of the Company. Compensation Limit Excess Plan benefits will be paid primarily from this trust. If there are insufficient assets in the trust, Compensation Limit Excess Plan benefits will then be paid from the general assets of the Company. RECORDKEEPER The recordkeeper for the Plan is Merrill Lynch Group Employee Services, 265 Davidson Avenue, Somerset, New Jersey 08873. TRUSTEE The trustee is Merrill Lynch Trust Company, 300 Davidson Avenue, Somerset, New Jersey 08873. PLAN CONTINUATION The Compensation Committee of the Board of Directors of AT&T Capital Corporation (or its delegate) reserves the right to modify, suspend, change, or terminate the Compensation Limit Excess Plan at any time. AT&T Capital Corporation does not guarantee the continuation of any benefits during employment, nor does it guarantee any specific level of benefits. Also, benefits are provided at AT&T Capital Corporation's discretion and do not create a contract of employment. EX-11 10 1 EXHIBIT 11 Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Thousands except per share data) Year Ended December 31, 1994 1993 1992 1991 1990 ___________________________________________________________________________ Income before cumulative effect of accounting change $100,336 $ 71,510 $ 73,572 $ 54,199 $ 47,755 Cumulative effect on prior years of accounting change - (2,914) - - - ___________________________________________________________________________ Net income $100,336 $ 68,596 $ 73,572 $ 54,199 $ 47,755 =========================================================================== Primary Average shares outstanding* 46,876 42,969 40,250 40,250 40,250 Net effect of dilutive stock options - based on the treasury method using average market price 30 33 - - - ___________________________________________________________________________ Total 46,906 43,002 40,250 40,250 40,250 =========================================================================== Per share amounts: Income before cumulative effect of accounting change $ 2.14 $ 1.67 $ 1.83 $ 1.35 $ 1.19 Cumulative effect on prior years of accounting change - (.07) - - - ___________________________________________________________________________ Net income $ 2.14 $ 1.60 $ 1.83 $ 1.35 $ 1.19 =========================================================================== 2 EXHIBIT 11 Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Thousands except per share data) (Continued) Year Ended December 31, 1994 1993 1992 1991 1990 ___________________________________________________________________________ Fully Diluted** Average shares outstanding* 46,876 42,969 40,250 40,250 40,250 Net effect of dilutive stock options - based on the treasury method using the greater of the average market price or year end price 30 33 - - - ___________________________________________________________________________ Total 46,906 43,002 40,250 40,250 40,250 =========================================================================== Per share amounts: Income before cumulative effect of accounting change $ 2.14 $ 1.67 $ 1.83 $ 1.35 $ 1.19 Cumulative effect on prior years of accounting change - (.07) - - - ___________________________________________________________________________ Net income $ 2.14 $ 1.60 $ 1.83 $ 1.35 $ 1.19 =========================================================================== * 1992, 1991 and 1990 shares are restated to give effect to a 402,500-for-one stock reclassification. ** This calculation is submitted in accordance with Regulation S-K item 601 (b) 11 although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3 %. EX-12 11 1 EXHIBIT 12 Form 10-K for 1994 File No. 1-11237 AT&T CAPITAL CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Thousands) Year Ended December 31, 1994 1993 1992 1991 1990 ___________________________________________________________________________ Earnings from continuing operations: Income before income taxes and extraordinary loss $173,614 $138,040 $114,875 $ 82,559 $ 70,891 Deduct undistributed earnings on equity investments, net of losses - - - (14) - Add fixed charges included in income before income taxes and cumulative effect of accounting change 277,913 242,100 258,312 279,926 269,035 ___________________________________________________________________________ Total earnings from continuing operations, as adjusted $451,527 $380,140 $373,187 $362,471 $339,926 ___________________________________________________________________________ Total fixed charges* $277,913 $242,100 $258,312 $279,926 $269,597 Ratio of earnings to fixed charges 1.62 1.57 1.44 1.29 1.26 ___________________________________________________________________________ * Fixed charges include interest on indebtedness, preferred stock dividends and the portion of rentals representative of the interest factor. EX-21 12 1 EXHIBIT 21 Form 10-K for 1994 File No. 1-11237 SUBSIDIARIES OF AT&T CAPITAL CORPORATION As of December 31, 1994 State or Other Jurisdiction of Incorporation Name of Subsidiary(*) or Organization ___________________________________________________________________________ Arrendadora Capita Corporation S.A. de C.V. Mexico AT&T Automotive Services, Inc. Delaware AT&T Capital Canada, Inc. (1) Ontario, Canada AT&T Capital FSC, Inc. Virgin Islands AT&T Capital Limited England Norfolk Finance Limited England Keep Leasing Limited England AT&T Commercial Finance Corporation (2) Delaware ATMOR Properties Inc. (in trust) Delaware AT&T Capital Leasing Services, Inc. (3) Massachusetts The Lease Factor, Inc. Massachusetts Eaton Express Corporation Massachusetts AT&T Capital Services Corporation Delaware AT&T Systems Leasing Corporation Michigan AT&T Credit Corporation Delaware AT&T Credit International, Inc. Delaware AT&T Credit Consumer Finance Corporation Delaware AT&T Credit Corporation of Puerto Rico Delaware NCR Credit Corp. Delaware AT&T Small Business Lending Corporation Delaware Capita International L.L.C. Delaware Capita Resources, Inc. Delaware Capital Syndication Corporation Delaware The Capita Corporation Australia Limited(4) Australia The Capita Corporation de Mexico, S.A. de C.V.(5) Mexico The Capita Corporation Hong Kong Limited (6) Hong Kong The Equipment Insurance Company Vermont (*) All subsidiaries do business under their corporate names, and the other names indicated in the footnotes below. (1) Hyster Credit Company (2) Hyster Credit Company and JCB Finance Company (3) Eaton Financial Company (4) AT&T Capital Corporation and The Capita Corporation (5) AT&T Capital de Mexico and The Capita Corporation (6) AT&T Capital Corporation EX-23 13 1 Exhibit 23 Form 10-K for 1994 File No. 1-11237 CONSENT OF INDEPENDENT AUDITORS _______________________________ We consent to the incorporation by reference in the registration statements of AT&T Capital Corporation and Subsidiaries on Forms S-3 (File No. 33-54359) and S-8 (File Nos. 33-49877 and 33-54315) of our reports dated January 26, 1995, which include explanatory paragraphs that describe the Company's change in its method of accounting for income taxes in 1993, on our audits of the consolidated financial statements and financial statement schedule of AT&T Capital Corporation and Subsidiaries as of December 31, 1994 and 1993, and for the years ended December 31, 1994, 1993 and 1992, which reports are included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. 1301 Avenue of the Americas New York, New York March 15, 1995 EX-24 14 1 EXHIBIT 24(a) Form 10-K for 1994 File No. 1-11237 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR. and EDWARD M. DWYER, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 28th day of February, 1995. Thomas C. Wajnert Director, Chairman of the Board and Chief Executive Officer STATE OF NEW JERSEY ) ) ss: COUNTY OF MORRIS ) On the 28th day of February, 1995, personally appeared before me, Thomas C. Wajnert, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 28th day of February, 1995. /S/ Ann E. McNee ___________________________ Notary Public of New Jersey My commission expires July 7,1997 (Seal) 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR. and THOMAS C. WAJNERT, and each of them, as attorneys for his and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 23rd day of February, 1995. Edward M. Dwyer Senior Vice President, Chief Financial Officer and Treasurer STATE OF NEW JERSEY ) ) ss: COUNTY OF MORRIS ) On the 23rd day of February, 1995, personally appeared before me, Edward M. Dwyer to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 23rd day of February, 1995. /S/ Suzanne M. Queally Notary Public of New Jersey My commission expires June 23, 1998 (Seal) 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 23rd day of February, 1995. Ramon Oliu, Jr. Vice President and Controller STATE OF NEW JERSEY ) ) ss: COUNTY OF MORRIS ) On the 23rd day of February, 1995, personally appeared before me, Ramon Oliu, Jr., to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 23rd day of February, 1995. /S/ Suzanne M. Queally ________________________________ Notary Public of New Jersey My commission expires June 23, 1998 (Seal) 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 22nd day of February, 1995. John P. Clancey Director STATE OF NEW JERSEY ) ) ss: COUNTY OF SOMERSET ) On the 22nd day of February, 1995, personally appeared before me, John P. Clancey, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 22nd day of February, 1995. /S/ Annette M. Franklin ____________________________________ Notary Public of New Jersey My commission expires Jan. 30, 1997 (Seal) 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 24th day of February, 1995. James P. Kelly Director STATE OF GEORGIA ) ) ss: COUNTY OF FULTON ) On the 24th day of February, 1995 personally appeared before me, James P. Kelly, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 24th day of February, 1995. /S/ Mawanna Mone _______________________________________ Notary Public of Fulton County, Georgia My commission expires Feb. 8, 1997 (Seal) 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 24th day of February, 1995. Gerald M. Lowrie Director DISTRICT OF COLUMBIA ) ) ss: ) On the 24th day of February, 1995, personally appeared before me, Gerald M. Lowrie, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 24th day of February, 1995. /S/ Linda L. Monga Notary Public My commission expires May 31, 1998 (Seal) 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 22nd day of February, 1995. Alex J. Mandl Director STATE OF NEW JERSEY ) ) ss: COUNTY OF MORRIS ) On the 22nd day of February, 1995, personally appeared before me, Alex J. Mandl, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 22nd day of February, 1995. /S/ Marie A. Corona Notary Public of New Jersey My commission expires June 16, 1998 (Seal) 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 23rd day of February, 1995. Richard A. McGinn Director STATE OF NEW JERSEY ) ) ss: COUNTY OF MORRIS ) On the 23rd day of February, 1995, personally appeared before me, Richard A. McGinn, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 23rd day of February, 1995. /S/ Ingrid E. Loubriel Notary Public of New Jersey My commission expires July 6, 1997 (Seal) 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 23rd day of February, 1995. Joseph J. Melone Director STATE OF NEW YORK ) ) ss: COUNTY OF NEW YORK ) On the 23rd day of February, 1995, personally appeared before me, Joseph J. Melone, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 23rd day of February, 1995. /S/ Marie Peterson Notary Public, State of New York My commission expires Nov. 19, 1996 (Seal) 10 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 23rd day of February, 1995. Richard W. Miller Director STATE OF NEW JERSEY ) ) ss: COUNTY OF SOMERSET ) On the 23rd day of February, 1995, personally appeared before me, Richard W. Miller, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 23rd day of February, 1995. /S/ Marie A. Pope Notary Public of New Jersey My commission expires June 1998 (Seal) 11 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 28th day of February, 1995. S. Lawrence Prendergast Director STATE OF NEW JERSEY ) ) ss: COUNTY OF UNION ) On the 28th day of February, 1995, personally appeared before me, S. Lawrence Prendergast, to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 28th day of February, 1995. /S/ Joanne Cutcliff ___________________________ Notary Public of New Jersey My commission expires Feb. 16, 1999 (Seal) 12 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: WHEREAS, AT&T CAPITAL CORPORATION, a Delaware corporation (hereinafter referred to as the "Company"), proposes to file shortly with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, an annual report on Form 10-K; and WHEREAS, the undersigned is a director, an officer, or both an officer and a director of the Company, as indicated below, under his name: NOW, THEREFORE, the undersigned hereby constitutes and appoints RAMON OLIU, JR., EDWARD M. DWYER and THOMAS C. WAJNERT, and each of them, as attorneys for him and in his name, place and stead, and in each of his offices and capacities as a director, an officer, or both an officer and a director of the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendment or amendments thereto on Form 8, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises, including the use or transmission of any personal identification numbers assigned to the undersigned by the Securities and Exchange Commission, as fully, for all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 27th day of February, 1995. Brooks Walker, Jr. Director STATE OF CALIFORNIA ) ) ss: COUNTY OF SAN FRANCISCO ) On the 27th day of February, 1995, personally appeared before me, Brooks Walker, Jr., to me known, and known to me to be the person described in and who executed the foregoing instrument and duly acknowledged that he executed and delivered the same for the purpose therein expressed. WITNESS my hand and official seal this 27th day of February, 1995. /S/ Audrey S. Dodic Notary Public - California My commission expires Sept. 26, 1995 (Seal) EX-24 15 1 EXHIBIT 24(b) Form 10-K for 1994 File No. 1-11237 CERTIFICATE OF CORPORATE RESOLUTION I, Robert J. Ingato, an Assistant Secretary of AT&T Capital Corporation, hereby certify that the following resolutions were duly adopted by the Audit Committee of AT&T Capital Corporation's Board of Directors at a meeting held on March 1, 1995: RESOLVED: that the Company's annual report on Form 10-K for 1994 substantially in the form presented to the Committee at this meeting is approved, with such changes as the Chief Financial Officer may approve, provided that any material changes will also be approved by the General Counsel and the Chief Executive Officer and that the Audit Committee will be advised of any material changes made in the financial statements (or related notes) in the Form 10-K; and FURTHER RESOLVED: that the Chief Executive Officer, the Chief Financial Officer and the Controller are each severally authorized to sign the Form 10-K in the name and on behalf of the Company. Robert J. Ingato Dated: March 15, 1995 Robert J. Ingato EX-27 16
5 This schedule contains summary financial information primarily extracted from AT&T Capital Corporation's audited consolidated income statement and balance sheet for and at the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 54,464 0 0 (176,428) 0 0 0 (567,398) 8,021,923 0 3,379,581 470 0 0 1,007,748 8,021,923 126,567 1,384,079 116,995 430,578 427,187 80,888 271,812 173,614 73,278 100,336 0 0 0 100,336 2.14 2.14 This item is not applicable since the Company does not prepare a classified balance sheet. Accumulated depreciation relates to equipment under operating leases. *In accordance with Regulation S-K item 601(c) 2, inapplicable or immaterial financial data is reflected as zero value.
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