-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MAfULIO0idUSsJPq4e5BKXrs8OJzNyx1jelnJB+gMyjshpkAL8QXivxAdgOiSSPk IaqnQtPxqWQAi1NyY+7Bpw== 0000950117-96-001265.txt : 19961023 0000950117-96-001265.hdr.sgml : 19961022 ACCESSION NUMBER: 0000950117-96-001265 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19961021 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CAPITAL CORP /DE/ CENTRAL INDEX KEY: 0000897708 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 223211453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-11243 FILM NUMBER: 96645672 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITA PREFERRED FUNDING L P CENTRAL INDEX KEY: 0001021970 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-11243-01 FILM NUMBER: 96645673 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITA PREFERRED TRUST CENTRAL INDEX KEY: 0001021971 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-11243-02 FILM NUMBER: 96645674 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 S-3/A 1 AT&T CAPITAL CORPORATION S-3, AM #3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1996 REGISTRATION NO. 333-11243 ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ AT&T CAPITAL CORPORATION CAPITA PREFERRED FUNDING L.P. CAPITA PREFERRED TRUST (EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) IN SPECIFIED IN CERTIFICATE OF TRUST) CERTIFICATE OF LIMITED PARTNERSHIP) DELAWARE DELAWARE DELAWARE (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION) 22-3211453 22-3467161 22-3467159 (I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 44 WHIPPANY ROAD MORRISTOWN, NEW JERSEY 07962 (201) 397-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) ------------------------ ROBERT J. INGATO SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY AT&T CAPITAL CORPORATION 44 WHIPPANY ROAD MORRISTOWN, NEW JERSEY 07962 (201) 397-3000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: ANDREW R. KELLER RICHARD T. PRINS SIMPSON THACHER & BARTLETT GREGORY A. FERNICOLA 425 LEXINGTON AVENUE SKADDEN, ARPS, SLATE, MEAGHER & FLOM NEW YORK, NEW YORK 10017 919 THIRD AVENUE (212) 455-2000 NEW YORK, NEW YORK 10022 (212) 735-3000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this registration statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] ------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED PER UNIT OFFERING PRICE(1) FEE(2) Capita Preferred Trust Trust Originated Preferred Securities...................... 8,000,000 $25 $ 200,000,000 $ 60,607 Capita Preferred Funding L.P. Partnership Preferred Securities(3)................... 8,000,000 $25 $ 200,000,000 -- Guarantee of AT&T Capital Corporation with respect to Trust Preferred Securities(4)............................. -- -- -- -- Guarantee of AT&T Capital Corporation with respect to Partnership Preferred Securities(4)............................. -- -- -- -- Guarantees of AT&T Capital Corporation with respect to certain debentures of its wholly owned subsidiaries (the 'Affiliate Debentures')(4)........................... -- -- -- -- Subordinated Debenture of AT&T Capital Corporation(4) ........................... $ 200,000,000 -- $ 200,000,000 -- Totals................................. $ 60,607
(cover continued on next page) THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ________________________________________________________________________________ (footnotes from cover page) (1) Estimated solely for the pupose of determining the registration fee pursuant to Rule 457. (2) Previously paid. (3) The Partnership Preferred Securities will be purchased by Capita Preferred Trust with the proceeds of the sale of the Trust Preferred Securities, together with the proceeds received from AT&T Capital Corporation in respect of the common securities to be issued by Capita Preferred Trust. No separate consideration will be received for the Partnership Preferred Securities. (4) No separate consideration will be received for (i) guarantees of AT&T Capital Corporation with respect to the Trust Preferred Securities, the Partnership Preferred Securities or the Affiliate Debentures or (ii) the Subordinated Debenture. The Subordinated Debenture and the Affiliate Debentures will be purchased by Capita Preferred Funding L.P. with proceeds of the sale of the Partnership Preferred Securities, together with a capital contribution from AT&T Capital Corporation. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED OCTOBER 21, 1996 PROSPECTUS 8,000,000 TRUST PREFERRED SECURITIES CAPITA PREFERRED TRUST % TRUST ORIGINATED PREFERRED SECURITIES'SM' ('TOPrS'SM'') (LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY [LOGO] ------------------------ The % Trust Originated Preferred Securities'SM' (the 'TOPrS'SM'' or 'Trust Preferred Securities') offered hereby represent preferred undivided beneficial ownership interests in the assets of Capita Preferred Trust, a statutory business trust formed under the laws of the State of Delaware (the 'Trust'). AT&T Capital Corporation, a Delaware corporation (the 'Company' or 'AT&T Capital'), will own all the common securities (the 'Trust Common Securities' and, together with the Trust Preferred Securities, the 'Trust Securities') representing undivided beneficial ownership interests in the assets of the Trust. The Trust exists for the sole purpose of issuing the Trust Securities and investing the proceeds as described below and engaging in activities incident thereto. The proceeds from the sale of the Trust Securities will be used by the Trust to purchase Partnership Preferred Securities ('Partnership Preferred Securities'), representing the limited partnership interests of Capita Preferred Funding L.P., a Delaware limited partnership (the 'Partnership'). The general partnership interest, which constitutes all of the interest in the Partnership other than the limited partnership interests represented by the Partnership Preferred Securities, is owned by the Company, which is the sole general partner of the Partnership (in such capacity, the 'General Partner'). Substantially all of the proceeds from the sale of the Partnership Preferred Securities, together with the capital contribution from the General Partner, will be used by the Partnership to purchase the Debentures (as defined herein), which consist of debt instruments of the Company (continued on next page) SEE 'RISK FACTORS' BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE TRUST PREFERRED SECURITIES, INCLUDING CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The Trust Preferred Securities have been approved, subject to issuance, for listing on the New York Stock Exchange, Inc. (the 'New York Stock Exchange'). Trading of the Trust Preferred Securities on the New York Stock Exchange is expected to commence within a 30-day period after the initial delivery of the Trust Preferred Securities. See 'Underwriting.' ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4) - --------------------------------------------------------------------------------------------------------------- Per Trust Preferred Security............ $ (3) $ - --------------------------------------------------------------------------------------------------------------- Total................................... $ (3) $ - --------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from October , 1996. (2) The Trust, the Partnership and the Company have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See 'Underwriting.' (3) In view of the fact that the proceeds of the sale of the Trust Preferred Securities will be ultimately invested in investment instruments of the Company and its eligible controlled affiliates, the Company has agreed to pay to the Underwriters as compensation (the 'Underwriters' Compensation') $ per Trust Preferred Security (or $ in the aggregate); provided that such compensation for sales of or more Trust Preferred Securities to a single purchaser will be $ per Trust Preferred Security. Therefore, to the extent of such sales, the actual amount of Underwriters' Compensation will be less than the aggregate amount specified in the preceding sentence. See 'Underwriting.' (4) Expenses of the offering which are payable by the Company are estimated to be $1,138,907, of which $200,000 will be reimbursed by, and certain additional expenses related to the offering will be paid for by, the Underwriters. ------------------------ The Trust Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Trust Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company ('DTC') on or about , 1996. ------------------------ MERRILL LYNCH & CO. GOLDMAN, SACHS & CO. LEHMAN BROTHERS PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED ------------------------ The date of this Prospectus is , 1996 'SM'Trust Originated Preferred Securities' and 'TOPrS' are service marks of Merrill Lynch & Co., Inc. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. (continued from cover page) and certain of its domestic eligible controlled affiliates. In addition, approximately one percent of the proceeds from the sale of the Partnership Preferred Securities and the capital contribution from the General Partner will be used to purchase certain U.S. government obligations and commercial paper of entities not affiliated with the Company (the 'Eligible Debt Securities'). See 'Description of the Partnership Preferred Securities -- Partnership Investments.' Holders of the Trust Preferred Securities will be entitled to receive cumulative cash distributions accruing from the date of original issuance and payable quarterly in arrears on each March 31, June 30, September 30, and December 31, commencing December 31, 1996 at an annual rate of % of the liquidation amount of $25 per Trust Preferred Security (equivalent to $ per Trust Preferred Security) if, as and when the Trust has funds available for payment. See 'Description of the Trust Preferred Securities -- Distributions.' Distributions not paid on the scheduled payment date will accumulate and compound quarterly at a rate per annum equal to %. The distribution rate and the distribution payment dates and other payment dates for the Trust Preferred Securities will correspond to the distribution rate and distribution payment dates and other payment dates for the Partnership Preferred Securities, which constitute the sole assets of the Trust. As described above, the assets of the Partnership will initially consist only of the Debentures and, to a limited extent, Eligible Debt Securities. The payment of distributions by the Trust and payments on liquidation of the Trust or the redemption of Trust Preferred Securities, as described below, are guaranteed by the Company (the 'Trust Guarantee') to the extent the Trust has funds available therefor as described under 'Description of the Trust Guarantee.' The payment of distributions by the Partnership (if, as and when declared) and payments on liquidation of the Partnership or the redemption of Partnership Preferred Securities, as described below, are also guaranteed by the Company (the 'Partnership Guarantee') to the extent the Partnership has funds available therefor as described under 'Description of the Partnership Guarantee.' In addition, payments in respect of the Debentures (other than the Company Debenture (as defined herein)) are fully and unconditionally guaranteed, on a subordinated basis, by the Company (the 'Investment Guarantees') for the benefit of the holders of the Partnership Preferred Securities. The Trust Guarantee, the Partnership Guarantee and the Investment Guarantees (collectively, the 'Guarantees'), when taken together with the Company Debenture and the Company's obligations to pay all fees and expenses of the Trust and the Partnership, constitute a guarantee to the extent set forth herein by the Company of the distribution, redemption and liquidation payments payable to the holders of the Trust Preferred Securities. Unlike other TOPrS transactions, however, the Guarantees do not apply to current distributions by the Partnership unless and until such distributions are declared by the Partnership out of funds legally available for payment or to liquidating distributions unless there are assets available for payment in the Partnership, each as more fully described in the next succeeding paragraph and under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership.' The Company's obligations under the Guarantees are subordinate and junior in right of payment to all other liabilities of the Company and rank pari passu with the most senior preferred stock issued from time to time by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred stock of any affiliate of the Company and its obligations under the Company Debenture are subordinate and junior in right of payment to all senior indebtedness of the Company. At September 30, 1996, the Company had outstanding consolidated senior indebtedness aggregating approximately $7.9 billion, which would have ranked senior to the Company's obligations under the Guarantees and the Company Debenture. See 'Risk Factors -- Risk Factors Related to TOPrS -- Ranking of Subordinate Obligations Under the Guarantees and the Company Debenture.' Distributions on the Partnership Preferred Securities will be declared and paid only as determined in the sole discretion of the Company in its capacity as the General Partner of the Partnership. In addition, the General Partner is not obligated to declare distributions on the Partnership Preferred Securities at any time, including upon or following a Partnership Enforcement Event (as defined herein). To the extent that the issuers (including, where applicable, the Company, as guarantor) of the securities in which the Partnership invests fail to make any payments in respect of such securities (or, if applicable, guarantees), the Partnership will not have sufficient funds to pay and will not declare or pay 2 distributions on the Partnership Preferred Securities. In addition, as described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' the Partnership may not have sufficient funds to pay current or liquidating distributions on the Partnership Preferred Securities if (i) at any time that the Partnership is receiving current payments in respect of the securities held by the Partnership (including the Debentures), the General Partner, in its sole discretion, does not declare distributions on the Partnership Preferred Securities and the Partnership receives insufficient amounts to pay the additional compounded distributions that will accrue in respect of the Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds received in respect of the Debentures upon their retirement or at their maturities in Affiliate Investment Instruments and Eligible Debt Securities that do not generate income in an amount that is sufficient to pay full distributions in respect of the Partnership Preferred Securities or (iii) the Partnership invests in equity or debt securities of Investment Affiliates that are not guaranteed by the Company and that cannot be liquidated by the Partnership for an amount sufficient to pay such distributions in full. If the Partnership does not declare and pay distributions on the Partnership Preferred Securities out of funds legally available for distribution, the Trust will not have sufficient funds to make distributions on the Trust Preferred Securities, in which event the Trust Guarantee will not apply to such distributions until the Trust has sufficient funds available therefor. See 'Risk Factors -- Risk Factors Related to TOPrS -- Distributions Payable Only if Declared by General Partner; Restrictions on Certain Payments; Tax Consequences,' ' -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' 'Description of the Trust -- Preferred Securities -- Distributions' and 'Description of the Partnership Preferred Securities-Distributions.' If (a) for any distribution period, full distributions on a cumulative basis on any Trust Preferred Securities have not been paid, (b) an Investment Event of Default by any Investment Affiliate in respect of any Affiliate Investment Instrument (each as defined herein) has occurred and is continuing or (c) the Company is in default of its obligations under any Guarantee, then during such period the Company shall not, nor permit any majority owned subsidiary to (i) declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its capital stock or comparable equity interest (except for dividends or distributions in shares of its capital stock, conversions or exchanges of common stock of one class into common stock of another class and distributions with respect to the Partnership or the Trust or dividends and distributions on the common stock of wholly owned subsidiaries of the Company), (ii) make, or permit the making of, any Affiliated Restricted Payments except for Permissible Affiliated Payments (each as defined herein), and (iii) make any guarantee payments with respect to the foregoing. The Partnership Preferred Securities are redeemable by the Partnership, in whole or in part, from time to time, on or after September 30, 2006 at an amount per Partnership Preferred Security equal to $25 plus accrued and unpaid distributions thereon. The Partnership Preferred Securities may also be redeemed, in whole but not in part, at any time upon the occurrence of a Partnership Special Event (as defined herein). If the Partnership redeems the Partnership Preferred Securities, the Trust must redeem Trust Securities on a pro rata basis having an aggregate liquidation amount equal to the aggregate principal amount of the Partnership Preferred Securities so redeemed at a redemption price corresponding to the redemption price of the Partnership Preferred Securities (which includes all accrued and unpaid distributions thereon to the date fixed for redemption) (the 'Redemption Price'). See 'Description of the Trust Preferred Securities -- Mandatory Redemption.' Neither the Partnership Preferred Securities nor the Trust Preferred Securities have any scheduled maturity or are redeemable at any time at the option of the holders thereof. The Trust will be dissolved upon the occurrence of a Trust Special Event (as defined herein). Upon dissolution of the Trust, the Partnership Preferred Securities will be distributed to the holders of the Trust Securities, on a pro rata basis, in lieu of any cash distribution, unless the Partnership Preferred Securities are redeemed in the limited circumstances described herein. If the Partnership Preferred Securities are distributed to the holders of the Trust Securities, the Company will use its best efforts to cause the Partnership Preferred Securities to be listed on the New York Stock Exchange or such other national securities exchange or similar organization as the Trust Preferred Securities are then listed or quoted. See 'Description of the Trust Preferred Securities -- Trust Special Event Redemption or Distribution' and 'Description of the Partnership Preferred Securities.' 3 In the event of any liquidation, dissolution, winding up or termination of the Trust, the holders of the Trust Preferred Securities will be entitled to receive for each Trust Preferred Security a liquidation amount of $25 plus accrued and unpaid distributions thereon, except to the extent, in connection with such dissolution, Partnership Preferred Securities are distributed to the holders of the Trust Preferred Securities. Upon (i) the occurrence of an Investment Event of Default by an Investment Affiliate (including the Company) in respect of any Affiliate Investment Instrument or (ii) default by the Company on any of its obligations under any Guarantee, the holders of the Trust Preferred Securities will have a preference over the holders of the Trust Common Securities with respect to payments upon liquidation of the Trust. Under no circumstances will the investment instruments held by the Partnership be distributed in kind to the holders of the Trust Preferred Securities or Partnership Preferred Securities. See 'Description of the Trust Preferred Securities -- Liquidation Distribution Upon Dissolution.' IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION The Company, the Trust and the Partnership have filed with the Securities and Exchange Commission (the 'Commission') a Registration Statement on Form S-3 (the 'Registration Statement,' which term shall include all amendments, exhibits and schedules thereto), pursuant to the Securities Act of 1933, as amended (the 'Securities Act'), and the rules and regulations promulgated thereunder, with respect to the Trust Preferred Securities offered hereby (as well as the Partnership Preferred Securities, the Trust Guarantee and the Partnership Guarantee). This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission, and to which reference is hereby made. The Company is subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance therewith files periodic reports and other information with the Commission. Except for the listing of Trust Preferred Securities that is expected to be made on the New York Stock Exchange, none of the Trust, the Partnership or the Company has any securities that are listed on any national securities exchange. The Registration Statement, as well as such reports and other information filed by the Company with the Commission, may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, copies of such material can be obtained from the Commission's Web Site (http://www.sec.gov). Such reports and other information concerning the Company are also available for inspection at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company beneficially owns all of the Partnership's partnership interests (other than the Partnership Preferred Securities, which are held by the Property Trustee (as defined herein) for the benefit of the holders of Trust Preferred Securities) and beneficially owns all of the undivided beneficial interests in the assets of the Trust (other than the beneficial interests represented by the Trust Preferred Securities). See 'Capita Preferred Trust,' 'Capita Preferred Funding L.P.,' 'Description of the Trust Preferred Securities' and 'Description of the Partnership Preferred Securities.' In future filings under the Exchange Act, a footnote to the Company's annual financial statements will state that the Trust and the Partnership are consolidated with the Company, that the sole assets of the Trust are the Partnership 4 Preferred Securities, that the sole assets of the Partnership are the Affiliate Investment Instruments and the Eligible Debt Securities and that the Guarantees, when taken together with the Company Debenture and the Company's obligations to pay all fees and expenses of the Trust and the Partnership, constitute a guarantee to the extent set forth herein by the Company of the distribution, redemption and liquidation payments payable to the holders of the Trust Preferred Securities. The Guarantees do not apply, however, to current distributions by the Partnership unless and until such distributions are declared by the Partnership out of funds legally available for payment or to liquidating distributions unless there are assets available for payment in the Partnership, each as more fully described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership.' Statements made in this Prospectus concerning the provisions of any contract, agreement or other document referred to herein are not necessarily complete. With respect to each such statement concerning a contract, agreement or other document filed as an exhibit to the Registration Statement or otherwise filed with the Commission, reference is made to such exhibit or other filing for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed by the Company with the Commission and are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the '1995 Form 10-K'); (2) The Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1996 and June 30, 1996; and (3) The Company's Current Reports on Form 8-K dated April 12, 1996, April 30, 1996, June 6, 1996, August 20, 1996 and October 1, 1996. The Company will provide without charge to each person, including any beneficial owner of such person, to whom this Prospectus is delivered, upon written or oral request, a copy of any and all information incorporated by reference in this Prospectus (not including exhibits to the information that has been incorporated by reference, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Such requests should be directed to AT&T Capital Corporation, 44 Whippany Road, Morristown, NJ 07962-1983 (Telephone Number 201-397-4444), Attention of the Investor Relations Department. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Trust Preferred Securities shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements and notes thereto appearing elsewhere or incorporated by reference in this Prospectus. The Company operates through its business units, which consist of its various subsidiaries and divisions within such subsidiaries. Unless the context requires otherwise, as used herein, the term the 'Company' or 'AT&T Capital' includes such business units. Certain terms used in this Summary are defined elsewhere in this Prospectus. See 'Index of Defined Terms' for a cross reference to the location in this Prospectus where such terms are defined. THE COMPANY AT&T Capital Corporation ('AT&T Capital' or the 'Company') is a full-service, diversified equipment leasing and finance company that operates principally in the United States and also has operations in Europe, Canada, the Asia/Pacific Region and Latin America. The Company is one of the largest equipment leasing and finance companies in the United States and is the largest lessor of telecommunications equipment in the United States, in each case, based on the aggregate value of equipment leased or financed. AT&T Capital, through its various subsidiaries, leases and finances a wide variety of equipment, including general office, manufacturing and medical equipment, telecommunications equipment (such as private branch exchanges, telephone systems and voice processing units), information technology equipment (such as personal computers, retail point of sale systems and automatic teller machines) and transportation equipment (primarily vehicles). In addition, AT&T Capital provides inventory financing for equipment dealers, franchise financing for franchisees and financing collateralized by real estate. At December 31, 1995, the percentage of the Company's total assets in each of its various asset categories was as follows: 28% were comprised of general office, manufacturing and medical equipment; 23% were comprised of telecommunications equipment; 23% were comprised of information technology equipment; 19% were comprised of transportation equipment; and 7% were comprised of Small Business Administration loans and other financings collateralized by real estate and other assets. The Company's leasing and financing services are marketed (i) to customers of equipment manufacturers, distributors and dealers with which the Company has a marketing relationship for financing services and (ii) directly to end-users of equipment. The Company's approximately 500,000 customers include large global companies, small and mid-sized businesses and federal, state and local governments and their agencies. During its eleven year history, the Company has achieved significant growth in assets, finance volume (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 and asset-based lending transactions), revenues and net income. At December 31, 1995, the Company's total assets were $9.5 billion, an increase of 18.9% over the prior year-end; finance volume for 1995 was $4.6 billion, an increase of 7.4% over 1994; total revenues for 1995 were $1.6 billion, an increase of 13.9% over 1994; and net income of $127.6 million for 1995 was 27.1% greater than the Company's net income for 1994. Total assets at the end of the third quarter of 1996 were $10.3 billion, representing a 7.4% increase over total assets at the end of 1995, and net income of $115.3 million for the first nine months of 1996 represented an increase of 34.9% over the net income for the corresponding period in 1995. AT&T Capital has two broad business strategies: (i) to enhance its position as a leader in providing leasing and financing services that are marketed to customers of equipment manufacturers, distributors and dealers ('vendors') with whom the Company has a marketing relationship for financing services (the Company's 'Global Vendor Finance' strategy); and (ii) to establish itself as a leader in providing leasing, financing and related services that are marketed directly to end-users of equipment, including customers of the Company's Global Vendor Finance marketing activities (e.g., end-users acquiring general equipment for which the Company previously financed telecommunications equipment), as well as customers of vendors with whom the Company does not have a marketing relationship for financing services (the Company's 'Direct Customer Finance' strategy). For the year ended December 31, 1995, 6 the percentage of the Company's aggregate finance volume derived from the Company's Global Vendor Finance and Direct Customer Finance programs was 58% and 42%, respectively. AT&T Capital seeks to implement its strategies by taking advantage of what it believes are its competitive strengths: (i) high-volume processing capabilities that enable it to serve a large number of customers in a timely and efficient manner; (ii) significant experience in structuring and managing Global Vendor Finance and Direct Customer Finance programs tailored to specific customer needs; (iii) risk management skills (including initial credit review and residual value assessment and continuing portfolio management capabilities); (iv) asset management skills (including equipment remarketing skills that enhance the ability of the Company to realize the residual values of its equipment); and (v) financial structuring capabilities. See 'Business of the Company -- Certain Business Skills.' The Company was founded in 1985 by AT&T Corp. ('AT&T') as a captive finance company to assist AT&T's equipment marketing and sales efforts by providing its customers with sophisticated financing. AT&T Capital has operated independently since its initial public offering (the 'IPO') in 1993. Consequently, the Company believes that the disposition by AT&T of its remaining ownership of the Company's Common Stock, par value $.01 per share (the 'Common Stock') as a result of the Merger referred to below will not have a material impact on the manner in which the Company conducts its business operations, except that following the Merger, the Company anticipates that significant changes in the Company's financing strategy will be implemented. In particular, the Company anticipates that approximately 30% of its financing volume originated each year may be securitized annually pursuant to off-balance sheet securitization transactions. See 'Business of the Company -- Business Strategy.' The Company has a management team with significant experience with the Company and in the equipment leasing and finance industry. At September 30, 1996, the Company and its subsidiaries had approximately 2,900 employees. The principal executive offices of the Company are located at 44 Whippany Road, Morristown, New Jersey 07962. THE MERGER On October 1, 1996, the Company consummated a merger (the 'Merger') with Antigua Acquisition Corporation, a recently formed Delaware corporation ('Merger Sub'), pursuant to an Agreement and Plan of Merger (the 'Merger Agreement') among AT&T, the former indirect owner of approximately 86% of the outstanding Common Stock of the Company, Hercules Limited, a recently formed Cayman Islands corporation ('Holdings'), and Merger Sub, a majority-owned subsidiary of Holdings. Pursuant to the Merger Agreement, Merger Sub was merged with and into the Company, with the Company continuing its corporate existence under Delaware law as the surviving corporation. All of the outstanding common equity capital of the Company is currently directly or indirectly owned by members of a leasing consortium (the 'Leasing Consortium') consisting of (i) certain members of the Company's management (the 'Management Investors'), including Thomas C. Wajnert, Chairman of the Board and Chief Executive Officer of the Company, and approximately 23 other members of the Company's senior management, and (ii) GRS Holding Company Limited, a private United Kingdom holding corporation engaged in the U.K. rail leasing business ('GRSH'). Following the consummation of the Merger and the related transactions, the Management Investors own 3.3% of the Common Stock (or approximately 5.5% on a fully diluted basis) and GRSH indirectly owns 96.7% of the Common Stock (or approximately 94.5% on a fully diluted basis). GRSH, in turn, is 85% beneficially owned by Nomura International plc, a wholly owned subsidiary of The Nomura Securities Co., Ltd. ('Nomura'), and 9.5% beneficially owned by Babcock & Brown Holdings Inc., a San Francisco based leasing, asset and project financing advisory company ('Babcock & Brown'), in each case, through instruments convertible into GRSH's capital stock. The principal activities of Nomura, which was founded in 1925 in Osaka, Japan and is currently Japan's largest securities brokerage house, include securities brokerage, trading, investment banking and commercial banking in global financial markets. 7 Following the Merger, on October 15, 1996, a newly established trust sponsored by the Company issued and sold equipment receivable-backed securities in an off-balance sheet securitization which generated net proceeds to the Company of approximately $2.6 billion which proceeds, together with the equity contributions relating to the Merger (approximately $0.9 billion), were used to repay short-term notes, including approximately $1.3 billion of short-term obligations incurred by the Company to finance a portion of the aggregate consideration paid in respect of the Merger. See 'The Merger' for a description of certain pro forma financial data after giving effect to the Merger and the related transactions, including such securitization by the Company. RELATIONSHIP WITH AT&T ENTITIES In September 1995, AT&T announced plans to separate itself into three publicly traded companies (AT&T, Lucent Technologies Inc. ('Lucent') and NCR Corporation ('NCR') (collectively, the 'AT&T Entities')) and to dispose of its approximately 86% equity interest in the Company to the general public or another company (the 'AT&T Restructuring'). Pursuant to the AT&T Restructuring, the Company consummated the Merger which resulted in, among other things, the disposition by AT&T of its remaining equity interest in the Company. See 'The Merger.' On September 30, 1996, AT&T spun off its entire remaining interest in Lucent to AT&T's shareholders. Lucent's businesses involve the manufacture and distribution of public telecommunications systems, business communications systems, micro-electronic components, and consumer telecommunications products. In addition, AT&T has announced that it intends to distribute to its shareholders all of its interest in NCR by the end of 1996. NCR's businesses involve the manufacture and distribution of information technology equipment, including automatic teller machines and point-of-sale terminal equipment. In connection with the Company's IPO in 1993, the Company entered into a series of agreements with AT&T to formalize the relationship between the two companies, including the following three significant agreements, each dated as of June 25, 1993: (i) an Operating Agreement (the 'AT&T Operating Agreement'), (ii) an Intercompany Agreement (the 'Intercompany Agreement') and (iii) a License Agreement (the 'License Agreement'). The Company has executed agreements comparable to the AT&T Operating Agreement with each of Lucent and NCR (the 'Additional Operating Agreements' and, together with the AT&T Operating Agreement, the 'Operating Agreements'). In addition, the Company has entered into letter agreements (the 'Agreement Supplements') with Lucent and NCR pursuant to which Lucent and NCR have agreed that various provisions of the Intercompany Agreement and the License Agreement shall apply equally to them. The initial term of each of the Operating Agreements, the Intercompany Agreement, the License Agreement and the Agreement Supplements is scheduled to end on August 4, 2000. In addition, AT&T has the right under the License Agreement, after two years' prior notice, to require the Company to discontinue use of the 'AT&T' trade name as part of the Company's corporate or 'doing business' name. For additional details with respect to the terms of each of the Operating Agreements, the Intercompany Agreement, the License Agreement and the Agreement Supplements, see 'Relationship with AT&T Entities.' In 1995, approximately 41% and 76% of the Company's total revenues and net income, respectively, were attributable, directly or indirectly, to AT&T Entities. See 'Risk Factors -- Changes in Relationship with AT&T Entities -- Revenues and Net Income Attributable to AT&T Entities' for a description of the Company's dependence on the revenue and net income attributable to the Company's relationship with the AT&T Entities and their customers and employees. 8 THE OFFERING The Trust.................................... Capita Preferred Trust, a Delaware statutory business trust. The sole assets of the Trust will be the Partnership Preferred Securities. The Partnership.............................. Capita Preferred Funding L.P., a Delaware limited partnership. The assets of the Partnership will initially consist of the Debentures and, to a limited extent, certain Eligible Debt Securities. Securities Offered........................... 8,000,000 of % Trust Preferred Securities. Distributions................................ Distributions on the Trust Preferred Securities will accrue from the date of original issuance of the Trust Preferred Securities and will be payable at the annual rate of % of the liquidation amount of $25 per Trust Preferred Security if, as, and when the Trust has funds available for payment. Distributions will be payable quarterly in arrears on each March 31, June 30, September 30, and December 31, commencing December 31, 1996. Distributions not made on the scheduled payment date will accumulate and compound quarterly at a rate per annum equal to %. The ability of the Trust to pay distributions on the Trust Preferred Securities is entirely dependent on its receipt of corresponding distributions with respect to the Partnership Preferred Securities. The ability of the Partnership to pay distributions on the Partnership Preferred Securities is, in turn, dependent on its receipt of payments with respect to the Debentures and the Eligible Debt Securities held by the Partnership. Distributions on the Partnership Preferred Securities will be declared and paid only as determined in the sole discretion of the Company in its capacity as the General Partner of the Partnership. See 'Risk Factors -- Risk Factors Related to TOPrS -- Distributions Payable Only if Declared by General Partner; Restrictions on Certain Payments; Tax Consequences,' 'Description of the Trust Preferred Securities -- Distributions' and 'Description of the Partnership Preferred Securities -- Distributions' and ' -- Partnership Investments.' Rights Upon Non-Payment of Distributions and Certain Defaults; Covenants of the Company.................................... If, at any time, (i) arrearages on distributions on the Trust Preferred Securities shall exist for six consecutive quarterly distribution periods, (ii) an Investment Event of Default occurs and is continuing on any Affiliate Investment Instrument or (iii) the Company is in default on any of its obligations under the Trust Guarantee, then (a) the Property Trustee, as the holder of the Partnership Preferred Securities, will have the right to enforce the terms of the Partnership Preferred Securities, including the right to direct the Special Representative (as defined herein) to enforce (1) the Partnership's creditors' rights and other rights with respect to the Affiliate Investment
9 Instruments and the Investment Guarantees and (2) the rights of the holders of the Partnership Preferred Securities to receive distributions (only if, as and when declared) on the Partnership Preferred Securities, and (b) the Trust Guarantee Trustee or the Special Representative, as the holders of the Trust Guarantee and the Partnership Guarantee, respectively, shall have the right to enforce such Guarantees, including the right to enforce the covenant restricting certain payments by the Company and its majority owned subsidiaries described below. Under no circumstances, however, shall the Special Representative have authority to cause the General Partner to declare distributions on the Partnership Preferred Securities. If the Partnership does not declare and pay distributions on the Partnership Preferred Securities out of funds legally available for distribution, the Trust will not have sufficient funds to make distributions on the Trust Preferred Securities. See 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' 'Description of the Trust Preferred Securities -- Trust Enforcement Events' and 'Description of the Partnership Preferred Securities -- Partnership Enforcement Events.' The Company has agreed that if (a) for any distribution period, full distributions on a cumulative basis on any Trust Preferred Securities have not been paid, (b) an Investment Event of Default by any Investment Affiliate in respect of any Affiliate Investment Instrument has occurred and is continuing or (c) the Company is in default of its obligations under the Trust Guarantee, the Partnership Guarantee or any Investment Guarantee, then, during such period the Company shall not, nor permit any majority owned subsidiary to (i) declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its capital stock or comparable equity interest (except for dividends or distributions in shares of its capital stock, conversions or exchanges of common stock of one class into common stock of another class and dividends, distributions with respect to the Partnership or the Trust or dividends and distributions on the common stock of wholly owned subsidiaries of the Company), (ii) make, or permit the making of, any Affiliated Restricted Payments except for Permissible Affiliated Payments and (iii) make any guarantee payments with respect to the foregoing. Liquidation Amount........................... In the event of any liquidation of the Trust, holders will be entitled to receive $25 per Trust Preferred Security plus an amount equal to any accrued and unpaid distributions thereon to the date of payment (such amount being the 'Trust Liquidation Distribution'), unless Partnership Preferred Securities are distributed to such holders in
10 connection with a Trust Special Event. If upon a liquidation of the Trust (in which the Partnership Preferred Securities are not distributed to holders of the Trust Securities), the Trust Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Trust Liquidation Distribution, then the amounts payable directly by the Trust on the Trust Preferred Securities shall be paid on a pro rata basis. The holders of the Trust Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Trust Preferred Securities, except that upon (i) the occurrence of an Investment Event of Default by an Investment Affiliate (including the Company) in respect of any Affiliate Investment Instrument or (ii) default by the Company on any of its obligations under any Guarantee, the holders of the Trust Preferred Securities will have a preference over the holders of the Trust Common Securities with respect to payments upon liquidation of the Trust. See 'Description of the Trust Preferred Securities -- Liquidation Distribution Upon Dissolution.' Optional Redemption.......................... The Partnership Preferred Securities will be redeemable for cash, at the option of the Partnership, in whole or in part, from time to time, after September 30, 2006, at an amount per Partnership Preferred Security equal to $25 plus accrued and unpaid distributions thereon. Upon any redemption of the Partnership Preferred Securities, the Trust Preferred Securities will be redeemed at the Redemption Price. See 'Description of the Partnership Preferred Securities -- Optional Redemption' and 'Description of the Trust Preferred Securities -- Mandatory Redemption.' Neither the Partnership Preferred Securities nor the Trust Preferred Securities have any scheduled maturity or are redeemable at any time at the option of the holders thereof. Guarantees................................... The Company will irrevocably guarantee, on a subordinated basis, the payment in full of (i) any accrued and unpaid distributions on the Trust Preferred Securities to the extent of funds of the Trust available therefor, (ii) the amount payable upon redemption of the Trust Preferred Securities to the extent of funds of the Trust available therefor and (iii) generally, the liquidation amount of the Trust Preferred Securities to the extent of the assets of the Trust available for distribution to holders of Trust Preferred Securities. See 'Description of the Trust Guarantee.' The Company will also irrevocably guarantee, on a subordinated basis and to the extent set forth herein, the payment in full of (i) any accrued and unpaid distributions on the Partnership Preferred Securities if, as and when declared out of funds legally available therefor, (ii) the amount payable upon redemption of the
11 Partnership Preferred Securities to the extent of funds of the Partnership legally available therefor and (iii) generally, the liquidation amount of the Partnership Preferred Securities to the extent of the assets of the Partnership available for distribution to holders of Partnership Preferred Securities. See 'Description of the Partnership Guarantee.' The Company will fully and unconditionally guarantee, on a subordinated basis, payments in respect of the Debentures (other than the Company Debenture) for the benefit of the holders of the Partnership Preferred Securities, to the extent described under 'Description of the Partnership Preferred Securities -- Investment Guarantees.' The Guarantees, when taken together with the Company Debenture and the Company's obligations to pay all fees and expenses of the Trust and the Partnership, constitute a guarantee to the extent set forth herein by the Company of the distribution, redemption and liquidation payments payable to the holders of the Trust Preferred Securities. The Guarantees do not apply, however, to current distributions by the Partnership unless and until such distributions are declared by the Partnership out of funds legally available for payment or to liquidating distributions unless there are assets available for payment in the Partnership, each as more fully described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership.' The Company's obligations under the Guarantees are subordinate and junior in right of payment to all other liabilities of the Company and rank pari passu with the most senior preferred stock issued from time to time by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred stock of any affiliate of the Company. Voting Rights................................ Generally, holders of the Trust Preferred Securities will not have any voting rights. The holders of a majority in liquidation amount of the Trust Preferred Securities, however, have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as holder of the Partnership Preferred Securities, (i) to exercise its rights in the manner described above under 'Rights Upon Non-Payment of Distributions and Certain Defaults; Covenants of the Company' and (ii) to consent to any amendment, modification or termination of the Limited Partnership Agreement or the Partnership Preferred Securities where such consent shall be required. See 'Description of the Trust Preferred Securities -- Voting Rights.'
12 Special Event Redemptions or Distributions... Upon the occurrence of a Trust Tax Event (which event will generally be triggered upon the occurrence of certain adverse tax consequences or the denial of an interest deduction on the Debentures held by the Partnership) or a Trust Investment Company Event (which event will generally be triggered if the Trust is considered an 'investment company' under the Investment Company Act of 1940, as amended (the '1940 Act')), except in certain limited circumstances, the Regular Trustees (as defined herein) will have the right to liquidate the Trust and cause Partnership Preferred Securities to be distributed to the holders of the Trust Preferred Securities. In certain circumstances involving a Partnership Tax Event (which event will generally be triggered upon the occurrence of certain adverse tax consequences or the denial of an interest deduction on the Debentures held by the Partnership) or a Partnership Investment Company Event (which event will generally be triggered if the Partnership is considered an 'investment company' under the 1940 Act), the Partnership will have the right to redeem the Partnership Preferred Securities, in whole (but not in part), at $25 per Partnership Preferred Security plus accrued and unpaid distributions thereon, in lieu of a distribution of the Partnership Preferred Securities, in which event the Trust Securities will be redeemed at the Redemption Price. See 'Description of the Trust Preferred Securities -- Trust Special Event Redemption or Distribution' and 'Description of the Partnership Preferred Securities -- Partnership Special Event Redemption.' Form of Trust Preferred Securities........... The Trust Preferred Securities will be represented by a global certificate or certificates registered in the name of Cede & Co., as nominee for DTC. Beneficial interests in the Trust Preferred Securities will be evidenced by, and transfers thereof will be effected only through, records maintained by the participants in DTC. Except as described herein, Trust Preferred Securities in certificated form will not be issued in exchange for the global certificate or certificates. See 'Description of the Trust Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company.' Use of Proceeds.............................. All of the proceeds from the sale of the Trust Securities will be invested by the Trust in the Partnership Preferred Securities. The Partnership will use the funds to make investments in the Debentures and, to a limited extent, certain Eligible Debt Securities. See 'Use of Proceeds.'
13 SUMMARY FINANCIAL DATA The Results of Operations Data, the Balance Sheet Data and the Other Data shown below at or for the years ended December 31, 1995, 1994 and 1993 are derived from the Consolidated Financial Statements of the Company at such dates or for such periods, which have been audited by Coopers & Lybrand L.L.P., independent accountants. Such data at or for the nine months ended September 30, 1996 and 1995 are derived from unaudited consolidated financial information. In management's opinion, the Company's unaudited consolidated financial statements at or for the nine months ended September 30, 1996 and 1995 include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results for the entire year or any other interim period. The summary financial data as presented below 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 incorporated by reference in this Prospectus. The Company's unaudited consolidated financial information at or for the nine months ended September 30, 1996 does not include the effects of the Merger and related transactions. For a description of the significant impact of the Merger and related transactions on the Company's financial position and results of operations, see 'The Merger.' For a description of certain increased annual costs that the Company expects to incur as a result of the Merger, see 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company.'
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ----------------------- ------------------------------------ 1996 1995 1995 1994 1993 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) RESULTS OF OPERATIONS DATA: Total revenues................ $1,370,494 $1,140,651 $1,577,035 $1,384,079 $1,359,589 Interest expense.............. 350,359 300,891 411,040 271,812 236,335 Operating and administrative expenses.................... 375,172 351,443 473,663 427,187 381,515 Provision for credit losses... 71,454 60,359 86,214 80,888 123,678 Income before income taxes and cumulative effect on prior years of accounting change...................... 182,496 143,276 208,239 173,614 138,040 Income before cumulative effect on prior years of accounting change and impact of tax rate change.......... 115,290 85,466 127,555 100,336 83,911 Cumulative effect on prior years of accounting change(1)................... -- -- -- -- (2,914) Impact of 1993 tax rate change(1)................... -- -- -- -- (12,401) Net income(1)................. 115,290 85,466 127,555 100,336 68,596 Earnings per share(1)......... 2.43 1.82 2.70 2.14 1.60
AT SEPTEMBER 30, AT DECEMBER 31, ---------------- ------------------------------------ 1996 1995 1994 1993 ---------------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Total assets.................. $ 10,251,600 $9,541,259 $8,021,923 $6,409,726 Total debt(2)................. 7,917,926 6,928,409 5,556,458 4,262,405 Total liabilities(2).......... 9,033,798 8,425,134 7,013,705 5,485,283 Total shareowners' equity..... 1,217,802 1,116,125 1,008,218 924,443
(table continued on next page) 14
AT OR FOR THE AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ---------------------------------- ----------------------------------- 1996 1995 1995 1994 1993 ---------------- ---------------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) OTHER DATA: Ratio of earnings to fixed charges(3).................. 1.51x 1.47x 1.50x 1.62x 1.57x Ratio of total debt to shareowners' equity(4)...... 6.50x 6.07x 6.22x 5.51x 4.61x Return on average equity(5)(7)................ 13.2% 11.0% 12.1% 10.5% 8.5% Return on average assets(6)(7)................ 1.6% 1.3% 1.5% 1.4% 1.1% Portfolio Assets of the Company..................... $ 10,041,020 $ 8,892,895 $9,328,623 $7,661,226 $6,236,624 Allowance for credit losses... 235,205 214,711 223,220 176,428 159,819 Net Portfolio Assets of the Company..................... 9,805,815 8,678,184 9,105,403 7,484,798 6,076,805 Assets of others managed by the Company................. 2,159,316 2,428,924 2,214,502 2,659,526 2,795,663 Volume of equipment financed(8)................. 3,780,000 3,088,790 4,567,000 4,251,000 3,467,000 Ratio of allowance for credit losses to net charge-offs(9).............. 3.08x 4.22x 4.77x 3.18x 2.71x Ratio of net charge-offs to Portfolio Assets(9)......... 0.76% 0.57 0.50% 0.73% 0.95% Ratio of allowance for credit losses to Portfolio Assets...................... 2.34% 2.41% 2.39% 2.30% 2.56% Ratio of operating and administrative expenses to period-end total assets(10).................. 4.88% 5.19% 4.96% 5.33% 5.95%
- ------------ (1) Net income and earnings per share for 1993 were adversely impacted by the federal tax rate increase to 35% and a cumulative effect on prior years of accounting change. See note 10 to the Consolidated Financial Statements incorporated herein by reference to the 1995 Form 10-K. Earnings per share without these charges for 1993 would have been $1.95 per share. (2) Total debt does not include, and total liabilities includes, certain interest-free loans from AT&T to the Company under certain tax agreements, in aggregate outstanding principal amounts of $247.4 million, $248.9 million, $214.1 million and $188.6 million at September 30, 1995, December 31, 1995, 1994 and 1993, respectively. The Company no longer receives such interest-free loans and repaid such loans in their entirety with a payment of $247.4 million on September 30, 1996. See 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company -- Tax Deconsolidation' and note 4 below. (3) Earnings before income taxes and cumulative effect on prior years of accounting change plus fixed charges (the sum of interest on indebtedness and the portion of rentals representative of the interest factor) divided by fixed charges. Prior to the Merger, a portion of the Company's indebtedness to AT&T did not bear interest. See note 2 above. On a pro forma basis giving effect to the issuance of the Trust Preferred Securities on January 1, 1995, the ratio of earnings to fixed charges for the nine months ended September 30, 1996 and the year ended December 31, 1995 would have been 1.49x and 1.47x, respectively. Had the Merger and related transactions, including the issuance of the Trust Preferred Securities, taken place on January 1, 1995, the pro forma ratio of earnings to fixed charges for the nine months ended September 30, 1996 would have been 1.17x, and for the year ended December 31, 1995, there would have been an earnings deficiency of $30.0 million to cover fixed charges. See 'Ratio of Earnings to Fixed Charges of the Company.' (4) Total debt does not include certain interest-free loans previously made from AT&T to the Company under certain tax agreements. The Company repaid such loans in their entirety with a payment of $247.4 million on September 30, 1996. If such loans were so included, the ratio of total debt to shareowners' equity would have been 6.28x, 6.45x, 5.72x and 4.81x at September 30, 1995, December 31, 1995, 1994 and 1993, respectively. See 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company -- Tax Deconsolidation' and note 2 above. (5) Net income (annualized in the case of the nine months ended September 30, 1996 and 1995) divided by average total shareowners' equity. (6) Net income (annualized in the case of the nine months ended September 30, 1996 and 1995) divided by average total assets. (7) In 1993, the Company's adjusted return on average equity and return on average assets, defined as income before cumulative effect on prior years of accounting change and impact of tax rate change as a percentage of average equity and average assets, respectively, was 10.3% and 1.4%, respectively. (8) 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 and asset-based lending transactions. (9) Net charge-offs at September 30, 1996 and 1995 are calculated based on the twelve months then ended. (10) Operating and administrative expenses (annualized for the nine months ended September 30, 1996 and 1995) divided by period-end total assets. 15 RATINGS OF SECURITIES Standard & Poor's Ratings Group, a division of McGraw-Hill ('S&P'), will assign a rating to the Trust Preferred Securities of 'BBB - ', Moody's Investors Service, Inc. ('Moody's') has assigned an initial rating to the Trust Preferred Securities of 'ba2', Duff & Phelps Credit Rating Co. ('Duff & Phelps') has indicated it will assign a rating to the Trust Preferred Securities of 'BBB - ' and Fitch Investors Service, Inc. ('Fitch') has indicated its expected rating of the Trust Preferred Securities as 'BBB - .' An explanation of the significance of ratings may be obtained from the rating agencies. Generally, rating agencies base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate. A credit rating of a security is not a recommendation to buy, sell or hold securities. There is no assurance that any rating will apply for any given period of time or that a rating may not be adjusted or withdrawn. 16 RISK FACTORS Prospective purchasers of the Trust Preferred Securities should consider carefully the risk factors set forth below, as well as all other information contained or incorporated by reference in this Prospectus, in evaluating an investment in the Trust Preferred Securities. To the extent any of the information contained or incorporated by reference in this Prospectus constitutes a 'forward-looking statement' as defined in Section 27A(i)(1) of the Securities Act, the risk factors set forth below are meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement. RISKS RELATED TO EXPECTED PLANS INVOLVING THE COMPANY SECURITIZATION PROGRAM. The Company's current business plan incorporates future securitization transactions as a key part of the Company's financing to manage the Company's leverage ratio and to transfer credit risk. The Company will continue to manage the securitized assets following their sale. To the extent that the actual level of securitization deviates significantly from the Company's current target level of securitization (currently planned at approximately 30% of the financing volume originated in each year), there could be a material adverse effect on the Company's results of operations and any such significant deviation may affect the credit ratings assigned to the short-term or long-term debt of the Company. LEVERAGE AND DEBT SERVICE. As a result of the Merger and related transactions, there has been a significant increase in the Company's ratio of consolidated indebtedness to shareowners' equity. As of September 30, 1996, on a pro forma basis for the Merger and related transactions, the Company's ratio of consolidated indebtedness to shareowners' equity plus Company-obligated preferred securities issued in this offering would have been 7.19x. The increased debt-to-equity ratio will be a factor in the analyses of the Company applied by statistical rating organizations. Any future downgrades in the credit ratings of the Company's short-term or long-term debt would increase the Company's cost of borrowing, limit its access to the commercial paper market (the Company's traditional funding source) and reduce its competitiveness, particularly if any such rating is in a generic rating category that signifies that the relevant debt of the Company is less than investment grade, and certain ratings downgrades below 'BB+' by S&P or below 'Ba1' by Moody's could result in the termination of one or more of the License Agreements with AT&T, Lucent and NCR. See 'Relationship with AT&T Entities -- Operating and Certain Other Agreements with AT&T Entities' below. Any such downgrading could have a material adverse effect on the Company. CHANGES IN RELATIONSHIP WITH AT&T ENTITIES REVENUES AND NET INCOME ATTRIBUTABLE TO AT&T ENTITIES. A substantial portion of the Company's revenues and a substantial majority of its net income are attributable to the financing provided by the Company to customers of AT&T, Lucent and NCR (the 'Customers of the AT&T Entities') with respect to products manufactured or distributed by them (the 'AT&T Entities Products') and, to a lesser extent, to transactions where the AT&T Entities or their employees are customers of the Company (the 'AT&T Entities as End-User'), primarily with respect to the lease of information technology and other equipment or vehicles to them as end-users and to the administration and management of certain leased assets on behalf of AT&T. The Company's commercial relationships with the AT&T Entities are currently governed by certain important agreements described below and in 'Relationship with AT&T Entities.' For the nine months ended September 30, 1996, approximately 30.5% and 59.7% (or $418.4 million and $68.8 million) of the Company's total revenues and net income, respectively, were attributable to lease and other financing provided by the Company to the Customers of the AT&T Entities with respect to the AT&T Entities Products. An additional approximately 7.2% and 7.6% (or $99.2 million and $8.8 million) of total revenues and net income, respectively, for the nine months ended September 30, 1996 were attributable to transactions with the AT&T Entities as End-Users. The Company's non-AT&T Entities related business generated 62.3% and 32.7% (or $852.9 million and $37.7 million) of total revenues and net income, respectively, for the nine months ended September 30, 1996 17 (approximately 30.9% of net income for the period without giving effect to a securitization of lease receivables effected by the Company in the first quarter of 1996). In 1995, approximately 32.7% and 67.9% (or $516.2 million and $86.6 million) of the Company's total revenues and net income, respectively, were attributable to lease and other financing provided by the Company to the Customers of the AT&T Entities with respect to the AT&T Entities Products. An additional approximately 8.3% and 8.2% (or $130.6 million and $10.5 million) of total revenues and net income, respectively, in 1995 were attributable to transactions with the AT&T Entities as End-Users. In 1995, the Company's non-AT&T Entities related business generated approximately 59.0% and 23.9% (or $930.2 million and $30.5 million) of total revenues and net income, respectively. The foregoing net income amounts were calculated based upon an allocation of interest, income taxes and certain corporate overhead expenses that the Company believes to be reasonable. See 'Business of the Company -- General.' Accordingly, while the proportion of the Company's total revenues and net income from non-AT&T Entities related business has grown over the last several years, a substantial portion of the Company's total revenues, and a substantial majority of the Company's net income, have been generated by the Company's relationship with the AT&T Entities. A substantial majority of such revenues and substantially all such net income have been attributable to transactions with customers of Lucent and its subsidiaries (and the business related to these transactions have been generally among the most profitable for the Company). A significant decrease in the portion of the sales of the AT&T Entities Products (the 'AT&T Entities Product Sales') that are financed by the Company, or in the absolute amount of the AT&T Entities Product Sales (in either case, particularly with respect to Lucent), or in the amount of transactions effected by the Company with the AT&T Entities as End-User (particularly with respect to AT&T) would have a material adverse effect on the Company's results of operations and financial condition. OPERATING AND CERTAIN OTHER AGREEMENTS WITH AT&T ENTITIES. The initial terms of each of the Operating Agreements (pursuant to which, among other things, the Company serves as preferred provider of financing services and has certain related and other rights and privileges in connection with the financing of equipment to the Customers of the AT&T Entities) will expire on August 4, 2000, but will be automatically renewed for successive two-year periods unless either party thereto gives the other a non-renewal notice at least one year prior to the end of the initial or renewal term. None of the AT&T Entities is required to renew the term of its Operating Agreement beyond the expiration of the current term on August 4, 2000. Although the Company will seek to maintain and improve its existing relationships with Lucent, NCR and AT&T and seek to extend each of the Operating Agreements beyond August 4, 2000, no assurance can be given that the Operating Agreements, or any of them, will be extended beyond such date or, if extended, that the terms and conditions thereof will not be modified in a manner adverse to the Company. Failure to renew NCR's and Lucent's Operating Agreements on terms not adverse to the Company could have a material adverse effect on the Company. Moreover, in certain circumstances, the Operating Agreements may be terminated prior to their expiration. See 'Relationship with AT&T Entities' for a summary of certain important terms of the Operating Agreements, including a description of the scope (and limitations) of the Company's 'preferred provider' status under such agreements. To provide additional incentive for Lucent to assist the Company in the financing of products manufactured or distributed by Lucent, in recent years the Company has paid Lucent a sales assistance fee equal to a designated percentage of the aggregate sales prices and other charges ('volumes') of Lucent products financed by the Company. In early 1996, following Lucent's request, the Company agreed to pay a substantial increase in the Lucent sales assistance fee for 1995, both as an absolute amount and as a percentage of volumes attributable to Lucent. After giving effect to the increase, the sales assistance fee paid by the Company to Lucent for 1995 was approximately double the 1994 fee. The Company and Lucent recently agreed to a modified formula for calculating the sales assistance fee for the remaining years of the term of Lucent's Operating Agreement (retroactive to January 1, 1996). The revised formula is expected to result in aggregate annual sales assistance fees which are approximately double the amounts that would have been paid if the pre-1995 formula had been 18 maintained. No assurance can be given that Lucent will not seek higher sales assistance fees in 1996 or future years (or otherwise attempt to share in the revenues of the Company associated with the leasing of Lucent products) or seek to use alternative providers of financing. Similarly, although neither AT&T nor NCR has requested any sales assistance fees or other similar benefits from the Company by reason of the financing by the Company of their respective products, no assurance can be given that AT&T or NCR will not do so in the future. Any such action by Lucent, alone or in combination with similar action by AT&T or NCR, could have a material adverse effect on the Company. The Operating Agreements do not require that the Company be the sole provider of financing in connection with the AT&T Entities Product Sales. Also, such Operating Agreements provide no assurance that the percentage of such sales for which the Company provides financing will not decrease in the future. Subject to certain restrictions, the Operating Agreements permit the AT&T Entities to use or promote an alternative financing program offered by an unaffiliated company that provides better terms than those offered by the Company, without providing the Company an opportunity to match such better terms. In addition, none of the Operating Agreements is generally required to be assumed by the purchaser or other transferee of all or any portion of the relevant AT&T Entity's product manufacturing business upon any sale or other disposition thereof by such AT&T Entity, although such AT&T Entity is required to use reasonable efforts to cause the related Operating Agreement to be so assumed. Moreover, each Operating Agreement provides that the relevant AT&T Entity may terminate the Company's 'preferred provider' status and organize their own 'captive' finance subsidiaries if the Company's Financing Penetration Rate (as defined in the respective Operating Agreements) decreases by certain specified amounts or if the Company becomes a subsidiary of a person other than Holdings or one of its affiliates. The Company does not expect its Financing Penetration Rate under its Operating Agreements with Lucent and NCR to decrease during the remainder of the initial term thereof by an amount that would permit Lucent or NCR, as the case may be, to terminate the Company's 'preferred provider' status, although no assurance can be given in that regard. The Company's ability to capture a significant portion of the AT&T Entities Product Sales is augmented by the provisions of the Agreement Supplements with Lucent and NCR pursuant to which Lucent and NCR have licensed certain trade names and service marks, including the 'Lucent Technologies' and 'NCR' trade names, to the Company for use in the business of the Company and certain of its subsidiaries. The Company's License Agreement with AT&T also has similar provisions. The initial term of the License Agreement and Agreement Supplements expires on August 4, 2000 but will be automatically renewed in the event of a renewal of the relevant Operating Agreement, for a term equal to any renewal term of that Operating Agreement. Each License Agreement may be terminated prior to the end of its term upon the occurrence of certain events (including upon the termination of the applicable Operating Agreement and the occurrence of certain ratings downgrades below 'BB+' by S&P or below 'Ba1' by Moody's). In addition, AT&T may require the Company to discontinue, following two years' prior notice, use of (i) the 'AT&T' trade name as part of the Company's corporate name and (ii) the other service marks licensed by AT&T to the Company. The Company's subsidiaries may, in such event, continue to use the 'AT&T' trade name and service marks in connection with the provision of financing services and otherwise in accordance with the terms of the License Agreement, which include extensive restrictions on the use thereof in connection with the issuance of securities. The Operating Agreements do not apply to the Company's relationship with the AT&T Entities as end-users of information technology and other equipment or vehicles financed by the Company. Although the Intercompany Agreement and Agreement Supplements provides that each AT&T Entity will view the Company as its preferred provider of financing, the Intercompany Agreement and Agreement Supplements do not require any of the AT&T Entities to continue to use the Company as its financing source for its own acquisitions of such equipment or vehicles if competitors of the Company offer financing on more attractive terms. See 'Relationship with AT&T Entities.' 19 RISKS RELATED TO THE TERMINATION OF AT&T'S OWNERSHIP INTEREST IN THE COMPANY BUSINESS RELATIONSHIP. Prior to the consummation of the Merger, AT&T had an approximately 86% economic interest in the Company. The Company believes that it has benefitted from that interest because approximately 86% of the profits derived by the Company from its commercial relationship with the AT&T Entities (the Company's most important commercial relationship -- see ' -- Changes in Relationship with AT&T Entities -- Revenues and Net Income Attributable to AT&T Entities' above) directly or indirectly benefitted AT&T. Following the AT&T Restructuring and the consummation of the Merger, the Company's relationship with AT&T, Lucent and NCR as its principal customers and sources of business will be based entirely on commercial dealings and its contract rights, without any ownership interest by AT&T, Lucent or NCR in the Company. To the extent that this change causes the relations of AT&T, Lucent and NCR with the Company to be less favorable than in the past, there will be an adverse effect on the Company. CERTAIN INCREASED COSTS AND EXPENSES. General. In connection with the consummation of the Merger and related transactions pursuant to which AT&T sold its entire indirect equity interest in the Company (see 'The Merger'), certain of the Company's annual expenses are expected to increase. A summary of the significant increases follows. Borrowing Costs. While it is difficult to predict the response of investors to the Company's medium and long-term note and commercial paper programs and, therefore, it is difficult to quantify such effect of the Merger and related transactions and consequent downgrading of ratings on the Company's debt with reasonable accuracy, the Company has estimated an increase in borrowing costs of approximately 20 basis points relating to its commercial paper program and 25 basis points relating to its medium and long-term debt issuances. Assuming such an increase in borrowing costs, had the Merger occurred on January 1, 1995, the Company's 1995 interest expense would have increased by $7.4 million. The increase in interest expense was calculated using the 1995 average commercial paper balance outstanding and the 1995 issuances of medium and long-term debt multiplied by the respective incremental borrowing costs. To illustrate the Company's sensitivity to interest rates, had the increase in such borrowing costs been 10 basis points lower or higher than the assumed respective increases in borrowing costs referred to above the Company's interest expense increase would have been $4.1 million or $10.7 million, respectively. Tax Deconsolidation. The Company was formerly a member of AT&T's consolidated group for federal income tax purposes, but immediately after the Merger ceased to be a member of such tax group (the 'Tax Deconsolidation'). The Tax Deconsolidation is expected to have certain adverse effects on the Company as described below. Most financings by the Company of products manufactured by the AT&T Entities involve the purchase of such products by the Company and the contemporaneous lease of such products by the Company to third parties. Because the Company and the AT&T Entities are no longer affiliated, sales of such products to the Company by the AT&T Entities will generate current taxable income for AT&T or the affiliate of AT&T manufacturing such products, together with a liability of AT&T or such affiliate to pay federal income tax on such income. Notwithstanding such sales of products, while the Company was a part of the AT&T consolidated federal income tax group at the time of such sale, the payment of such taxes had been deferred (the amount of such previously deferred taxes being herein called 'Gross Profit Tax Deferral') generally until the Company claimed depreciation on the products, or sold the products outside the group. Pursuant to one of the former tax agreements between AT&T and the Company, AT&T had extended interest-free loans to the Company in an amount equal to the then outstanding amount of Gross Profit Tax Deferral, as well as certain other intercompany transactions. As a result of the Tax Deconsolidation, the Company no longer receives such loans, which had constituted a competitive advantage to the Company in financing the AT&T Entities Products. In addition, the Company was required to repay all such outstanding loans immediately prior to the Tax Deconsolidation. The aggregate outstanding principal amount of the interest-free loans associated with Gross Profit Tax Deferral which were repaid by the Company in connection with the Tax Deconsolidation equaled approximately $247.4 million. Additionally, as a result of Tax Deconsolidation, 20 the Company made a payment to AT&T of $35 million in exchange for AT&T's assumption of certain federal and combined state tax liabilities of the Company relating to periods prior to the Merger. Operating and Administrative Expenses. The Company's annual expenses for operating and administrative expenses are expected to increase after the Merger as a result of the Company no longer being entitled to the discounts accorded to AT&T and its subsidiaries or received directly from AT&T. The incremental and recurring costs in the Company's operating and administrative expenses for which the Company received such discounts include services for telecommunication, certain information processing, travel, human resources, real estate, express mail and insurance services. In addition, annual management and advisory fees of initially $3.0 million will be paid to Nomura. The Company estimates the total increase in operating and administrative expenses to be $5.9 million annually (including such management and advisory fees). Compensation and Benefit Plans. Under the Company's Share Performance Incentive Plan ('SPIP'), approximately 120 employees had the right to receive cash awards at the end of five, 3-year performance periods. The first such period ended on June 30, 1996, with each of the other performance periods ending on the annual anniversary of such date through and including June 30, 2000. In connection with the Merger, nearly all of these cash awards for the second through the fifth performance periods were accelerated and paid at the closing of the Merger, resulting in an aggregate payment of approximately $50.9 million. In addition, approximately $9.9 million is expected to be paid to certain officers and other key employees of the Company in connection with the waiver and modification of the Company's Leadership Guarantee Plan and other termination and compensation related payments effective upon closing of the Merger. Transaction Costs. The Company will incur an $11.3 million after-tax expense relating to the Company's Merger-related and other transaction costs. COMPETITION The equipment leasing and finance industry in which the Company operates is highly competitive and has been undergoing a process of consolidation. As a result, certain of the Company's competitors' relative cost bases have been reduced. Participants in the industry compete through price (including the ability to control costs), risk management, innovation and customer services. 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. The Company's competitors include 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 which lease their own products to customers. 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 debt at a lower cost than the Company. CERTAIN OTHER RISKS The Company is subject to certain other risks including the risk that its allowance for credit losses may not prove adequate to cover ultimate losses and that its estimated residual values will not be realized at the end of the lease terms. On an aggregate basis, the Company has historically realized proceeds from the sale of equipment during the lease term and at lease termination in excess of the Company's recorded residual values. There can be no assurance, however, that credit allowances will prove adequate to cover losses in connection with the Company's investment in finance receivables, capital leases and operating leases ('Portfolio Assets', and net of allowance for credit losses, 'Net Portfolio Assets') or that such residual values will be realized in the future. See 'Business of the Company -- Certain Business Skills.' 21 RISK FACTORS RELATED TO TOPRS DISTRIBUTIONS PAYABLE ONLY IF DECLARED BY GENERAL PARTNER; RESTRICTIONS ON CERTAIN PAYMENTS; TAX CONSEQUENCES Distributions on the Partnership Preferred Securities will be payable only if, as and when declared by the General Partner in its sole discretion. If interest payments on the Debentures are deferred as permitted thereby, or if such interest payments are not paid to the Partnership according to their terms (and guarantee payments on the Investment Guarantees are not made by the Company), the Partnership will generally lack funds to pay distributions on the Partnership Preferred Securities. If the Partnership does not make current distributions on the Partnership Preferred Securities, either because the General Partner does not declare distributions to be made or because the Partnership lacks sufficient funds, the Trust will not have funds available to make current distributions on the Trust Preferred Securities. As described under 'Description of the Trust Guarantee -- Certain Covenants of the Company,' the Company will be restricted from, among other things, paying any dividends on its Common Stock or (subject to certain exceptions) making payments to Affiliates if full distributions on the Trust Preferred Securities have not been paid. However, the Company has no current intention to pay dividends on its Common Stock at any time in the foreseeable future. Therefore, although the Company's intention as to its dividend policy can and may change at any time in the future at the discretion of the Company's Board of Directors (subject to applicable requirements of law), the restriction on dividend payments that would be imposed on the Company if distributions are not made on the Trust Preferred Securities would not materially affect the manner in which the Company intends to operate its business. In addition, as a consequence of the Merger, the Company's Common Stock is no longer listed on the New York Stock Exchange and there is no longer a public market for the Common Stock; the absence of such public market, together with the current policy of the Company not to pay dividends, reduces the effectiveness of the dividend restriction described above in deterring the Company, as General Partner, from failing to declare distributions on the Partnership Preferred Securities. Should the Partnership fail to pay current distributions on the Partnership Preferred Securities, each holder of Trust Preferred Securities will generally be required to accrue income, for United States federal income tax purposes, in respect of the cumulative deferred distributions (including interest thereon) allocable to its proportionate share of the Partnership Preferred Securities. As a result, each holder of Trust Preferred Securities will recognize income for United States federal income tax purposes in advance of the receipt of cash and will not receive the cash from the Trust related to such income if such holder disposes of its Trust Preferred Securities prior to the record date for the date on which distributions of such amounts are made by the Trust. See 'Certain Federal Income Tax Considerations.' INSUFFICIENT INCOME OR ASSETS AVAILABLE TO PARTNERSHIP The Trust Preferred Securities are subject to the risk of a current or liquidating distribution rate mismatch between the rate paid on the Trust Preferred Securities and the rate paid on the securities held by the Partnership, including the Debentures and any additional securities acquired by the Partnership in the future. Such mismatch could occur if (i) at any time that the Partnership is receiving current payments in respect of the securities held by the Partnership (including the Debentures), the General Partner, in its sole discretion, does not declare distributions on the Partnership Preferred Securities and the Partnership receives insufficient amounts to pay the additional compounded distributions that will accrue in respect of the Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds received in respect of the Debentures upon their retirement or at their maturities in Affiliate Investment Instruments or Eligible Debt Securities that do not generate income in an amount that is sufficient to pay full distributions in respect of the Partnership Preferred Securities at a rate of % per annum or (iii) the Partnership invests in equity or debt securities of Investment Affiliates that are not guaranteed by the Company and that cannot be liquidated by the Partnership for an amount sufficient to pay such distributions in full. If the reinvestments in the Investment Affiliates contemplated by the General Partner do not meet the eligibility criteria for Affiliate Investment Instruments described under 'Description of the Partnership Preferred Securities -- Partnership 22 Investments,' the Partnership shall invest funds available for reinvestment in Eligible Debt Securities. To the extent that the Partnership lacks sufficient funds to make current or liquidating distributions on the Partnership Preferred Securities in full, the Trust will not have sufficient funds available to pay full current or liquidating distributions on the Trust Preferred Securities. DEPENDENCE ON AFFILIATE INVESTMENT INSTRUMENTS Approximately 99% of the proceeds from the issuance of the Partnership Preferred Securities and the General Partner's capital contribution will be invested in the Debentures, which consist of debt instruments of the Company and two domestic eligible controlled affiliates. PROPOSED TAX LEGISLATION On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget Proposal, the Treasury Department proposed legislation (the 'Proposed Legislation') that would, among other things, deny the borrower an interest deduction with respect to certain types of debt instruments that are payable in stock of the issuer or a related party. The Proposed Legislation also would treat as equity for United States federal income tax purposes instruments with a maximum term of more than 20 years that are not shown as indebtedness on the consolidated balance sheet of the issuer. On March 29, 1996, Senate Finance Committee Chairman William V. Roth and House Ways and Means Committee Chairman Bill Archer issued a joint statement (the 'Joint Statement') indicating their intent that certain legislative proposals initiated by the Clinton administration, including the Proposed Legislation, that may be adopted by either of the tax-writing committees of Congress, would have an effective date that is no earlier than the date of 'appropriate Congressional action'. In addition, subsequent to the publication of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury Department officials concurring with the view expressed in the Joint Statement (the 'Democrat Letters'). If the principles contained in the Joint Statement and the Democrat Letters were followed and the Proposed Legislation were enacted, such legislation would not apply to the Debentures. There can be no assurances, however, that legislation enacted after the date hereof will not adversely affect the tax treatment of the Debentures, or whether such tax treatment would cause a Partnership Tax Event or a Trust Tax Event that may result in the redemption of the Partnership Preferred Securities and, consequently, the Trust Preferred Securities. SPECIAL EVENT REDEMPTION OR DISTRIBUTION Upon the occurrence of a Trust Special Event or a Partnership Special Event (each of which will generally be triggered either upon (i) the occurrence of certain adverse tax consequences to the Trust or the Partnership, as the case may be, or the denial of an interest deduction by the related Investment Affiliate on the Debentures held by the Partnership or (ii) the Trust or Partnership being considered an 'investment company' under the 1940 Act) (each, a 'Special Event'), the Trust will be dissolved with the result, except in the limited circumstances described below, that the Partnership Preferred Securities would be distributed to the holders of the Trust Preferred Securities in connection with the liquidation of the Trust. In certain circumstances, the Partnership shall have the right to redeem the Partnership Preferred Securities, in whole (but not in part), in lieu of a distribution of the Partnership Preferred Securities by the Trust, in which event the Trust will redeem the Trust Preferred Securities for cash. See 'Description of the Trust Preferred Securities -- Trust Special Event Redemption or Distribution' and 'Description of the Partnership Preferred Securities -- Partnership Special Event Redemption.' Unless the liquidation of the Trust occurs as a result of the Trust being subject to United States federal income tax with respect to income on the Partnership Preferred Securities, a distribution of the Partnership Preferred Securities upon the dissolution of the Trust would not be a taxable event to holders of the Trust Preferred Securities. If, however, the liquidation of the Trust were to occur because the Trust is subject to United States federal income tax with respect to income accrued or received on the Partnership Preferred Securities, the distribution of Partnership Preferred Securities to holders by the Trust would be a taxable event to each such holder, and a holder would recognize gain or loss as if the holder had exchanged its Trust Preferred Securities for the Partnership Preferred Securities it received upon the liquidation of the Trust. Similarly, the holders of the Trust Preferred Securities would 23 recognize gain or loss if the Trust dissolves upon an occurrence of a Partnership Special Event and the holders of Trust Preferred Securities receive cash in exchange for their Trust Preferred Securities. See 'Certain United States Federal Income Tax Considerations -- Redemption of Trust Preferred Securities for Cash.' There can be no assurance as to the market prices for the Partnership Preferred Securities that may be distributed in exchange for Trust Preferred Securities if a dissolution or liquidation of the Trust were to occur. Accordingly, the Trust Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Partnership Preferred Securities that a holder of Trust Preferred Securities may receive upon dissolution and liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the Trust Preferred Securities offered hereby. Because holders of Trust Preferred Securities may receive Partnership Preferred Securities upon the occurrence of a Special Event, prospective purchasers of Trust Preferred Securities also are making an investment decision with regard to the Partnership Preferred Securities and should carefully review all the information regarding the Partnership Preferred Securities contained herein. See 'Description of the Partnership Preferred Securities -- Partnership Special Event Redemption' and 'Description of the Partnership Preferred Securities -- General.' RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEES AND THE COMPANY DEBENTURE The Company's obligations under the Trust Guarantee, the Partnership Guarantee and the Investment Guarantees are subordinate and junior in right of payment to all liabilities of the Company and will rank pari passu with the most senior preferred stock issued, if any, from time to time by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred stock of any affiliate of the Company and its obligations under the Company Debenture are subordinate and junior in right of payment to all senior indebtedness of the Company. As of September 30, 1996, consolidated senior indebtedness of AT&T Capital aggregated approximately $7.9 billion. Except under certain limited circumstances described under 'Description of the Partnership Preferred Securities -- Partnership Investments' with respect to the Company Debenture, there are no terms in the Trust Preferred Securities, the Partnership Preferred Securities, the Guarantees or the Debentures that limit the Company's ability to incur additional indebtedness, including indebtedness that ranks senior to the Guarantees. See 'Description of the Partnership Preferred Securities -- Partnership Investments' and ' -- Investment Guarantees,' 'Description of the Trust Guarantee' and 'Description of the Partnership Guarantee.' ENFORCEMENT OF CERTAIN RIGHTS BY OR ON BEHALF OF HOLDERS OF TRUST PREFERRED SECURITIES If a Trust Enforcement Event occurs and is continuing, then (a) the holders of Trust Preferred Securities would rely on the enforcement by the Property Trustee of its rights, as a holder of the Partnership Preferred Securities, against the Company, including the right to direct the Special Representative to enforce (i) the Partnership's creditors' rights and other rights with respect to the Affiliate Investment Instruments and the Investment Guarantees, (ii) the rights of the holders of the Partnership Preferred Securities under the Partnership Guarantee, and (iii) the rights of the holders of the Partnership Preferred Securities to receive distributions (only if and to the extent declared out of funds legally available therefor) on the Partnership Preferred Securities, and (b) the Trust Guarantee Trustee shall have the right to enforce the terms of the Trust Guarantee, including the right to enforce the covenant restricting certain payments by the Company and its majority owned subsidiaries. Under no circumstances, however, shall the Special Representative have authority to cause the General Partner to declare distributions on the Partnership Preferred Securities. As a result, although the Special Representative may be able to enforce the Partnership's creditors' rights to accelerate and receive payments in respect of the Affiliate Investment Instruments and the Investment Guarantees, the Partnership would be entitled to reinvest such payments in additional Affiliate Investment Instruments, subject to satisfying the reinvestment criteria described under 'Description of the Partnership Preferred Securities -- Partnership Investments,' and the Eligible Debt Securities, rather than declaring and making distributions on the Partnership Preferred Securities. See 'Description of the Trust Preferred Securities -- Trust Enforcement Events.' 24 LIMITED VOTING RIGHTS Holders of the Trust Preferred Securities will have limited voting rights and will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, Trustees, which voting rights are vested exclusively in the holder of the Trust Common Securities. See 'Description of the Trust Preferred Securities -- Voting Rights.' TRADING CHARACTERISTICS OF TRUST PREFERRED SECURITIES The price at which the Trust Preferred Securities may trade may not fully reflect the value of the accrued but unpaid distributions on the Trust Preferred Securities (which will equal the accrued but unpaid distributions on the Partnership Preferred Securities). In addition, as a result of the right of the General Partner to not declare current distributions on the Partnership Preferred Securities, the market price of the Trust Preferred Securities (which represent undivided beneficial ownership interests in the Partnership Preferred Securities) may be more volatile than other similar securities where there is no such right to defer current distributions. A holder who disposes of its Trust Preferred Securities will be required to include for United States federal income tax purposes accrued but unpaid distributions on the Partnership Preferred Securities through the date of disposition in income as ordinary income, and to add such amount to its adjusted tax basis in its pro rata share of the Partnership Preferred Securities deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include all accrued but unpaid distributions), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See 'Certain Federal Income Tax Considerations.' NO PRIOR MARKET FOR THE TRUST PREFERRED SECURITIES The Trust Preferred Securities constitute a new issue of securities with no established trading market. The Trust Preferred Securities have been approved, subject to issuance, for listing on the New York Stock Exchange. There can be no assurance that an active market for the Trust Preferred Securities will develop or be sustained in the future on the New York Stock Exchange. Although the Underwriters have indicated to the Company that they intend to make a market in the Trust Preferred Securities, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue any such market-making at any time without notice. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Trust Preferred Securities. 25 USE OF PROCEEDS The proceeds to be received by the Trust from the sale of the Trust Preferred Securities and the Trust Common Securities will be used by the Trust to purchase Partnership Preferred Securities, and will be applied by the Partnership to invest in the Debentures and Eligible Debt Securities. See 'Description of the Partnership Preferred Securities -- Partnership Investments.' After payment of the Underwriters' Compensation (as defined under 'Underwriting') and other expenses of this offering, the Company will, and will cause the subsidiaries of the Company which are the issuers of the Debentures to, use the proceeds from the sale of such Debentures to the Partnership of $200 million to repay certain outstanding indebtedness. CAPITALIZATION The following table sets forth the short-term notes and capitalization of the Company as of September 30, 1996, pro forma for the Merger and related transactions (excluding the effects of this offering) as described below under 'The Merger', and as adjusted to give effect to the sale of the Trust Preferred Securities offered hereby and the application of the proceeds therefrom. This table should be read in conjunction with the Consolidated Financial Statements and the related notes thereto incorporated by reference in this Prospectus.
PRO FORMA AS ADJUSTED FOR ACTUAL FOR MERGER(1) THE OFFERING ---------- ------------- --------------- (DOLLARS IN THOUSANDS) Short-term notes, less unamortized discounts....................... $3,021,459 $ 1,714,859 $ 1,514,859 Medium and long-term debt.......................................... 4,896,467 4,896,467 4,896,467 Company-obligated preferred securities of subsidiary(2)............ -- -- 200,000 Shareowners' equity: Preferred Stock, $.01 par value, authorized 10,000,000 shares; no shares issued and outstanding............................ -- -- -- Common Stock, $.01 par value, authorized 100,000,000 shares; issued and outstanding 47,097,447 shares (150,000,000 shares authorized and 90,000,000 shares issued and outstanding on a pro forma basis)............................................ 471 900 900 Additional paid-in capital......................................... 786,163 624,206 624,206 Foreign currency translation adjustment............................ (2,804) (2,804) (2,804) Retained earnings.................................................. 454,895 84,900 84,900 Recourse loans to senior executives(3)............................. (20,923) (15,423) (15,423) ---------- ------------- --------------- Total shareowners' equity..................................... 1,217,802 691,779 691,779 ---------- ------------- --------------- Total capitalization.......................................... $9,135,728 $ 7,303,105 $ 7,303,105 ---------- ------------- --------------- ---------- ------------- ---------------
- ------------ (1) Gives effect to the Merger and related transactions (excluding the effects of this offering), which are described below under 'The Merger.' (2) As described herein, the assets of the Trust will be comprised of the Partnership Preferred Securities issued by the Partnership, and the assets of the Partnership will initially be comprised of the Debentures and the Eligible Debt Securities. Except to the extent described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' the Guarantees, when taken together with the Company Debenture and the Company's obligations to pay all fees and expenses of the Trust and the Partnership, constitute a guarantee by the Company of the distribution, redemption and liquidation payments payable to the holders of the Trust Preferred Securities. (3) These recourse loans to senior executives were made pursuant to the Company's 1993 Leveraged Stock Purchase Plan and the 1993 Long Term Incentive Plan. Most of these loans remain outstanding following the Merger. 26 RATIO OF EARNINGS TO FIXED CHARGES OF THE COMPANY
PRO FORMA FOR OFFERING(1) ----------------------------- NINE MONTHS NINE MONTHS ENDED YEAR ENDED ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, ----------------------------------------- 1996 1995 1996 1995 1994 1993 1992 1991 ------------- ------------ ------------- ----- ----- ----- ----- ----- Ratio of earnings to fixed charges......... 1.49x 1.47x 1.51x 1.50x 1.62x 1.57x 1.44x 1.29x
- ------------ (1) The pro forma data represents the Company's results as if the issuance of the Trust Preferred Securities had taken place on January 1, 1995. Had the Merger and related transactions, including the issuance of the Trust Preferred Securities, taken place on January 1, 1995, the pro forma ratio of earnings to fixed charges for the nine months ended September 30, 1996 would have been 1.17x, and for the year ended December 31, 1995 there would have been an earnings deficiency of $30.0 million to cover fixed charges. See 'The Merger' for a description of the Merger and the transactions related to the Merger reflected in this pro forma presentation. Earnings consist of income before income taxes and cumulative effect on prior years of accounting change plus fixed charges. Fixed charges consist of interest on indebtedness and the portion of rentals representative of the interest factor. 27 SELECTED FINANCIAL DATA The Results of Operations Data, the Balance Sheet Data and the Other Data shown below at or for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 are derived from the Consolidated Financial Statements of the Company at such dates or for such periods, which have been audited by Coopers & Lybrand L.L.P., independent accountants. Such data at or for the nine months ended September 30, 1996 and 1995 are derived from unaudited consolidated financial information. In management's opinion, the Company's unaudited consolidated financial statements at or for the nine months ended September 30, 1996 and 1995 include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results for the entire year or any other interim period. The selected financial data as presented below 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 incorporated by reference in this Prospectus. The Company's unaudited consolidated financial information at or for the nine months ended September 30, 1996 does not include the effects of the Merger and related transactions. For a description of the significant impact of the Merger and related transactions on the Company's financial position and results of operations, see 'The Merger.' For a description of certain increased annual costs that the Company expects to incur as a result of the Merger, see 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company.'
NINE MONTHS ENDED SEPTEMBER 30, ------------------------- 1996 1995 ----------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) RESULTS OF OPERATIONS DATA: Total revenues..................... $ 1,370,494 $1,140,651 Interest expense................... 350,359 300,891 Operating and administrative expenses......................... 375,172 351,443 Provision for credit losses........ 71,454 60,359 Income before income taxes and cumulative effect on prior years of accounting change............. 182,496 143,276 Income before cumulative effect on prior years of accounting change and impact of tax rate change.... 115,290 85,466 Cumulative effect on prior years of accounting change(1)............. -- -- Impact of 1993 tax rate change(1)........................ -- -- Net income(1)...................... 115,290 85,466 Earnings per share(1).............. 2.43 1.82 YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- RESULTS OF OPERATIONS DATA: Total revenues..................... $1,577,035 $1,384,079 $1,359,589 $1,265,526 $1,160,150 Interest expense................... 411,040 271,812 236,335 252,545 275,650 Operating and administrative expenses......................... 473,663 427,187 381,515 359,689 298,833 Provision for credit losses........ 86,214 80,888 123,678 111,715 108,635 Income before income taxes and cumulative effect on prior years of accounting change............. 208,239 173,614 138,040 114,875 82,559 Income before cumulative effect on prior years of accounting change and impact of tax rate change.... 127,555 100,336 83,911 73,572 54,199 Cumulative effect on prior years of accounting change(1)............. -- -- (2,914) -- -- Impact of 1993 tax rate change(1)........................ -- -- (12,401) -- -- Net income(1)...................... 127,555 100,336 68,596 73,572 54,199 Earnings per share(1).............. 2.70 2.14 1.60 1.83 1.35
AT SEPTEMBER 30, AT DECEMBER 31, ---------------- ------------------------------------------------------------------ 1996 1995 1994 1993 1992 1991 ---------------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Total assets......... $ 10,251,600 $9,541,259 $8,021,923 $6,409,726 $5,895,429 $5,197,245 Total debt(2)........ 7,917,926 6,928,409 5,556,458 4,262,405 4,089,483 3,594,247 Total liabilities(2)..... 9,033,798 8,425,134 7,013,705 5,485,283 5,158,808 4,647,979 Total shareowners' equity............. 1,217,802 1,116,125 1,008,218 924,443 736,621 549,266 (table continued on next page)
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AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31, ------------------------------ ------------------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 ---------------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) OTHER DATA: Ratio of earnings to fixed charges(3)... 1.51x 1.47x 1.50x 1.62x 1.57x 1.44x 1.29x Ratio of total debt to shareowners' equity(4).......... 6.50x 6.07x 6.22x 5.51x 4.61x 5.55x 6.54x Return on average equity(5)(7)....... 13.2% 11.0% 12.1% 10.5% 8.5% 11.4% 10.7% Return on average assets(6)(7)....... 1.6% 1.3% 1.5% 1.4% 1.1% 1.3% 1.1% Portfolio Assets of the Company........ $ 10,041,020 $8,892,895 $9,328,623 $7,661,226 $6,236,624 $5,724,702 $5,050,797 Allowance for credit losses............. 235,205 214,711 223,220 176,428 159,819 123,961 93,967 Net Portfolio Assets of the Company..... 9,805,815 8,678,184 9,105,403 7,484,798 6,076,805 5,600,741 4,956,830 Assets of others managed by the Company............ 2,159,316 2,428,924 2,214,502 2,659,526 2,795,663 1,374,354 649,014 Volume of equipment financed(8)........ 3,780,000 3,088,790 4,567,000 4,251,000 3,467,000 3,253,000 2,453,000 Ratio of allowance for credit losses to net charge-offs(9)..... 3.08x 4.22x 4.77x 3.18x 2.71x 1.58x 1.15x Ratio of net charge-offs to Portfolio Assets(9).......... 0.76% 0.57% 0.50% 0.73% 0.95% 1.37% 1.62% Ratio of allowance for credit losses to Portfolio Assets............. 2.34% 2.41% 2.39% 2.30% 2.56% 2.17% 1.86% Ratio of operating and administrative expenses to period-end total assets(10)......... 4.88% 5.19% 4.96% 5.33% 5.95% 6.10% 5.75%
- ------------ (1) Net income and earnings per share for 1993 were adversely impacted by the federal tax rate increase to 35% and a cumulative effect on prior years of accounting change. See note 10 to the Consolidated Financial Statements incorporated herein by reference to the 1995 Form 10-K. Earnings per share without these charges for 1993 would have been $1.95 per share. See 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company' for a description of certain increased annual costs that the Company might incur as a result of the Merger. (2) Total debt does not include, and total liabilities includes, certain interest-free loans from AT&T to the Company under certain tax agreements, in aggregate outstanding principal amounts of $247.4 million, $248.9 million, $214.1 million, $188.6 million, $193.1 million and $206.6 million at September 30, 1995, December 31, 1995, 1994, 1993, 1992 and 1991, respectively. The Company no longer receives such interest-free loans and repaid such loans in their entirety with a payment of $247.4 million on September 30, 1996. See 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company -- Tax Deconsolidation' and note 4 below. (3) Earnings before income taxes and cumulative effect on prior years of accounting change plus fixed charges (the sum of interest on indebtedness and the portion of rentals representative of the interest factor) divided by fixed charges. Prior to the Merger, a portion of the Company's indebtedness to AT&T did not bear interest. See note 2 above. On a pro forma basis giving effect to the issuance of the Trust Preferred Securities on January 1, 1995, the ratio of earnings to fixed charges for the nine months ended September 30, 1996 and the year ended December 31, 1995 would have been 1.49x and 1.47x, respectively. Had the Merger and related transactions, including the issuance of the Trust Preferred Securities, taken place on January 1, 1995, the pro forma ratio of earnings to fixed charges for the nine months ended September 30, 1996 would have been 1.17x and for the year ended December 31, 1995, there would have been an earnings deficiency of $30.0 million to cover fixed charges. See 'Ratio of Earnings to Fixed Charges of the Company.' (4) Total debt did not include certain interest-free loans previously made from AT&T to the Company under certain tax agreements. The Company repaid such loans in their entirety with a payment of $247.4 million on September 30, 1996. If such loans were so included, the ratio of total debt to shareowners' equity would have been 6.28x, 6.45x, 5.72x, 4.81x, 5.81x and 6.92x at September 30, 1995, December 31, 1995, 1994, 1993, 1992 and 1991, respectively. See 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company -- Tax Deconsolidation' and note 2 above. (5) Net income (annualized in the case of the nine months ended September 30, 1996 and 1995) divided by average total shareowners' equity. (6) Net income (annualized in the case of the nine months ended September 30, 1996 and 1995) divided by average total assets. (7) In 1993, the Company's adjusted return on average equity and return on average assets, defined as income before cumulative effect on prior years of accounting change and impact of tax rate change as a percentage of average equity and average assets, respectively, was 10.3% and 1.4%, respectively. (8) 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 and asset-based lending transactions. (9) Net charge-offs at September 30, 1996 and 1995 are calculated based on the twelve months then ended. (10) Operating and administrative expenses (annualized for the nine months ended September 30, 1996 and September 30, 1995) divided by period-end total assets. 29 BUSINESS OF THE COMPANY The following information should be read in conjunction with the description of the Company's business in the 1995 Form 10-K of the Company incorporated herein by reference. GENERAL AT&T Capital is a full-service, diversified equipment leasing and finance company with a presence in more than 20 countries in North America, Europe, Canada, the Asia/Pacific Region and Latin America. The Company is one of the largest equipment leasing and finance companies in the United States and is the largest lessor of telecommunications equipment in the United States, in each case, based on the aggregate value of equipment leased or financed. AT&T Capital leases and finances equipment manufactured and distributed by numerous vendors, including Lucent and NCR. In addition, the Company provides equipment leasing and financing and related services directly to end-user customers. The Company's approximately 500,000 customers include large global companies, small and mid-size businesses and federal, state and local governments and their agencies. A significant portion of the Company's total assets and revenues and a substantial majority of its net income are attributable to financing provided by the Company to Customers of the AT&T Entities with respect to AT&T Entities Products and, to a lesser extent, transactions with the AT&T Entities as End-Users, primarily with respect to the lease of information technology and other equipment or vehicles to them as end-users and the administration and management of certain leased assets on behalf of AT&T. The following table shows the respective percentages of the Company's total assets, revenues and net income (loss) related to its United States and foreign operations that are attributable to (i) leasing and financing services provided by the Company to Customers of the AT&T Entities, (ii) transactions involving the AT&T Entities as End-User and (iii) the Company's non-AT&T Entities related business, in each case at or for the nine months ended September 30, 1996 and at or for the years ended December 31, 1995, 1994 and 1993. A substantial majority of the assets and revenues, and substantially all the Company's net income, that were attributable to Customers of the AT&T Entities were attributable to leasing and financing services provided by the Company to customers of Lucent and its subsidiaries. The net income (loss) shown below were calculated based upon what the Company believes to be a reasonable allocation of interest, income taxes and certain corporate overhead expenses.
AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 ---------------------------------------------------------------------------------- % OF ASSETS % OF TOTAL REVENUES % OF NET INCOME (LOSS) ------------------------ ------------------------ -------------------------- U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL ---- ------- ----- ---- ------- ----- ----- ------- ------ Customers of the AT&T Entities.................... 27.7 0.6 28.3 30.0 0.5 30.5 59.6 0.1 59.7 AT&T Entities as End-User..... 4.0 -- 4.0 7.2 -- 7.2 7.6 -- 7.6 Non-AT&T Entities Related Business.................... 49.0 18.7 67.7 49.3 13.0 62.3 36.8 (4.1) 32.7 ---- ------- ----- ---- ------- ----- ----- ------- ------ Total............... 80.7 19.3 100.0 86.5 13.5 100.0 104.0 (4.0) 100.0 ---- ------- ----- ---- ------- ----- ----- ------- ------ ---- ------- ----- ---- ------- ----- ----- ------- ------
AT OR FOR THE YEAR ENDED DECEMBER 31, 1995 --------------------------------------------------------------------------------- % OF ASSETS % OF TOTAL REVENUES % OF NET INCOME (LOSS) ------------------------ ------------------------ ------------------------- U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL ---- ------- ----- ---- ------- ----- ----- ------- ----- Customers of the AT&T Entities.................... 29.4 0.1 29.5 32.3 0.4 32.7 67.2 0.7 67.9 AT&T Entities as End-User..... 5.3 -- 5.3 8.3 -- 8.3 8.2 -- 8.2 Non-AT&T Entities Related Business.................... 47.8 17.4 65.2 46.3 12.7 59.0 27.0 (3.1) 23.9 ---- ------- ----- ---- ------- ----- ----- ------- ----- Total............... 82.5 17.5 100.0 86.9 13.1 100.0 102.4 (2.4) 100.0 ---- ------- ----- ---- ------- ----- ----- ------- ----- ---- ------- ----- ---- ------- ----- ----- ------- -----
30
AT OR FOR THE YEAR ENDED DECEMBER 31, 1994 --------------------------------------------------------------------------------- % OF ASSETS % OF TOTAL REVENUES % OF NET INCOME (LOSS) ------------------------ ------------------------ ------------------------- U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL ---- ------- ----- ---- ------- ----- ----- ------- ----- Customers of the AT&T Entities.................... 34.3 0.3 34.6 33.1 0.3 33.4 83.9 (1.4) 82.5 AT&T Entities as End-User..... 6.8 -- 6.8 9.5 -- 9.5 8.5 -- 8.5 Non-AT&T Entities Related Business.................... 48.0 10.6 58.6 47.8 9.3 57.1 11.8 (2.8) 9.0 ---- ------- ----- ---- ------- ----- ----- ------- ----- Total............... 89.1 10.9 100.0 90.4 9.6 100.0 104.2 (4.2) 100.0 ---- ------- ----- ---- ------- ----- ----- ------- ----- ---- ------- ----- ---- ------- ----- ----- ------- -----
AT OR FOR THE YEAR ENDED DECEMBER 31, 1993 --------------------------------------------------------------------------------- % OF ASSETS % OF TOTAL REVENUES % OF NET INCOME (LOSS) ------------------------ ------------------------ ------------------------- U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL ---- ------- ----- ---- ------- ----- ----- ------- ----- Customers of the AT&T Entities.................... 38.1 0.3 38.4 31.1 0.2 31.3 99.8 (1.7) 98.1(1) AT&T Entities as End-User..... 9.5 -- 9.5 14.9 -- 14.9 20.8 -- 20.8(1) Non-AT&T Entities Related Business.................... 46.1 6.0 52.1 47.8 6.0 53.8 (6.9) (12.0) (18.9)(1) ---- ------- ----- ---- ------- ----- ----- ------- ----- Total............... 93.7 6.3 100.0 93.8 6.2 100.0 113.7 (13.7) 100.0 ---- ------- ----- ---- ------- ----- ----- ------- ----- ---- ------- ----- ---- ------- ----- ----- ------- -----
- ------------ (1) In 1993, the Customers of the AT&T Entities, AT&T Entities as End-User and non-AT&T Entities related business net income (loss) accounted for 89.0%, 20.2% and (9.2%), respectively, of the Company's net income before cumulative effect of the 1993 accounting change and impact of the tax rate change. For a description of the 1993 accounting change and impact of the tax rate change, see Note 10 to the Consolidated Financial Statements which are included in the 1995 Form 10-K incorporated herein by reference. The increases in 1995 in the non-AT&T Entities related business assets and revenues (as a percentage of total assets and revenues) were generated almost equally from United States and foreign operations. The significant increase in 1995 in the Company's United States non-AT&T Entities related business net income was primarily generated from large-ticket specialty and structured finance activities, Small Business Administration loan sales and growth in the vehicle portfolio. Net losses from foreign non-AT&T Entities related business somewhat offset the strong United States results. The securitization of certain non-AT&T Entities related Portfolio Assets positively affected net income of the non-AT&T Entities related business in all years presented as well as in the nine months ended September 30, 1996. However, the Company decreased significantly the amount of securitization each year from 1993 through 1995. Partly as a result of the reduction in securitized assets, the portion of the Company's non-AT&T Entities related business net income attributable to securitization has decreased by 88.7% from 1993 to 1995. See Note 6 to the Consolidated Financial Statements in the 1995 Form 10-K incorporated herein by reference. The Company's non-AT&T Entities related business contributed 30.9% of the Company's net income for the nine months ended September 30, 1996 without giving effect to a securitization of non-AT&T Entities related business Portfolio Assets effected by the Company during such period. No similar securitization was effected during the nine months ended September 30, 1995. See ' -- Business Strategy' below for a discussion of the Company's current securitization plans. BUSINESS STRATEGY AT&T Capital has two broad business strategies: (i) to enhance its position as a leader in providing leasing and financing services that are marketed to customers of equipment manufacturers, distributors and dealers with whom the Company has a marketing relationship for financing services (the Company's 'Global Vendor Finance' strategy); and (ii) to establish itself as a leader in providing leasing, financing and related services that are marketed directly to end-users of equipment, including customers of the Company's Global Vendor Finance marketing activities (e.g., end-users acquiring general equipment for which the Company previously financed telecommunications equipment), as well as customers of 31 vendors with whom the Company does not have a marketing relationship for financing services (the Company's 'Direct Customer Finance' strategy). In 1995, Global Vendor Finance constituted 58% of the Company's total financing volume (24% attributable to the AT&T Entities and 34% attributable to other vendors) and represented 56% of the Company's year-end total assets (29% attributable to the AT&T Entities and 27% attributable to other vendors). In 1995, Direct Customer Finance constituted 42% of the Company's total financing volume (4% attributable to AT&T Entities and their employees as end-users and 38% to other end-users) and 44% of the Company's year-end total assets (5% attributable to the AT&T Entities and their employees as end-users and 39% to other end-users). The Company anticipates that significant changes in the Company's financing strategy will be implemented. In particular, the Company anticipates that approximately 30% of its financing volume originated each year may be securitized annually pursuant to off-balance sheet securitization transactions. To the extent that the actual level of securitization deviates significantly from the planned level, there could be a material adverse effect on the Company. See 'Risk Factors -- Risks Related to Expected Plans Involving the Company-Securitization Program.' The Company anticipates that the cost of the Company's on-balance sheet financing will increase by virtue of its disaffiliation from AT&T and its lower debt ratings. See 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company.' However, such increase in borrowing costs is expected to be offset in significant part by the lower financing rates associated with the Company's planned off-balance sheet securitization program. CERTAIN BUSINESS SKILLS The Company has developed a number of business skills and competencies that management believes make the Company an effective competitor in the leasing and finance industry. For example, in connection with its Global Vendor Finance relationship with the AT&T Entities, the Company has developed the capabilities necessary to service large numbers of customers on an efficient and timely basis. In general, the Company has linked its telecommunications and data systems with those of the sales and marketing offices of the AT&T Entities and has placed its own personnel and equipment at these offices. These linkages and on-site presence, in conjunction with the Company's credit review and scoring capabilities (see ' -- Vendor Relationship Management Skills -- Credit Management Skills' below), enable the Company to receive and process a large volume of applications, provide related credit review and approval and otherwise efficiently service a high volume of transactions at what the Company believes is a relatively low cost per transaction. This process allows the Company to respond on a timely basis to credit inquiries (generally within 10 minutes for routine financings under $50,000). VENDOR RELATIONSHIP MANAGEMENT SKILLS As a result of its Global Vendor Finance and Direct Customer Finance relationships, the Company has, in addition to its credit management skills and asset management skills described below, gained significant experience in structuring and managing vendor finance and direct customer finance programs tailored to specific customer needs. The Company has tailored programs to specific customer needs by providing a number of specialized products and programs, including (i) customer financing products; (ii) specialized sales aid services, including training of vendor personnel and point-of-sale support; (iii) tailored private label programs, in which financing is provided to the vendor's customers under the vendor's name; (iv) specialized customer operations support and interfaces; (v) alternate channel programs; (vi) inventory financing; and (vii) support for value-added retailers or distributions. CREDIT MANAGEMENT SKILLS. The Company has adopted policies and procedures that management believes allow the Company to review carefully the creditworthiness of its customers under procedures that management believes are efficient and timely. Management of key risks is initially the responsibility of business unit operating personnel and is further coordinated throughout the Company by the Risk Management Department, which has established policies and procedures for tracking credit performance results on a monthly basis. Consistent with its strategy, the Company has diversified its credit risk associated with its Portfolio Assets by customer, industry segment, equipment type, geographic location 32 and transaction maturity. Small transactions are generally credit scored by operating personnel utilizing innovative expert systems credit scoring technology developed in conjunction with the Bell Laboratories Operations Research Department. This credit scoring technology supports decisions and associated strategies for credit risk management throughout the customers' financing lifecycle. Larger transactions are individually reviewed by experienced credit officers. This system, when combined with the Company's ongoing risk management review process, provides overall risk management techniques that management believes position the Company favorably in the marketplace. ASSET MANAGEMENT SKILLS. The Company's asset management skills include its equipment remarketing capabilities, its in-house equipment refurbishing facilities and its knowledge of developing technologies and products and obsolescence trends, particularly with respect to information technology equipment. These skills assist the Company in its efforts to establish residual values, to maximize the value of equipment that is returned to the Company at the end of a lease and to help reduce the Company's risks in connection with its residual values. Estimates of residual values are determined by the Company from, among other things, studies prepared by the Company, professional appraisals, historical experience, industry data, market information on sales of used equipment, end-of-lease customer behavior and estimated obsolescence trends. The Company actively manages its residuals by working with lessees and vendors 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 industries, particularly the information technology industries, for obsolescence trends. The Company strategically manages its portfolio to ensure a broad diversification of residual value risk by equipment type and lease expiration. FINANCIAL STRUCTURING CAPABILITIES. The Company manages approximately $1.4 billion in lease finance assets (consisting principally of equity interests in leveraged leases of commercial aircraft and project finance transactions) for AT&T. The personnel that structured and negotiated the transactions under which the lease finance assets were acquired, in addition to providing services relating to the management of the lease finance assets, assist other segments of the Company's business in structuring transactions that require use of complex financial expertise, including transactions in specialty product areas that the Company believes are not currently being served adequately by the industry. THE MERGER On October 1, 1996, the Company consummated the Merger with Merger Sub, pursuant to the Merger Agreement among AT&T, the former indirect owner of approximately 86% of the outstanding Common Stock of the Company, Holdings and Merger Sub. Pursuant to the Merger Agreement, Merger Sub was merged with and into the Company, with the Company continuing its corporate existence under Delaware law as the surviving corporation. All of the outstanding common equity capital of the Company is currently directly or indirectly owned by the members of the Leasing Consortium consisting of (i) the Management Investors, including Thomas C. Wajnert, Chairman of the Board and Chief Executive Officer of the Company, and approximately 23 other members of the Company's senior management, and (ii) GRSH. Following the consummation of the Merger and the related transactions, the Management Investors own 3.3% of the Common Stock (or approximately 5.5% on a fully diluted basis) and GRSH indirectly owns 96.7% of the Common Stock (or approximately 94.5% on a fully diluted basis). The Merger and related transactions had a significant impact on the Company's financial position and results of operations. Had the Merger and related transactions occurred on September 30, 1996, on a pro forma basis, the Company's total assets, debt, total liabilities and shareowners' equity would have been $8.1 billion, $6.4 billion, $7.2 billion and $0.7 billion, respectively. Had the Merger and related transactions occurred on January 1, 1995, the Company's revenues for the nine months ended September 30, 1996 and the year ended December 31, 1995 would have been $1.2 billion and $1.3 billion, respectively, and the Company's net income (loss) for the nine months ended September 30, 1996 and the year ended December 31, 1995 would have been $38.4 million and $(16.4) million, respectively. The transactions related to the Merger include: (i) the securitization of approximately $3.1 billion of lease and loan receivables which occurred on October 15, 1996, and the application of the net proceeds therefrom principally to repay short-term borrowings of approximately $1.3 billion incurred as 33 part of the financing of the Merger; (ii) the conversion of the Company's then outstanding common stock to the right to receive $45 per share in cash pursuant to the Merger Agreement; (iii) the issuance and sale of the Trust Preferred Securities by the Trust and the application of the net proceeds therefrom; (iv) the Tax Deconsolidation from AT&T (see 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the Company -- Tax Deconsolidation'), including the repayment of approximately $247.4 million of non-interest bearing notes held by AT&T and the payment by the Company to AT&T of $35.0 million in exchange for AT&T's assumption of all federal and combined state tax liabilities of the Company relating to periods prior to the Merger; (v) effects of an Internal Revenue Code of 1986, as amended (the 'Code') Section 338(h)(10) election, including the deferred tax effects relating to the Merger and the Section 338(h)(10) election; (vi) the issuance of short-term notes and the incurrence of liabilities for payments under certain benefit plans, other payments to certain employees and for Merger related transaction costs; (vii) the expected increase in the Company's borrowing cost resulting from the Merger; (viii) the expected increase in the Company's annual expenses for operating and administrative expenses resulting from the Company no longer being entitled to the discounts accorded to AT&T and its subsidiaries or received directly from AT&T; (ix) the payment of certain annual transaction management and advisory fees; and (x) payments associated with acceleration of amounts payable under compensation and benefit plans. The Company's pro forma revenues and net income results for the periods described above do not reflect the Company's proposed future strategy of increasing its use of periodic securitizations of lease and loan receivables as a funding source. In addition, such pro forma results do not reflect the significant gain associated with the Company's October 15, 1996 asset securitization. Had the securitization taken place on January 1, 1995 and had such gain been included in the Company's pro forma results, the Company's revenues for the year ended December 31, 1995 would have been $1.4 billion, and the Company's net income for the year ended December 31, 1995 would have been $68.5 million (excluding other non-recurring expenses of $39.4 million). In addition to asset sales in connection with the Company's anticipated securitization transactions described in this Prospectus, the Company may review opportunities from time to time to dispose of certain assets depending upon market conditions and other circumstances at such time, although the Company does not currently have any agreements for such dispositions. The Company's Board of Directors and management will continue to evaluate the Company's corporate structure, business, management composition, operations, organization and other matters and make such changes as the Board deems appropriate. The Company's Current Report on Form 8-K dated October 1, 1996, which is incorporated by reference into this Prospectus, contains unaudited pro forma consolidated financial information with respect to the Company. Such unaudited pro forma consolidated financial information gives effect to the Merger and related transactions described above. RELATIONSHIP WITH AT&T ENTITIES In September 1995, AT&T announced plans to effect the AT&T Restructuring, which was comprised of separating itself into three publicly traded companies (AT&T, Lucent and NCR) and disposing of its approximately 86% equity interest in the Company to the general public or another company. Pursuant to the AT&T Restructuring, the Company consummated the Merger which resulted in, among other things, the disposition by AT&T of its remaining equity interest in the Company. See 'The Merger.' On September 30, 1996, AT&T spun off its entire remaining interest in Lucent to AT&T's shareholders. Lucent's businesses involve the manufacture and distribution of public telecommunications systems, business communications systems, micro-electronic components, and consumer telecommunications products. In addition, AT&T has announced that it intends to distribute to its shareholders all of its interest in NCR by the end of 1996. NCR's businesses involve the manufacture and distribution of information technology equipment, including automatic teller machines and point-of-sale terminal equipment. 34 In connection with the Company's IPO in 1993, the Company entered into a series of agreements with AT&T to formalize the relationship between the two companies, including the following three significant agreements, each dated as of June 25, 1993: (i) the Operating Agreement, (ii) the Intercompany Agreement and (iii) the License Agreement. Each of these agreements, together with the Agreement Supplements entered into with Lucent and NCR, are described below. The descriptions of such agreements set forth herein do not purport to be complete and are subject in their entirety to the actual terms of such agreements, copies of which have been filed with the Commission. See 'Available Information.' The AT&T Operating Agreement provides, among other things, that (i) the Company serves as AT&T's 'preferred provider' of financing services and has certain related and other rights and privileges in connection with the financing of AT&T equipment to AT&T's customers and (ii) subject to various exceptions, the AT&T Entities shall not compete or maintain an ownership interest in any business that competes with the Company and its subsidiaries. The Company has executed agreements comparable to the AT&T Operating Agreement with each of Lucent and NCR. As the 'preferred provider' of financing services for customers of Lucent, NCR and AT&T, the Company receives a number of significant benefits, including the receipt by the Company of information from Lucent and NCR relating to their product development and marketing plans, the promotion and support by Lucent and NCR of the efforts of the Company to market its leasing and financing services to their customers and dealers, the provision of space at the Lucent and NCR sales sites for personnel and equipment of the Company and the right of the Company to maintain computer and telecommunication linkages with Lucent and NCR in connection with the offering, documenting and monitoring of the Company's leasing and financing services. The Company endeavors to take advantage of these benefits, and has, over the past eleven years, invested significant resources in creating a financing organization dedicated to and integrated (through such computer and telecommunication linkages) with the sales forces of Lucent and, to a lesser extent, NCR. In addition, the Company has developed relationships with the organizations of the AT&T Entities (particularly Lucent), has developed and maintained comprehensive, proprietary customer databases and has gained a significant position with respect to the aftermarket for Lucent and NCR equipment. The Company believes that Lucent and NCR are likewise the recipients of significant benefits as a result of AT&T Capital's preferred provider status, although there can be no assurance that any of such agreements will be extended beyond the expiration of their initial term on August 4, 2000, or, if extended, that the terms and conditions thereof will not be modified in a manner adverse to the Company. See 'Risk Factors -- Changes in Relationship with AT&T Entities -- Operating and Certain Other Agreements with AT&T Entities.' In connection with its financing business for Lucent, the Company provides an additional incentive, in the form of a sales assistance fee, for Lucent to assist the Company in the financing of products manufactured or distributed by Lucent. The sales assistance fee is based on designated percentages of the aggregate sales prices and other charges ('volumes') of Lucent products financed by the Company. In early 1996, the Company agreed to increase the designated percentage for the sales assistance fee from the percentage paid by the Company in prior years. After giving effect to the changes in the fee for 1995, the sales assistance fee paid by the Company to Lucent for 1995 was approximately double the 1994 fee. The Company and Lucent recently agreed to a modified formula for calculating the sales assistance fee for the remaining years of the term of Lucent's Operating Agreement (retroactive to 1996). The revised formula is expected to result in aggregate annual sales assistance fees which are approximately double the amounts that would have been paid if the pre-1995 formula had been maintained. The Intercompany Agreement provides, among other things, that the Company will administer for a fee various portfolios of financing and leasing assets, including certain portfolios which prior to the Company's IPO had been owned by the Company. In addition, the Company has entered into the Agreement Supplements with Lucent and NCR pursuant to which Lucent and NCR have agreed that various provisions of the Intercompany Agreement shall equally apply to them. Pursuant to the License Agreement, AT&T has licensed certain trade names and service marks, including the 'AT&T' trade name, to the Company for use in the leasing and financing business of the 35 Company and certain of its subsidiaries and, in the case of the 'AT&T' trade name, to use as part of the corporate names of the Company and certain subsidiaries. Pursuant to the Agreement Supplements, Lucent and NCR have similarly licensed to the Company certain trade names and service marks, including the 'Lucent Technologies' and 'NCR' trade names. The initial term of each of the Operating Agreements, the Intercompany Agreement, the License Agreement and the Agreement Supplements is scheduled to end on August 4, 2000, subject to early termination rights. In addition, AT&T has the right under the License Agreement, after two years' prior notice, to require the Company to discontinue use of the 'AT&T' trade name as part of the Company's corporate or assumed or 'doing business' name. See 'Risk Factors -- Changes in Relationship with AT&T Entities -- Revenues and Net Income Attributable to AT&T Entities' for a description of the Company's dependence on the revenue and net income attributable to the Company's relationship with the AT&T Entities and their customers and employees. CAPITA PREFERRED TRUST Capita Preferred Trust (the 'Trust') is a statutory business trust formed under the Delaware Business Trust Act, as amended (the 'Trust Act'), pursuant to a declaration of trust and the filing of a certificate of trust with the Secretary of State of the State of Delaware; such declaration will be amended and restated in its entirety (as so amended and restated, the 'Declaration') substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The Declaration will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the 'Trust Indenture Act'). Upon issuance of the Trust Preferred Securities, the purchasers thereof will own all the Trust Preferred Securities. See 'Description of the Trust Preferred Securities.' The Company will acquire Trust Common Securities in an aggregate liquidation amount equal to at least 3% of the total capital of the Trust. The Trust will use all the proceeds derived from the issuance of the Trust Securities to purchase the Partnership Preferred Securities from the Partnership and, accordingly the assets of the Trust will consist solely of the Partnership Preferred Securities. The Trust exists for the exclusive purpose of (i) issuing the Trust Securities representing undivided beneficial ownership interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Partnership Preferred Securities, and (iii) engaging in only those other activities necessary or incidental thereto. Pursuant to the Declaration, there will initially be five trustees (the 'Trustees') for the Trust. Three of the Trustees (the 'Regular Trustees') will be individuals who are employees or officers of or who are affiliated with the Company. The fourth trustee will be a financial institution that is unaffiliated with the Company and is indenture trustee for purposes of compliance with the provisions of the Trust Indenture Act (the 'Property Trustee'). The fifth trustee will be an entity that maintains its principal place of business in the State of Delaware (the 'Delaware Trustee'). Initially, The First National Bank of Chicago, N.A., a national banking association, will act as Property Trustee, and its affiliate, First Chicago Delaware Inc., a Delaware corporation, will act as Delaware Trustee until, in each case, removed or replaced by the holder of the Trust Common Securities. For purposes of compliance with the Trust Indenture Act, The First National Bank of Chicago, N.A. will also act as trustee under the Trust Guarantee (the 'Trust Guarantee Trustee'). The Property Trustee will hold title to the Partnership Preferred Securities for the benefit of the holders of the Trust Securities, and the Property Trustee will have the power to exercise all rights, powers and privileges with respect to the Partnership Preferred Securities under the Amended and Restated Agreement of Limited Partnership to be entered into by the Company and the Trust (the 'Limited Partnership Agreement') as the holder of the Partnership Preferred Securities. In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the 'Property Account') to hold all payments made in respect of the Partnership Preferred Securities for the benefit of the holders of the Trust Securities. The Trust Guarantee Trustee will hold the Trust Guarantee for the benefit of the holders of the Trust Preferred Securities. The Company, as the holder of all the Trust Common Securities, will have the right to appoint, remove or replace any of the Trustees and to increase or decrease the number of trustees, provided that the number of trustees shall be at 36 least three; provided further that at least one trustee shall be a Delaware Trustee, at least one trustee shall be the Property Trustee and at least one Trustee shall be a Regular Trustee. The Company will pay all fees and expenses related to the organization and operations of the Trust (including any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Trust) and the offering of the Trust Preferred Securities and be responsible for all debts and obligations of the Trust (other than with respect to the Trust Securities). For so long as the Trust Preferred Securities remain outstanding, the Company will covenant (i) to maintain directly 100% ownership of the Trust Common Securities, (ii) to cause the Trust to remain a statutory business trust and not to voluntarily dissolve, wind-up, liquidate or be terminated, except as permitted by the Declaration of the Trust, (iii) to use its commercially reasonable efforts to ensure that the Trust will not be an 'investment company' for purposes of the 1940 Act and (iv) to take no action which would be reasonably likely to cause the Trust to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. The rights of the holders of the Trust Preferred Securities, including economic rights, rights to information and voting rights, are as set forth in the Declaration and the Trust Act. See 'Description of the Trust Preferred Securities.' The Declaration and the Trust Guarantee also incorporate by reference the terms of the Trust Indenture Act. The location of the principal executive office of the Trust is c/o AT&T Capital Corporation, 44 Whippany Road, Morristown, NJ 07962, and its telephone number is (201) 397-3000. CAPITA PREFERRED FUNDING L.P. Capita Preferred Funding L.P. (the 'Partnership') is a limited partnership that was formed under the Delaware Revised Uniform Limited Partnership Act, as amended (the 'Partnership Act'), on August 29, 1996. Pursuant to the certificate of limited partnership, as amended, and the Limited Partnership Agreement, the Company is the sole general partner of the Partnership (in such capacity the 'General Partner'). Upon the issuance of the Partnership Preferred Securities, which securities represent limited partner interests in the Partnership, the Trust will be the sole limited partner of the Partnership. Contemporaneous with the issuance of the Partnership Preferred Securities, the General Partner will contribute capital to the Partnership in an amount sufficient to establish its initial capital account at an amount equal to at least 15% of the total capital of the Partnership. The Partnership is managed by the General Partner and exists for the sole purpose of (i) issuing its partnership interests, (ii) investing the proceeds thereof in Affiliate Investment Instruments and Eligible Debt Securities and (iii) engaging in only those other activities necessary or incidental thereto. To the extent that aggregate payments to the Partnership on the Affiliate Investment Instruments and on Eligible Debt Securities exceeds distributions payable with respect to the Partnership Preferred Securities, the Partnership may at times have excess funds which shall be allocated to and may, in the General Partner's sole discretion, be distributed to the General Partner. For so long as the Partnership Preferred Securities remain outstanding, the Company will covenant in the Limited Partnership Agreement (i) to remain the sole general partner of the Partnership and to maintain directly 100% ownership of the General Partner's interest in the Partnership, which interest will at all times represent at least 1% of the total capital of the Partnership; (ii) to cause the Partnership to remain a limited partnership and not to voluntarily dissolve, liquidate, wind-up or be terminated, except as permitted by the Limited Partnership Agreement, (iii) to use its commercially reasonable efforts to ensure that the Partnership will not be an 'investment company' for purposes of the 1940 Act and (iv) to take no action which would be reasonably likely to cause the Partnership to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. The rights of the holders of the Partnership Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the Limited Partnership Agreement and the Partnership Act. See 'Description of the Partnership Preferred Securities.' 37 The Limited Partnership Agreement provides that the General Partner will have liability for the fees and expenses of the Partnership (including any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Partnership and be responsible for all debts and obligations of the Partnership (other than with respect to the Partnership Preferred Securities). Under Delaware law, assuming a limited partner in a Delaware limited partnership such as the Partnership (i.e., a holder of the Partnership Preferred Securities) does not participate in the control of the business of the limited partnership, such limited partner will not be personally liable for the debts, obligations and liabilities of such limited partnership, whether arising in contract, tort or otherwise, solely by reason of being a limited partner of such limited partnership (subject to any obligation such limited partner may have to repay any funds that may have been wrongfully distributed to it). The Partnership's business and affairs will be conducted by the General Partner. The location of the principal executive offices of the Partnership is c/o AT&T Capital Corporation, 44 Whippany Road, Morristown, NJ 07962 and its telephone number is (201) 397-3000. DESCRIPTION OF THE TRUST PREFERRED SECURITIES The Trust Preferred Securities will be issued pursuant to the terms of the Declaration. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Property Trustee, The First National Bank of Chicago, N.A., will act as trustee for the Trust Preferred Securities under the Declaration for purposes of compliance with the provisions of the Trust Indenture Act. The terms of the Trust Preferred Securities will include those stated in the Declaration and those made part of the Declaration by the Trust Indenture Act. The following summary of the material terms and provisions of the Trust Preferred Securities does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Declaration, a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part, the Trust Act and the Trust Indenture Act. GENERAL The Trust Preferred Securities will be issued in fully registered form without coupons. Trust Preferred Securities will not be issued in bearer form. See ' -- Book-Entry Only Issuance -- The Depository Trust Company.' The Declaration authorizes the Regular Trustees of the Trust to issue the Trust Securities, which represent undivided beneficial ownership interests in the assets of the Trust. Title to the Partnership Preferred Securities will be held by the Property Trustee for the benefit of the holders of the Trust Securities. The Declaration does not permit the Trust to acquire any assets other than the Partnership Preferred Securities or the issuance by the Trust of any securities other than the Trust Securities or the incurrence of any indebtedness by the Trust. The payment of distributions out of money held by the Trust, and payments out of money held by the Trust upon redemption of the Trust Preferred Securities or liquidation of the Trust, are guaranteed by the Company to the extent described under 'Description of the Trust Guarantee.' The Trust Guarantee will be held by The First National Bank of Chicago, N.A., the Trust Guarantee Trustee, for the benefit of the holders of the Trust Preferred Securities. The Trust Guarantee does not cover payment of distributions when the Trust does not have sufficient available funds to pay such distributions. In such event, holders of Trust Preferred Securities will have the remedies described below under ' -- Trust Enforcement Events.' DISTRIBUTIONS The distribution rate on Trust Preferred Securities will be fixed at a rate per annum of % of the stated liquidation amount of $25 per Trust Preferred Security if, as and when the Trust has funds available for payment. Distributions not paid on the scheduled payment date will accumulate and compound quarterly at a rate per annum equal to %. The term 'distribution' as used herein includes any such compounded amounts unless otherwise stated or the context otherwise requires. The amount of distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. 38 Distributions on the Trust Preferred Securities will be cumulative, will accrue from the date of initial issuance and will be payable quarterly in arrears on each March 31, June 30, September 30 and December 31, commencing December 31, 1996, if, as and when available for payment, by the Property Trustee, except as otherwise described below. If distributions are not paid when scheduled, the accrued distributions shall be paid to the holders of record of Trust Preferred Securities as they appear on the books and records of the Trust on the record date with respect to the payment date for the Trust Preferred Securities which corresponds to the payment date fixed by the Partnership with respect to the payment of cumulative distributions on the Partnership Preferred Securities. Distributions on the Trust Preferred Securities will be made to the extent that the Trust has funds available for the payment of such distributions in the Property Account. Amounts available to the Trust for distribution to the holders of the Trust Preferred Securities will be limited to payments received by the Trust from the Partnership with respect to the Partnership Preferred Securities or from the Company on the Partnership Guarantee or the Trust Guarantee. Distributions on the Partnership Preferred Securities will be paid only if, as and when declared in the sole discretion of the Company, as the General Partner of the Partnership. Pursuant to the Limited Partnership Agreement, the General Partner is not obligated to declare distributions on the Partnership Preferred Securities at any time, including upon or following a Partnership Enforcement Event. See 'Description of Partnership Preferred Securities -- Partnership Enforcement Events.' The assets of the Partnership consist only of Affiliate Investment Instruments (which initially will be the Debentures) and Eligible Debt Securities. To the extent that the issuers (including, where applicable, the Company, as guarantor) of the securities in which the Partnership invests fail to make any payment in respect of such securities (or, if applicable, such guarantees), the Partnership will not have sufficient funds to pay and will not declare or pay distributions on the Partnership Preferred Securities. If the Partnership does not declare and pay distributions on the Partnership Preferred Securities out of funds legally available for distribution, the Trust will not have sufficient funds to make distributions on the Trust Preferred Securities, in which event the Trust Guarantee will not apply to such distributions until the Trust has sufficient funds available therefor. See 'Description of the Partnership Preferred Securities -- Distributions' and 'Description of the Trust Guarantee.' In addition, as described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' the Partnership may not have sufficient funds to pay current or liquidating distributions on the Partnership Preferred Securities if (i) at any time that the Partnership is receiving current payments in respect of the securities held by the Partnership (including the Debentures), the General Partner, in its sole discretion, does not declare distributions on the Partnership Preferred Securities and the Partnership receives insufficient amounts to pay the additional compounded distributions that will accrue in respect of the Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds received in respect of the Debentures upon their retirement or at their maturities in Affiliate Investment Instruments that do not generate income in an amount that is sufficient to pay full distributions in respect of the Partnership Preferred Securities or (iii) the Partnership invests in equity or debt securities of Investment Affiliates that are not guaranteed by the Company and that cannot be liquidated by the Partnership for an amount sufficient to pay such distributions in full. Distributions on the Trust Preferred Securities will be payable to the holders thereof as they appear on the books and records of the Trust on the relevant record dates, which will be one Business Day (as defined herein) prior to the relevant payment dates. Such distributions will be paid through the Property Trustee who will hold amounts received in respect of the Partnership Preferred Securities in the Property Account for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under ' -- Book-Entry Only Issuance -- The Depository Trust Company' below. In the event that the Trust Preferred Securities do not remain in book-entry only form, the relevant record dates shall be the 15th day of the month of the relevant payment dates. In the event that any date on which distributions are payable on the Trust Preferred Securities is not a Business Day, payment of the distribution payable on such date will be made on the next succeeding day which is a Business Day (without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A 'Business Day' 39 shall mean any day other than a day on which banking institutions in The City of New York are authorized or required by law to close. TRUST ENFORCEMENT EVENTS The occurrence, at any time, of (i) arrearages on distributions on the Trust Preferred Securities that shall exist for six quarterly distribution periods, (ii) a default by the Company in respect of any of its obligations under the Trust Guarantee or (iii) a Partnership Enforcement Event under the Limited Partnership Agreement, will constitute an enforcement event under the Declaration with respect to the Trust Securities (a 'Trust Enforcement Event'); provided, that pursuant to the Declaration, the holder of the Trust Common Securities will be deemed to have waived any Trust Enforcement Event with respect to the Trust Common Securities until all Trust Enforcement Events with respect to the Trust Preferred Securities have been cured, waived or otherwise eliminated. Until such Trust Enforcement Events with respect to the Trust Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Trust Preferred Securities and only the holders of the Trust Preferred Securities will have the right to direct the Property Trustee with respect to certain matters under the Declaration and, therefore, the Special Representative with respect to certain matters under the Limited Partnership Agreement. See 'Description of the Partnership Preferred Securities -- Partnership Enforcement Events' for a description of the events which will trigger the occurrence of a Partnership Enforcement Event. Upon the occurrence of a Trust Enforcement Event, (a) the Property Trustee, as the holder of the Partnership Preferred Securities, shall have the right to enforce the terms of the Partnership Preferred Securities, including the right to direct the Special Representative to enforce (i) the Partnership's creditors' rights and other rights with respect to the Affiliate Investment Instruments and the Investment Guarantees, (ii) the rights of the holders of the Partnership Preferred Securities under the Partnership Guarantee and (iii) the rights of the holders of the Partnership Preferred Securities to receive distributions (only if and to the extent declared out of funds legally available therefor) on the Partnership Preferred Securities, and (b) the Trust Guarantee Trustee shall have the right to enforce the terms of the Trust Guarantee, including the right to enforce the covenant restricting certain payments by the Company and its majority owned subsidiaries. If the Property Trustee fails to enforce its rights under the Partnership Preferred Securities after a holder of Trust Preferred Securities has made a written request, such holder of record of Trust Preferred Securities may directly institute a legal proceeding against the Partnership and the Special Representative to enforce the Property Trustee's rights under the Partnership Preferred Securities without first instituting any legal proceeding against the Property Trustee, the Trust or any other person or entity. In addition, for so long as the Trust holds any Partnership Preferred Securities, if the Special Representative fails to enforce its rights on behalf of the Partnership under the Affiliate Investment Instruments after a holder of Trust Preferred Securities has made a written request, a holder of record of Trust Preferred Securities may on behalf of the Partnership directly institute a legal proceeding against the Investment Affiliates under the Affiliate Investment Instruments, without first instituting any legal proceeding against the Property Trustee, the Trust, the Special Representative or the Partnership. In any event, for so long as the Trust is the holder of any Partnership Preferred Securities, if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of an Investment Affiliate to make any required payment when due on any Affiliate Investment Instrument or the failure of the Company to make any required payment when due on any Investment Guarantee, then a holder of Trust Preferred Securities may on behalf of the Partnership directly institute a proceeding against such Investment Affiliate with respect to such Affiliate Investment Instrument or against the Company with respect to any such Investment Guarantee, in each case for enforcement of payment. Under no circumstances, however, shall the Special Representative have authority to cause the General Partner to declare distributions on the Partnership Preferred Securities. As a result, although the Special Representative may be able to enforce the Partnership's creditors' rights to accelerate and receive payments in respect of the Affiliate Investment Instruments and the Investment Guarantees, the Partnership would be entitled to reinvest such payments in additional Affiliate Investment Instruments, 40 subject to satisfying the reinvestment criteria described under 'Description of the Partnership Preferred Securities -- Partnership Investments,' and Eligible Debt Securities, rather than declaring and making distributions on the Partnership Preferred Securities. The Company and the Trust are each required to file annually with the Property Trustee an officer's certificate as to its compliance with all conditions and covenants under the Declaration. MANDATORY REDEMPTION The Partnership Preferred Securities may be redeemed by the Partnership at the option of the General Partner, in whole or in part, at any time on or after September 30, 2006 or at any time in certain circumstances upon the occurrence of a Partnership Special Event. Upon the repayment of the Partnership Preferred Securities upon such redemption (either at the option of the General Partner or pursuant to a Partnership Special Event), the proceeds from such repayment shall simultaneously be applied to redeem Trust Securities having an aggregate liquidation amount equal to the Partnership Preferred Securities so repaid at an amount equal to the amount received in respect of the redeemed Partnership Preferred Securities; provided, that holders of the Trust Securities shall be given not less than 30 nor more than 60 days' notice of such redemption. See 'Description of the Partnership Preferred Securities -- General' and 'Description of the Partnership Preferred Securities -- Optional Redemption.' TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION If, at any time, a Trust Tax Event or a Trust Investment Company Event (each as hereinafter defined, and each, a 'Trust Special Event') shall occur and be continuing, the Regular Trustees shall, unless the Partnership Preferred Securities are redeemed in the limited circumstances described below, within 90 days following the occurrence of such Trust Special Event elect to either (i) dissolve the Trust upon not less than 30 nor more than 60 days' notice with the result that, after satisfaction of creditors of the Trust, if any, Partnership Preferred Securities with an aggregate principal amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid distributions on, and having the same record date for payment as, the Trust Preferred Securities and the Trust Common Securities outstanding at such time would be distributed on a pro rata basis to the holders of the Trust Preferred Securities and the Trust Common Securities in liquidation of such holders' interests in the Trust; provided, however, that if at the time there is available to the Trust the opportunity to eliminate, within such 90-day period, the Trust Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure which in the sole judgment of the Company has or will cause no adverse effect on the Trust, the Partnership, the Company or the holders of the Trust Securities and will involve no material cost, the Trust will pursue such measure in lieu of dissolution or (ii) cause the Trust Preferred Securities to remain outstanding, provided that in the case of this clause (ii), the Company shall pay any and all expenses incurred by or payable by the Trust attributable to the Trust Special Event. Furthermore, if in the case of the occurrence of a Trust Tax Event, the Regular Trustees have received an opinion (a 'Trust Redemption Tax Opinion') of nationally recognized independent tax counsel experienced in such matters that there is more than an insubstantial risk that interest payable by one or more of the Investment Affiliates with respect to the Debentures issued by such Investment Affiliate is not, or will not be, deductible by such Investment Affiliate for United States federal income tax purposes even if the Partnership Preferred Securities were distributed to the holders of the Trust Securities in liquidation of such holders' interests in the Trust as described above, then the General Partner shall have the right, within 90 days following the occurrence of such Trust Tax Event, to elect to cause the Partnership to redeem the Partnership Preferred Securities in whole (but not in part) for cash upon not less than 30 nor more than 60 days' notice and promptly following such redemption, the Trust Preferred Securities and Trust Common Securities will be redeemed by the Trust at the Redemption Price. 'Trust Tax Event' means that the Company shall have requested and received and shall have delivered to the Regular Trustees an opinion of nationally recognized independent tax counsel experienced in such matters (a 'Trust Dissolution Tax Opinion') to the effect that there has been (a) an 41 amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) a judicial decision interpreting, applying, or clarifying such laws or regulations, (c) an administrative pronouncement or action that represents an official position (including a clarification of an official position) of the governmental authority or regulatory body making such administrative pronouncement or taking such action, or (d) a threatened challenge asserted in connection with an audit of the Company or any of its subsidiaries, the Partnership, or the Trust, or a threatened challenge asserted in writing against any other taxpayer that has raised capital through the issuance of securities that are substantially similar to the Debentures, the Partnership Preferred Securities, or the Trust Preferred Securities, which amendment or change is adopted or which proposed change, decision or pronouncement is announced or which action, clarification or challenge occurs on or after the date of this Prospectus (collectively a 'Tax Action'), which Tax Action relates to any of the items described in (i) through (iii) below, and that there is more than an insubstantial risk that (i) the Trust is, or will be subject to United States federal income tax with respect to income accrued or received on the Partnership Preferred Securities, (ii) the Trust is, or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable by an Investment Affiliate with respect to the Debenture issued by such Investment Affiliate is not, or will not be, deductible by such Investment Affiliate for United States federal income tax purposes. 'Trust Investment Company Event' means that the Company shall have requested and received and shall have delivered to the Regular Trustees an opinion of nationally recognized independent legal counsel experienced in such matters to the effect that as a result of the occurrence on or after the date hereof of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a 'Change in 1940 Act Law'), the Trust is or will be considered an 'investment company' which is required to be registered under the 1940 Act. If the Partnership Preferred Securities are distributed to the holders of the Trust Preferred Securities, the Company will use its best efforts to cause the Partnership Preferred Securities to be listed on the New York Stock Exchange or on such other national securities exchange or similar organization as the Trust Preferred Securities are then listed or quoted. On the date fixed for any distribution of Partnership Preferred Securities, upon dissolution of the Trust, (i) the Trust Preferred Securities and the Trust Common Securities will no longer be deemed to be outstanding and (ii) certificates representing Trust Securities will be deemed to represent the Partnership Preferred Securities having an aggregate principal amount equal to the stated liquidation amount of, and bearing accrued and unpaid distributions equal to accrued and unpaid distributions on, such Trust Securities until such certificates are presented to the Company or its agent for transfer or reissuance. There can be no assurance as to the market price for the Partnership Preferred Securities which may be distributed in exchange for Trust Preferred Securities if a dissolution and liquidation of the Trust were to occur. Accordingly, the Partnership Preferred Securities which an investor may subsequently receive on dissolution and liquidation of the Trust may trade at a discount to the price of the Trust Preferred Securities exchanged. REDEMPTION PROCEDURES The Trust may not redeem fewer than all of the outstanding Trust Preferred Securities unless all accrued and unpaid distributions have been paid on all Trust Preferred Securities for all quarterly distribution periods terminating on or prior to the date of redemption. If the Trust gives a notice of redemption in respect of Trust Preferred Securities (which notice will be irrevocable), and if the Company has paid to the Property Trustee a sufficient amount of cash in connection with the related redemption of the Partnership Preferred Securities, then, by 12:00 noon, New York time, on the redemption date, the Trust will irrevocably deposit with the DTC funds sufficient to pay the amount payable on redemption of all book-entry certificates and will give DTC irrevocable instructions and authority to pay such amount to holders of the Trust Preferred Securities. 42 See ' -- Book-Entry Only Issuance -- The Depository Trust Company.' If notice of redemption shall have been given and funds are deposited as required, then upon the date of such deposit, all rights of holders of such Trust Preferred Securities so called for redemption will cease, except the right of the holders of such Trust Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Trust Preferred Securities is not a Business Day, then payment of the amount payable on such date will be made on the next succeeding day which is a Business Day (without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of Trust Preferred Securities is improperly withheld or refused and not paid either by the Trust or by the Company pursuant to the Trust Guarantee described under 'Description of the Trust Guarantee,' distributions on such Trust Preferred Securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment. In the event that fewer than all of the outstanding Trust Preferred Securities are to be redeemed, the Trust Preferred Securities will be redeemed in accordance with the procedures of DTC. See ' -- Book-Entry Only Issuance -- The Depository Trust Company.' Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or its subsidiaries may at any time and from time to time purchase outstanding Trust Preferred Securities by tender, in the open market or by private agreement. SUBORDINATION OF TRUST COMMON SECURITIES Payment of amounts upon liquidation of the Trust Securities shall be made pro rata based on the liquidation amount of the Trust Securities; provided, however, that upon (i) the occurrence of an Investment Event of Default by an Investment Affiliate (including the Company) in respect of any Affiliate Investment Instrument or (ii) default by the Company on any of its obligations under any Guarantee, the holders of the Trust Preferred Securities will have a preference over the holders of the Trust Common Securities with respect to payments upon liquidation of the Trust. In the case of any Trust Enforcement Event, the holder of Trust Common Securities will be deemed to have waived any such Trust Enforcement Event until all such Trust Enforcement Events with respect to the Trust Preferred Securities have been cured, waived or otherwise eliminated. Until all Trust Enforcement Events with respect to the Trust Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee shall act solely on behalf of the holders of the Trust Preferred Securities and not on behalf of the holder of the Trust Common Securities, and only the holders of the Trust Preferred Securities will have the right to direct the Property Trustee to act on their behalf. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a 'Trust Liquidation'), the then holders of the Trust Preferred Securities will be entitled to receive out of the assets of the Trust, after satisfaction of liabilities to creditors, distributions in cash or other immediately available funds in an amount equal to the aggregate of the stated liquidation amount of $25 per Trust Preferred Security plus accrued and unpaid distributions thereon to the date of payment (the 'Trust Liquidation Distribution'), unless, in connection with such Trust Liquidation, Partnership Preferred Securities in an aggregate stated principal amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid distributions on, the Trust Preferred Securities have been distributed on a pro rata basis to the holders of the Trust Preferred Securities. If, upon any such Trust Liquidation, the Trust Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Trust Liquidation Distribution, then the amounts payable directly by the Trust on the Trust Preferred Securities shall be paid on a pro rata basis. The holders of the Trust Common Securities will be entitled to receive distributions upon any such liquidation pro rata with the holders of the Trust Preferred Securities, 43 except in the limited circumstances described above under ' -- Subordination of Trust Common Securities.' Pursuant to the Declaration, the Trust shall terminate (i) upon the bankruptcy of the Company, (ii) upon the filing of a certificate of dissolution or the equivalent with respect to the Company, the filing of a certificate of cancellation with respect to the Trust after having obtained the consent of at least a majority in liquidation amount of the Trust Securities, voting together as a single class, to file such certificate of cancellation, or the revocation of the charter of the Company and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iii) upon the distribution of all of the Partnership Preferred Securities upon the occurrence of a Trust Special Event, (iv) upon the entry of a decree of a judicial dissolution of the Company or the Trust, or (v) upon the redemption of all the Trust Securities. VOTING RIGHTS Except as described herein, under the Trust Act, the Trust Indenture Act and under 'Description of the Trust Guarantee -- Amendments and Assignment,' and as otherwise required by law and the Declaration, the holders of the Trust Preferred Securities will have no voting rights. Subject to the requirement of the Property Trustee obtaining a tax opinion as set forth in the last sentence of this paragraph, the holders of a majority in liquidation amount of the Trust Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as holder of the Partnership Preferred Securities, to (i) exercise the remedies available to it under the Limited Partnership Agreement as a holder of the Partnership Preferred Securities, including the right to direct the Special Representative to exercise its rights in the manner described above under ' -- Trust Enforcement Events' and (ii) consent to any amendment, modification, or termination of the Limited Partnership Agreement or the Partnership Preferred Securities where such consent shall be required; provided, however, that where a consent or action under the Limited Partnership Agreement would require the consent or act of the holders of more than a majority of the aggregate liquidation amount of Partnership Preferred Securities affected thereby, only the holders of the percentage of the aggregate stated liquidation amount of the Trust Securities which is at least equal to the percentage required under the Limited Partnership Agreement may direct the Property Trustee to give such consent or take such action on behalf of the Trust. See 'Description of the Partnership Preferred Securities -- Voting Rights.' The Property Trustee shall notify all holders of the Trust Preferred Securities of any notice of any Partnership Enforcement Event received from the General Partner with respect to the Partnership Preferred Securities and the Affiliate Investment Instruments. Such notice shall state that such Partnership Enforcement Event also constitutes a Trust Enforcement Event. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy as described above, the Property Trustee shall be under no obligation to take any of the actions described in clauses (i) or (ii) above unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that as a result of such action, the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes and each holder will be treated as owning an undivided beneficial ownership interest in the Partnership Preferred Securities. A waiver of a Partnership Enforcement Event with respect to the Partnership Preferred Securities held by the Property Trustee will constitute a waiver of the corresponding Trust Enforcement Event. Any required approval or direction of holders of Trust Preferred Securities may be given at a separate meeting of holders of Trust Preferred Securities convened for such purpose, at a meeting of all of the holders of Trust Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of Trust Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Trust Preferred Securities. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of 44 proxies or consents. No vote or consent of the holders of Trust Preferred Securities will be required for the Trust to redeem and cancel Trust Preferred Securities or distribute Partnership Preferred Securities in accordance with the Declaration. Notwithstanding that holders of Trust Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Trust Securities that are owned at such time by the Company or any entity directly or indirectly controlled by, or under direct or indirect common control with, the Company, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such Trust Securities were not outstanding; provided however that persons (other than affiliates of the Company) to whom the Company or any of its subsidiaries have pledged Trust Preferred Securities may vote or consent with respect to such pledged Trust Preferred Securities under any of the circumstances described herein. The procedures by which holders of Trust Preferred Securities represented by the global certificates may exercise their voting rights are described below. See ' -- Book-Entry Only Issuance -- The Depository Trust Company.' Holders of the Trust Preferred Securities will have no rights to appoint or remove the Regular Trustees, who may be appointed, removed or replaced solely by the Company, as the holder of all of the Trust Common Securities. MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any corporation or other entity, except as described below. The Trust may, with the consent of a majority of the Regular Trustees and without the consent of the holders of the Trust Securities, the Property Trustee or the Delaware Trustee consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State of the United States; provided, that (i) if the Trust is not the survivor, such successor entity either (x) expressly assumes all of the obligations of the Trust under the Trust Securities or (y) substitutes for the Trust Preferred Securities other securities having substantially the same terms as the Trust Preferred Securities (the 'Successor Securities'), so long as the Successor Securities rank the same as the Trust Securities rank with respect to distributions, assets and payments, (ii) the Company expressly acknowledges a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Partnership Preferred Securities, (iii) the Trust Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Trust Preferred Securities are then listed or quoted, (iv) such merger, consolidation, amalgamation or replacement does not cause the Trust Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Preferred Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Trust, (vii) the Company guarantees the obligations of such successor entity under the Successor Securities to the same extent as provided by the Trust Guarantee, (viii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement will not adversely affect the rights, preferences and privileges of the holders of the Trust Preferred Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act, (C) following such merger, consolidation, amalgamation or replacement, the Trust (or such successor trust) will not be treated as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes and (D) following such merger, consolidation, amalgamation or replacement, the Partnership will not be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 45 100% in liquidation amount of the Trust Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if such consolidation, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. MODIFICATION OF THE DECLARATION The Declaration may be modified and amended if approved by a majority of the Regular Trustees (and in certain circumstances the Property Trustee and the Delaware Trustee), provided, that if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the holders of the Trust Securities voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority in liquidation amount of the Trust Securities affected thereby; provided, further that if any amendment or proposal referred to in clause (i) above would adversely affect only the Trust Preferred Securities or the Trust Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a majority in liquidation amount of such class of Trust Securities. The Declaration may be amended without the consent of the holders of the Trust Securities to (i) cure any ambiguity, (ii) correct or supplement any provision in the Declaration that may be defective or inconsistent with any other provision of the Declaration, (iii) add to the covenants, restrictions or obligations of the Sponsor, (iv) conform to any change in the 1940 Act, the Trust Indenture Act or the rules or regulations of either such Act and (v) modify, eliminate and add to any provision of the Declaration to such extent as may be necessary or desirable; provided that no such amendment shall have a material adverse effect on the rights, preferences or privileges of the holders of the Trust Securities. Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to fail to be classified as a grantor trust for United States federal income tax purposes, (ii) cause the Partnership to be classified as an association or publicly traded partnership taxable as a corporation for such purposes, (iii) reduce or otherwise adversely affect the powers of the Property Trustee or (iv) cause the Trust or the Partnership to be deemed an 'investment company' which is required to be registered under the 1940 Act. BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY The Depository Trust Company ('DTC') will act as securities depository (the 'Depository') for the Trust Preferred Securities and, to the extent distributed to the holders of Trust Preferred Securities, the Partnership Preferred Securities. The Trust Preferred Securities will be issued only as fully- registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global Trust Preferred Securities certificates ('Global Certificates'), representing the total aggregate number of Trust Preferred Securities, will be issued and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a 'banking organization' within the meaning of the New York Banking Law, a member of the Federal Reserve System, a 'clearing corporation' within the meaning of the New York Uniform Commercial Code, and a 'clearing agency' registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ('Participants') deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Participants in DTC include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its Participants and by the New York Stock Exchange, the 46 American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ('Indirect Participants'). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Trust Preferred Securities within the DTC system must be made by or through Participants, which will receive a credit for the Trust Preferred Securities on DTC's records. The ownership interest of each actual purchaser of Trust Preferred Securities ('Beneficial Owner') is in turn to be recorded on the Participants' and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Participants or Indirect Participants through which the Beneficial Owners purchased Trust Preferred Securities. Transfers of ownership interests in the Trust Preferred Securities are to be accomplished by entries made on the books of Participants and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Trust Preferred Securities, except in the event that use of the book-entry system for the Trust Preferred Securities is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Trust Preferred Securities; DTC's records reflect only the identity of the Participants to whose accounts such Trust Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. So long as DTC, or its nominee, is the registered owner or holder of a Global Certificate, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Trust Preferred Securities represented thereby for all purposes under the Declaration and the Trust Preferred Securities. No beneficial owner of an interest in a Global Certificate will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Declaration. DTC has advised the Company that it will take any action permitted to be taken by a holder of Trust Preferred Securities (including the presentation of Trust Preferred Securities for exchange as described below) only at the direction of one or more Participants to whose account the DTC interests in the Global Certificates are credited and only in respect of such portion of the aggregate liquidation amount of Trust Preferred Securities as to which such Participant or Participants has or have given such direction. However, if there is a Trust Enforcement Event under the Trust Preferred Securities, DTC will exchange the Global Certificates for Certificated Securities, which it will distribute to its Participants in accordance with its customary procedures. Conveyance of notices and other communications by DTC to Participants, by Participants to Indirect Participants, and by Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices in respect of the Trust Preferred Securities held in book-entry form will be sent to Cede & Co. If less than all of the Trust Preferred Securities are being redeemed, DTC will determine the amount of the interest of each Participant to be redeemed in accordance with its procedures. Although voting with respect to the Trust Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Trust Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Participants to whose accounts the Trust Preferred Securities are allocated on the record date (identified in a listing attached to the Omnibus Proxy). Distributions on the Trust Preferred Securities held in book-entry form will be made to DTC in immediately available funds. DTC's practice is to credit Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to 47 believe that it will not receive payments on such payment date. Payments by Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of such Participants and Indirect Participants and not of DTC, the Trust or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of any distributions to DTC is the responsibility of the Trust, disbursement of such payments to Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Participants and Indirect Participants. Except as provided herein, a Beneficial Owner of an interest in a Global Certificate will not be entitled to receive physical delivery of Trust Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under the Trust Preferred Securities. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Certificates among Participants of DTC, DTC is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trust will have any responsibility for the performance by DTC or its Participants or Indirect Participants under the rules and procedures governing DTC. DTC may discontinue providing its services as securities depository with respect to the Trust Preferred Securities at any time by giving notice to the Trust. Under such circumstances, in the event that a successor securities depository is not obtained, Trust Preferred Security certificates are required to be printed and delivered to the Property Trustee. Additionally, the Trust (with the consent of the Company) may decide to discontinue use of the system of book-entry transfers through DTC or any successor depository. In that event, certificates for the Trust Preferred Securities will be printed and delivered to the Property Trustee. In each of the above circumstances, the Company will appoint a paying agent with respect to the Trust Preferred Securities. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the global Trust Preferred Securities as represented by a Global Certificate. PAYMENT Payments in respect of the Trust Preferred Securities represented by the Global Certificates shall be made to DTC, which shall credit the relevant accounts at DTC on the scheduled payment dates or, in the case of certificated securities, if any, such payments shall be made by check mailed to the address of the holder entitled thereto as such address shall appear on the register. The Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Regular Trustees. In the event that The First National Bank of Chicago, N.A. shall no longer be the Paying Agent, the Regular Trustees shall appoint a successor to act as Paying Agent (which shall be a bank or trust company). REGISTRAR, TRANSFER AGENT, AND PAYING AGENT The Property Trustee will act as Registrar, Transfer Agent and Paying Agent for the Trust Preferred Securities. Registration of transfers of Trust Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust or the Company may require) in respect of any tax or other government charges which may be imposed in relation to it. The Trust will not be required to register or cause to be registered the transfer of Trust Preferred Securities after such Trust Preferred Securities have been called for redemption. INFORMATION CONCERNING THE PROPERTY TRUSTEE The Property Trustee, prior to the occurrence of a default with respect to the Trust Securities, undertakes to perform only such duties as are specifically set forth in the Declaration and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Trust Preferred Securities, 48 unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The holders of Trust Preferred Securities will not be required to offer such indemnity in the event such holders, by exercising their voting rights, direct the Property Trustee to take any action following a Trust Enforcement Event. GOVERNING LAW The Declaration and the Trust Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware. MISCELLANEOUS The Regular Trustees are authorized and directed to conduct the affairs of and to operate the Trust in such a way that the Trust will not be deemed to be an 'investment company' required to be registered under the 1940 Act or characterized as other than a grantor trust for United States federal income tax purposes. In this connection, the Regular Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust or the Declaration that the Regular Trustees determine in their discretion to be necessary or desirable for such purposes as long as such action does not adversely affect the interests of the holders of the Trust Preferred Securities. Holders of the Trust Preferred Securities have no preemptive rights. 49 DESCRIPTION OF THE TRUST GUARANTEE Set forth below is a summary of information concerning the Trust Guarantee which will be executed and delivered by the Company for the benefit of the holders from time to time of Trust Preferred Securities. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Trust Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Trust Guarantee incorporates by reference the terms of, and will be qualified as an indenture under, the Trust Indenture Act. The First National Bank of Chicago, N.A., as the Trust Guarantee Trustee, will hold the Trust Guarantee for the benefit of the holders of the Trust Preferred Securities and will act as indenture trustee for the purposes of compliance with the Trust Indenture Act. GENERAL Pursuant to the Trust Guarantee, the Company will irrevocably agree, on a subordinated basis and to the extent set forth therein, to pay in full to the holders of the Trust Preferred Securities (except to the extent paid by the Trust), as and when due, regardless of any defense, right of set off or counterclaim which the Trust may have or assert, the following payments (the 'Trust Guarantee Payments'), without duplication: (i) any accrued and unpaid distributions on the Trust Preferred Securities to the extent the Trust has funds available therefor, (ii) the Redemption Price with respect to any Trust Preferred Securities called for redemption by the Trust, to the extent the Trust has funds available therefor and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Partnership Preferred Securities to the holders of Trust Preferred Securities or the redemption of all of the Trust Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on the Trust Preferred Securities and (b) the amount of assets of the Trust remaining available for distribution to holders of Trust Preferred Securities upon the liquidation of the Trust. The Company's obligation to make a Trust Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Trust Preferred Securities or by causing the Trust to pay such amounts to such holders. The Trust Guarantee will be a guarantee on a subordinated basis with respect to the Trust Preferred Securities from the time of issuance of such Trust Preferred Securities but will only apply to any payment of distributions or Redemption Price, or to payments upon the dissolution, winding-up or termination of the Trust, to the extent the Trust shall have funds available therefor. If the Partnership fails to declare distributions on Partnership Preferred Securities, the Trust would lack available funds for the payment of distributions or amounts payable on redemption of the Trust Preferred Securities or otherwise, and in such event holders of the Trust Preferred Securities would not be able to rely upon the Trust Guarantee for payment of such amounts. Instead, holders of the Trust Preferred Securities will have the remedies described herein under 'Description of the Trust Preferred Securities -- Trust Enforcement Events', including the right to direct the Trust Guarantee Trustee to enforce the covenant restricting certain payments by the Company and its majority owned subsidiaries. See ' -- Certain Covenants of the Company' below. The Guarantees, when taken together with the Company Debenture and the Company's obligations to pay all fees and expenses of the Trust and the Partnership, constitute a guarantee to the extent set forth herein by the Company of the distribution, redemption and liquidation payments payable to the holders of the Trust Preferred Securities. The Guarantees do not apply, however, to current distributions by the Partnership unless and until such distributions are declared by the Partnership out of funds legally available for payment or to liquidating distributions unless there are assets available for payment in the Partnership, each as more fully described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership.' 50 CERTAIN COVENANTS OF THE COMPANY The Company will covenant in the Trust Guarantee that, if (a) for any distribution period, full distributions on a cumulative basis on any Trust Preferred Securities have not been paid, (b) an Investment Event of Default by any Investment Affiliate in respect of any Affiliate Investment Instrument has occurred and is continuing or (c) the Company is in default of its obligations under the Trust Guarantee, the Partnership Guarantee or any Investment Guarantee, then, during such period the Company shall not, nor permit any majority owned subsidiary to (i) declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its capital stock or comparable equity interest (except for dividends or distributions in shares of its capital stock, conversions or exchanges of common stock of one class into common stock of another class and dividends, distributions with respect to the Partnership or the Trust or dividends and distributions on the common stock of wholly owned subsidiaries of the Company), (ii) make, or permit the making of, any Affiliated Restricted Payments except for Permissible Affiliated Payments, and (iii) make any guarantee payments with respect to the foregoing. 'Affiliated Restricted Payments' means any payment (including, without limitation, payments for the sale, purchase or lease of any assets or properties or the rendering of any services) to any Affiliate of the Company, except for Permissible Affiliated Payments. 'Affiliate' means, with respect to any specified person, any other person that directly or indirectly controls or is controlled by, or is under common control with, such specified person, provided, that, with respect to the Company, 'Affiliate' shall be deemed to also include any entity of which at least 20% of the capital stock is owned by a person that directly or indirectly controls the Company. 'Permissible Affiliated Payments' means (i) payments by the Company or its subsidiaries (other than the Partnership or the Trust) to Affiliates of the Company for management or other advisory services not to exceed $10 million per annum and (ii) transactions made in good faith the terms of which are fair and reasonable to the Company or such majority owned subsidiary, as the case may be, and are at least as favorable as terms which could be obtained by the Company or such majority owned subsidiary, as the case may be, in a comparable transaction made on an arm's length basis with persons which are not Affiliates of the Company; provided, that with respect to a payment or a series of payments not greater than $1 million, such payment or payments shall be conclusively deemed to be on terms which are fair and reasonable to the Company or any of its majority owned subsidiaries and on terms which are at least as favorable as the terms which could be obtained on an arm's length basis with persons who are not Affiliates if such payment or payments are approved by a majority of the Company's independent directors; provided, further, that with respect to a payment or a series of related payments in excess of $1 million, the Company or such subsidiary shall either (A) have received a written opinion of a nationally recognized investment bank stating that the terms of such payment are fair to the Company or such subsidiary, as the case may be, from a financial point of view, or (B) have selected the Affiliate or Affiliates which are to receive such payments based upon a competitive bid procedure in which the Company or such subsidiary shall have received at least two independent bids, administered in good faith and on commercially reasonable terms by the Company or such subsidiary. EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEE An event of default under the Trust Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of a majority in liquidation amount of the Trust Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trust Guarantee Trustee or to direct the exercise of any trust or power conferred upon the Trust Guarantee Trustee under the Trust Guarantee. If the Trust Guarantee Trustee fails to enforce its rights under the Trust Guarantee after a holder of Trust Preferred Securities has made a written request, such holder may institute a legal proceeding directly against the Company to enforce the Trust Guarantee Trustee's rights under the Trust Guarantee, without first instituting a legal proceeding against the Trust, the Trust Guarantee Trustee or any other person or entity. In any event, if the Company has failed to make a guarantee payment under the Trust Guarantee, a holder of Trust Preferred Securities may directly 51 institute a proceeding in such holder's own name against the Company for enforcement of the Trust Guarantee for such payment. STATUS OF THE TRUST GUARANTEE; SUBORDINATION The Trust Guarantee will constitute an unsecured obligation of the Company and will rank subordinate and junior to all other liabilities of the Company and will rank pari passu with the most senior preferred stock issued from time to time by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred stock of any affiliate of the Company. The terms of the Trust Preferred Securities provide that each holder of Trust Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Trust Guarantee. The Trust Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may directly institute a legal proceeding against the Company to enforce its rights under the Trust Guarantee without instituting a legal proceeding against any other person or entity). AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not materially adversely affect the rights of holders of Trust Preferred Securities (in which case no vote will be required), the Trust Guarantee may be amended only with the prior approval of the holders of at least a majority in liquidation amount of all the outstanding Trust Preferred Securities. The manner of obtaining any such approval of holders of the Trust Preferred Securities will be as set forth under 'Description of the Trust Preferred Securities -- Voting Rights.' All guarantees and agreements contained in the Trust Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Trust Preferred Securities then outstanding. Except in connection with any permitted merger or consolidation of the Company with or into another entity or any permitted sale, transfer or lease of the Company's assets to another entity as described below under 'Description of the Partnership Preferred Securities -- Merger, Consolidation or Amalgamation of the Partnership,' the Company may not assign its rights or delegate its obligations under the Trust Guarantee without the prior approval of the holders of at least a majority of the aggregate stated liquidation amount of the Trust Preferred Securities then outstanding. TERMINATION OF THE TRUST GUARANTEE The Trust Guarantee will terminate as to each holder of Trust Preferred Securities upon (i) full payment of the Redemption Price of all Trust Preferred Securities, (ii) distribution of the Partnership Preferred Securities held by the Trust to the holders of the Trust Preferred Securities or (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust. The Trust Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Trust Preferred Securities must restore payment of any sum paid under such Trust Preferred Securities or such Trust Guarantee. INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE The Trust Guarantee Trustee, prior to the occurrence of a default with respect to the Trust Guarantee, undertakes to perform only such duties as are specifically set forth in the Trust Guarantee and, after default with respect to the Trust Guarantee, shall exercise the same degree of care as a prudent man would exercise in the conduct of his own affairs. Subject to such provision, the Trust Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Trust Guarantee at the request of any holder of Trust Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. GOVERNING LAW The Guarantee will be governed by, and construed in accordance with, the laws of the State of New York. 52 DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES GENERAL All of the partnership interests in the Partnership other than the Partnership Preferred Securities acquired by the Trust are owned directly by the Company. The Company is the sole general partner of the Partnership. The Limited Partnership Agreement authorizes and creates the Partnership Preferred Securities, which represent limited partnership interests in the Partnership. The limited partnership interests represented by the Partnership Preferred Securities will have a preference with respect to distributions and amounts payable on redemption or liquidation over the General Partner's interest in the Partnership. Except as otherwise described herein or provided in the Limited Partnership Agreement, the Limited Partnership Agreement does not permit the issuance of any additional partnership interests, or the incurrence of any indebtedness by the Partnership. The summary of certain material terms and provisions of the Partnership Preferred Securities set forth below does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Limited Partnership Agreement, which is filed as an exhibit to the Registration Statement of which this Prospectus is a part, and the Partnership Act. DISTRIBUTIONS Holders of Partnership Preferred Securities will be entitled to receive cumulative cash distributions, if, as and when declared by the General Partner in its sole discretion out of assets of the Partnership legally available for payment. The distributions payable on each Partnership Preferred Security will be fixed at a rate per annum of % of the stated liquidation preference of $25 per Partnership Preferred Security. Distributions not paid on the scheduled payment date will accumulate and compound quarterly at the rate per annum equal to %. The amount of distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Distributions on the Partnership Preferred Securities will be payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, commencing December 31, 1996. If distributions are not declared and paid when scheduled, the accrued distributions shall be paid to the holders of record of Partnership Preferred Securities as they appear on the books and records of the Partnership on the record date with respect to the payment date for the Partnership Preferred Securities. The Partnership's earnings available for distribution to the holders of the Partnership Preferred Securities will be limited to payments made on the Affiliate Investment Instruments and Investment Guarantees and payments on Eligible Debt Securities in which the Partnership has invested from time to time. See ' -- Partnership Investments.' To the extent that the issuers (including, where applicable, the Company, as guarantor) of the securities in which the Partnership invests fail to make any payment in respect of such securities (or, if applicable, such guarantees), the Partnership will not have sufficient funds to pay and will not declare or pay distributions on the Partnership Preferred Securities, in which event the Partnership Guarantee will not apply to such distributions until the Partnership has sufficient funds available therefor. See 'Description of the Partnership Guarantee.' In addition, distributions on the Partnership Preferred Securities may be declared and paid only as determined in the sole discretion of the Company, as the General Partner of the Partnership. If the Partnership fails to declare and pay distributions on the Partnership Preferred Securities out of funds legally available for distribution, the Trust will not have sufficient funds to make distributions on the Trust Preferred Securities, in which event the Trust Guarantee will not apply to such distributions until the Trust has sufficient funds available therefor. In addition, as described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' the Partnership may not have sufficient funds to pay current or liquidating distributions on the Partnership Preferred Securities if (i) at any time that the Partnership is receiving current payments in respect of the securities held by the Partnership (including the Debentures), the General Partner, in its sole discretion, does not declare distributions on the Partnership Preferred Securities and the Partnership receives insufficient amounts to pay the additional compounded distributions that will accrue in respect of the Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds received in respect of the Debentures upon their retirement 53 or at their maturities in Affiliate Investment Instruments that do not generate income in an amount that is sufficient to pay full distributions in respect of the Partnership Preferred Securities or (iii) the Partnership invests in equity or debt securities of Investment Affiliates that are not guaranteed by the Company and that cannot be liquidated by the Partnership for an amount sufficient to pay such distributions in full. Distributions on the Partnership Preferred Securities will be payable to the holders thereof as they appear on the books and records of the Partnership on the relevant record dates, which, as long as the Trust Preferred Securities remain (or, in the event that the Trust is liquidated in connection with a Trust Special Event, as long as the Partnership Preferred Securities remain) in book-entry-only form, will be one Business Day prior to the relevant payment dates. In the event the Trust Preferred Securities (or in the event that the Trust is liquidated in connection with a Trust Special Event, the Partnership Preferred Securities) shall not continue to remain in book-entry only form, the relevant record dates shall be the 15th day of the month of the relevant payment dates. In the event that any date on which distributions are payable on the Partnership Preferred Securities is not a Business Day, then payment of the distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. PARTNERSHIP ENFORCEMENT EVENTS If one or more of the following events shall occur and be continuing (each a 'Partnership Enforcement Event'): (i) arrearages on distributions on the Partnership Preferred Securities shall exist for six consecutive quarterly distribution periods, (ii) the Company is in default on any of its obligations under the Partnership Guarantee or any Investment Guarantee or (iii) an Investment Event of Default occurs and is continuing on any Affiliate Investment Instrument, then holders of the Partnership Preferred Securities will be entitled by the vote of a majority in aggregate liquidation preference of such holders (or, for so long as the Partnership Preferred Securities are held by the Property Trustee), the Property Trustee, as the holder of the Partnership Preferred Securities, will have the right (a) under the Limited Partnership Agreement to enforce the terms of the Partnership Preferred Securities, including the right to appoint and authorize a special representative of the Partnership and the limited partners (a 'Special Representative') to enforce (1) the Partnership's creditors' rights and other rights with respect to the Affiliate Investment Instruments and the Investment Guarantees, (2) the rights of the holders of the Partnership Preferred Securities under the Partnership Guarantee and (3) the rights of the holders of the Partnership Preferred Securities to receive distributions (only if and to the extent declared out of funds legally available therefor) on the Partnership Preferred Securities, and (b) under the Partnership Guarantee to enforce the terms of the Partnership Guarantee, including the right to enforce the covenant restricting certain payments by the Company and its majority owned subsidiaries. If the Special Representative fails to enforce its rights under the Affiliate Investment Instruments after a holder of Partnership Preferred Securities has made a written request, such holder of record of Partnership Preferred Securities may directly institute a legal proceeding against the Company to enforce the rights of the Special Representative and the Partnership under the Affiliate Investment Instruments without first instituting any legal proceeding against the Special Representative, the Partnership or any other person or entity. In any event, if a Partnership Enforcement Event has occurred and is continuing and such event is attributable to the failure of an Investment Affiliate to make any required payment when due on any Affiliate Investment Instrument, then a holder of Partnership Preferred Securities may on behalf of the Partnership directly institute a proceeding against such Investment Affiliate with respect to such Affiliate Investment Instrument for enforcement of payment. A holder of Partnership Preferred Securities may also bring a direct action against the Company to enforce such holder's right under the Partnership Guarantee. See 'Description of the Partnership Guarantee -- Events of Default; Enforcement of Partnership Guarantee.' Under no circumstances, however, shall the Special Representative have authority to cause the General Partner to declare distributions on the Partnership Preferred Securities. As a result, although the Special Representative may be able to enforce the Partnership's creditors' rights to accelerate and 54 receive payments in respect of the Affiliate Investment Instruments and the Investment Guarantees, the Partnership would be entitled to reinvest such payments in additional Affiliate Investment Instruments, subject to satisfying the reinvestment criteria described under 'Description of the Partnership Preferred Securities -- Partnership Investments,' and the Eligible Debt Securities, rather than declaring and making distributions on the Partnership Preferred Securities. The Special Representative shall not, by virtue of acting in such capacity, be admitted as a general partner in the Partnership or otherwise be deemed to be a general partner in the Partnership and shall have no liability for the debts, obligations or liabilities of the Partnership. PARTNERSHIP INVESTMENTS Approximately 99% of the proceeds from the issuance of the Partnership Preferred Securities and the General Partner's contemporaneous capital contribution (the 'Initial Partnership Proceeds') will be used by the Partnership to purchase the Debentures and the remaining 1% of the Initial Partnership Proceeds will be used to purchase Eligible Debt Securities. The purchase of the Debentures by the Partnership will occur contemporaneously with the issuance of the Partnership Preferred Securities. The initial Affiliate Investment Instruments purchased by the Partnership will consist of three debt instruments (the 'Debentures'). Approximately 85% of the of the Initial Partnership Proceeds will be used to purchase a Debenture of the Company (the 'Company Debenture'), and approximately 14% of the Initial Partnership Proceeds will be used to purchase Debentures of two domestic wholly owned subsidiaries of the Company (the 'Affiliate Debentures'). Each Debenture is expected to have a term of 20 years and to provide for interest payable at market rates for such Debentures. The Debentures will be general unsecured debt obligations of the relevant issuer, except that the Company Debenture will rank subordinate and junior to all senior indebtedness of the Company. The payment of interest on each of the Debentures may be deferred at any time, and from time to time, by the relevant issuer for a period not exceeding six consecutive quarters. If an issuer were to so defer the payment of interest, interest would continue to accrue and compound at the stated interest rate on such Debenture. The Debentures will contain covenants appropriate for unsecured debt securities issued by similar borrowers pursuant to a public offering or private placement under Rule 144A of a comparable debt security, including a limitation on consolidation, merger, sale or conveyance of assets of the relevant issuer and a limitation on incurrence of secured debt and, in the case of the Company Debenture, a limitation on its ability to incur senior indebtedness unless at least one nationally recognized rating agency rates the Company's long-term senior unsecured indebtedness in one of its generic rating categories which signifies investment grade. The Debentures will contain a mandatory redemption provision that is triggered upon a change of control of the relevant issuer, as well as redemption provisions that correspond to the redemption provisions applicable to the Partnership Preferred Securities, including an option to redeem the Debentures by the relevant issuer, in whole or in part, from time to time, on or after September 30, 2006, and following the occurrence of a Partnership Special Event, in each case, in the same manner described under ' -- Optional Redemption' and ' -- Partnership Special Event Redemption.' The Debentures, and any other Affiliate Investment Instruments that are debt instruments acquired by the Partnership in the future, will also contain customary events of default (the 'Investment Events of Default'), including events of default for defaults in payments on such securities when due (provided that no default shall occur upon a valid deferral of an interest payment by an issuer), defaults in the performance of the relevant issuer's obligations under its Debenture or Affiliate Investment Instruments, as the case may be, and certain bankruptcy, insolvency or reorganization events (subject to customary exceptions and grace periods). The payment of interest and principal when due and other payment terms of the Debentures (other than the Company Debenture), will be guaranteed to the extent described herein (each, an 'Investment Guarantee') by the Company for the benefit of the holders of Partnership Preferred Securities. See ' -- Investment Guarantees.' Approximately 1% of the Initial Partnership Proceeds will be invested in Eligible Debt Securities. 'Eligible Debt Securities' means cash or book-entry securities, negotiable instruments, or other securities of entities not affiliated with the Company represented by instruments in registered form which evidence any of the following: (a) any security issued or guaranteed as to principal or interest by 55 the United States, or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States, or any certificate of deposit for any of the foregoing; (b) commercial paper issued pursuant to Section 3(a)(3) of the Securities Act of 1933 (the 'Securities Act') and having, at the time of the investment or contractual commitment to invest therein, a rating from each of S&P and Moody's in the highest investment rating category granted by such rating agency and having a maturity not in excess of nine months; (c) demand deposits, time deposits and certificates of deposit which are fully insured by the Federal Deposit Insurance Corporation ('FDIC'); (d) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the Government of the United States of America or any agency or instrumentality thereof, the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company which is an Eligible Institution (as defined herein) and the deposits of which are insured by the FDIC; and (e) any other security which is identified as a permitted investment of a finance subsidiary pursuant to Rule 3a-5 under the 1940 Act at the time it is acquired by the Partnership. 'Eligible Institution' means (a) a depository institution organized under the laws of the United States or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), (1) (i) which has either (A) a long-term unsecured debt rating of AA or better by S&P and Aa or better by Moody's or (B) a short-term unsecured debt rating or a certificate of deposit rating of A-1+ by S&P and P-1 by Moody's and (ii) whose deposits are insured by the FDIC or (2) (i) the parent of which has a long-term or short-term unsecured debt rating which signifies investment grade and (ii) whose deposits are insured by the FDIC. The Partnership may, from time to time and subject to the restrictions described below, reinvest payments received with respect to the Affiliate Investment Instruments (including the Debentures) and the Eligible Debt Securities in additional Affiliate Investment Instruments and Eligible Debt Securities. As of the date of this Prospectus, the Company, as the General Partner, does not intend to cause the Partnership to reinvest payments received by the Partnership in the manner described below, although there can be no assurance that the General Partner's intention in respect of such reinvestments will not change in the future. The specific terms of all Affiliate Investment Instruments (including the Debentures) will be determined by a nationally recognized investment banking firm that does not (and whose directors, officers, employees and affiliates do not) have a direct or indirect material equity interest in the Company or any of its subsidiaries and which is either among the five largest underwriters of debt or preferred securities in the United States or was selected by the Company and approved by the holders of a majority in liquidation amount of the Partnership Preferred Securities (the 'Independent Financial Advisor'). Merrill Lynch & Co. will serve as the initial Independent Financial Advisor. The Partnership may reinvest in additional Affiliate Investment Instruments only if certain procedures and criteria are satisfied with respect to such Affiliate Investment Instrument, including the satisfaction of the following conditions: (i) the Partnership did not hold debt or equity securities of the issuer of the proposed Affiliate Investment Instrument within the three-year period ending on the date of such proposed investment; (ii) there was never a default on any debt obligation of, or arrearages of dividends on preferred stock issued by, the issuer of the proposed Affiliate Investment Instrument that was previously or is currently owned by the Partnership; and (iii) the applicable terms and provisions with respect to the proposed Affiliate Investment Instrument have been determined by the Independent Financial Advisor to be at least as favorable as terms which could be obtained by the Partnership in a public offering or private placement under Rule 144A of a comparable security issued by the relevant Investment Affiliate and (iv) the requesting Investment Affiliate shall not be deemed to be an investment company by reason of Section 3(a) or 3(b) of the 1940 Act. The term 'Investment Affiliate' means the Company or any corporation, partnership, limited liability company or other entity (other than the Partnership or the Trust) that is controlled by the Company. If the Partnership is unable to reinvest payments and proceeds from Affiliate Investment Instruments in additional Affiliate Investment Instruments meeting the above criteria, the Partnership may only invest such funds in Eligible Debt Securities (subject to restrictions of applicable law, including the 1940 Act). 56 INVESTMENT GUARANTEES General The Company will agree, on a subordinated basis and to the extent set forth therein, to execute and deliver an Investment Guarantee for the benefit of the holders of Partnership Preferred Securities with respect to each Debenture issued by an Investment Affiliate (other than the Company Debenture) to the extent set forth below. The Investment Guarantees shall be enforceable regardless of any defense, right of set-off or counterclaim that the Company may have or assert. The Investment Guarantees will be full and unconditional guarantees with respect to the applicable Debentures from the time of issuance. To the extent that, as described above, the Partnership invests in additional Affiliate Investment Instruments, the determination as to whether such Affiliate Investment Instrument will contain an Investment Guarantee will be made at the date of its issuance and will be based, among other things, upon its approval by the Independent Financial Advisor in accordance with the reinvestment criteria described above. The Investment Guarantees will constitute guarantees of payment and not of collection (that is, the guaranteed party may directly institute a legal proceeding against the Company to enforce its rights under the applicable Investment Guarantee without instituting a legal proceeding against any other person or entity). If no Special Representative has been appointed to enforce any Investment Guarantee, the General Partner has the right to enforce such Investment Guarantee on behalf of the holders of the Partnership Preferred Securities. The holders of not less than a majority in aggregate liquidation preference of the Partnership Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of any Investment Guarantee, including the giving of directions to the General Partner or the Special Representative, as the case may be. If the General Partner or the Special Representative fails to enforce any Investment Guarantee as above provided, any holder of Trust Preferred Securities may institute its own legal proceeding to enforce such Investment Guarantee. No Investment Guarantee will be discharged except by payment in full of all amounts guaranteed by such Investment Guarantee (without duplication of amounts theretofore paid by the relevant Investment Affiliate). Amendments and Assignment Except with respect to any changes that do not adversely affect the rights of holders of Partnership Preferred Securities (in which case no consent will be required), the Investment Guarantees may be amended only with the prior approval of the holders of not less than a majority in liquidation preference of the outstanding Partnership Preferred Securities, provided that for so long as the Property Trustee of the Trust is the holder of the Partnership Preferred Securities, such amendment will not be effective without the prior written approval of a majority in liquidation preference of the outstanding Trust Preferred Securities. All guarantees and agreements contained in the Investment Guarantees shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of Partnership Preferred Securities. Status of the Investment Guarantees The Company's obligations under the Investment Guarantees will constitute unsecured obligations of the Company and will rank subordinate and junior to all other liabilities of the Company and will rank pari passu with the most senior preferred stock issued from time to time by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred stock of any affiliate of the Company. Governing Law The Investment Guarantees will be governed by and construed in accordance with the laws of the State of New York. 57 OPTIONAL REDEMPTION The Partnership Preferred Securities are redeemable, at the option of the General Partner, in whole or in part, from time to time, on or after September 30, 2006, upon not less than 30 nor more than 60 days' notice, at an amount per Partnership Preferred Security equal to $25 plus accrued and unpaid distributions thereon. If the Partnership redeems Partnership Preferred Securities in accordance with the terms thereof, Trust Securities will be mandatorily redeemed at the Redemption Price. If a partial redemption would result in the delisting of the Trust Preferred Securities (or, if the Trust is liquidated in connection with a Trust Special Event, the delisting of the Partnership Preferred Securities), the Partnership may only redeem the Partnership Preferred Securities in whole. PARTNERSHIP SPECIAL EVENT REDEMPTION If, at any time, a Partnership Tax Event or a Partnership Investment Company Event (each as hereinafter defined, and each a 'Partnership Special Event') shall occur and be continuing, the General Partner shall, within 90 days following the occurrence of such Partnership Special Event, elect to either (i) redeem the Partnership Preferred Securities in whole (but not in part), upon not less than 30 or more than 60 days' notice at the Redemption Price, provided that, if at the time there is available to the Partnership the opportunity to eliminate, within such 90-day period, the Partnership Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable such measure that in the sole judgment of the Company has or will cause no adverse effect on the Partnership, the Trust or the Company, the General Partner will pursue such measure in lieu of redemption; or (ii) cause the Partnership Preferred Securities to remain outstanding, provided that in the case of this clause (ii), the General Partner shall pay any and all costs and expenses incurred by or payable by the Partnership attributable to the Partnership Special Event. 'Partnership Tax Event' means that the General Partner shall have requested and received an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that there has been a Tax Action which affects any of the events described in (i) through (iii) below and that there is more than an insubstantial risk that (i) the Partnership is, or will be, subject to United States federal income tax with respect to income accrued or received on the Affiliate Investment Instruments or the Eligible Debt Securities, (ii) the Partnership is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable by an Investment Affiliate with respect to the Debenture issued by such Investment Affiliate to the Partnership is not, or will not be, deductible by such Investment Affiliate for United States federal income tax purposes. 'Partnership Investment Company Event' means that the General Partner shall have requested and received an opinion of nationally recognized independent legal counsel experienced in such matters to the effect that as a result of the occurrence on or after the date hereof of a Change in 1940 Act Law, the Partnership is or will be considered an 'investment company' which is required to be registered under the 1940 Act. REDEMPTION PROCEDURES The Partnership may not redeem fewer than all the outstanding Partnership Preferred Securities unless all accrued and unpaid distributions have been paid on all Partnership Preferred Securities for all quarterly distribution periods terminating on or prior to the date of redemption. If the Partnership gives a notice of redemption in respect of Partnership Preferred Securities (which notice will be irrevocable) then, by 12:00 noon, New York City time, on the redemption date, the Partnership (i) if the Partnership Preferred Securities are in book entry form with DTC, will deposit irrevocably with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price in respect of the Partnership Preferred Securities held through DTC in global form or (ii) if the Partnership Preferred Securities are held in certificated form, will deposit with the paying agent for the Partnership Preferred Securities funds sufficient to pay such amount in respect of any Partnership Preferred Securities in certificated form and will give such paying agent irrevocable instructions and authority to pay such amounts to the 58 holders of Partnership Preferred Securities upon surrender of their certificates. See ' -- Book-Entry-Only Issuance -- The Depository Trust Company.' If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of holders of such Partnership Preferred Securities so called for redemption will cease, except the right of the holders of such Partnership Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Partnership Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. In the event that payment of the Redemption Price in respect of Partnership Preferred Securities is improperly withheld or refused and not paid either by the Partnership or by the Company pursuant to the Partnership Guarantee described under 'Description of the Partnership Guarantee,' distributions on such Partnership Preferred Securities will continue to accrue, from the original redemption date to the date of payment. Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or any of its subsidiaries may at any time and from time to time purchase outstanding Partnership Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary dissolution, winding-up or termination of the Partnership, the holders of the Partnership Preferred Securities at the time will be entitled to receive out of the assets of the Partnership available for distribution to partners after satisfaction of liabilities of creditors as required by the Partnership Act, before any distribution of assets is made to the General Partner, an amount equal to, in the case of holders of Partnership Preferred Securities, the aggregate of the stated liquidation preference of $25 per Partnership Preferred Security plus accrued and unpaid distributions thereon to the date of payment (such amount being the 'Partnership Liquidation Distribution'). Pursuant to the Limited Partnership Agreement, the Partnership shall be dissolved and its affairs shall be wound up: (i) upon the bankruptcy of the General Partner, (ii) upon the assignment by the General Partner of its entire interest in the Partnership when the assignee is not admitted to the Partnership as a general partner of the Partnership in accordance with the Limited Partnership Agreement, or the filing of a certificate of dissolution or its equivalent with respect to the General Partner, or the revocation of the General Partner's charter and the expiration of 90 days after the date of notice to the General Partner of revocation without a reinstatement of its charter, or if any other event occurs that causes the General Partner to cease to be a general partner of the Partnership under the Partnership Act, unless the business of the Partnership is continued in accordance with the Partnership Act, (iii) if the Partnership has redeemed or otherwise purchased all the Partnership Preferred Securities, (iv) upon the entry of a decree of judicial dissolution or (v) upon the written consent of all partners of the Partnership. VOTING RIGHTS Except as provided below and under 'Description of the Partnership Guarantee -- Amendments and Assignment' and as otherwise required by law and the Limited Partnership Agreement, the holders of the Partnership Preferred Securities will have no voting rights. Not later than 30 days after any Partnership Enforcement Event occurs, the General Partner will convene a meeting for the purpose of appointing a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the holders of 10% in liquidation preference of the outstanding Partnership Preferred Securities will be entitled to convene such meeting. The provisions of the Limited Partnership Agreement relating to the convening and conduct of the meetings of the partners will apply with respect to any such meeting. In the event that, at any such meeting, holders of less than a majority in aggregate liquidation preference of Partnership Preferred Securities entitled to 59 vote for the appointment of a Special Representative vote for such appointment, no Special Representative shall be appointed. Any Special Representative appointed shall cease to be a Special Representative of the Partnership and the limited partners if (1) the Partnership (or the Company pursuant to the Partnership Guarantee) shall have paid in full all accrued and unpaid distributions on the Partnership Preferred Securities, (2) such Investment Event of Default, as the case may be, shall have been cured, and (3) the Company is in compliance with all its obligations under the Partnership Guarantee and the Company, in its capacity as the General Partner, shall continue the business of the Partnership without dissolution. Notwithstanding the appointment of any such Special Representative, the Company shall continue as General Partner and shall retain all rights under the Limited Partnership Agreement, including the right to declare, in its sole discretion, the payment of distributions on the Partnership Preferred Securities for which the failure of such declaration would not constitute a default under the Limited Partnership Agreement. If any proposed amendment to the Limited Partnership Agreement provides for, or the General Partner otherwise proposes to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Partnership Preferred Securities, whether by way of amendment to the Limited Partnership Agreement or otherwise (including, without limitation, the authorization or issuance of any limited partner interests in the Partnership ranking, as to participation in the profits or distributions or in the assets of the Partnership, senior to the Partnership Preferred Securities), or (ii) the dissolution, winding-up or termination of the Partnership, other than (x) in connection with the occurrence of a Partnership Special Event or (y) as described under 'Merger, Consolidation or Amalgamation of the Partnership' above, then the holders of outstanding Partnership Preferred Securities will be entitled to vote on such amendment or proposal of the General Partner (but not on any other amendment or proposal) as a class, and such amendment or proposal shall not be effective except with the approval of the holders of a majority in liquidation preference of such outstanding Partnership Preferred Securities having a right to vote on the matter; provided, however, that if the Property Trustee on behalf of the Trust is the holder of the Partnership Preferred Securities, any such amendment or proposal not excepted by clauses (x) and (y) above shall not be effective without the prior or concurrent approval of the holders of a majority in liquidation amount of the outstanding Trust Preferred Securities having a right to vote on such matters. The General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available, (ii) waive any Investment Event of Default that is waivable under the Affiliate Investment Instruments, (iii) exercise any right to rescind or annul a declaration that the principal of any Affiliate Investment Instruments which are debt instruments shall be due and payable, (iv) waive the breach of the covenant by the Company to restrict certain payments by the Company and its majority owned subsidiaries, or (v) consent to any amendment, modification termination of any Affiliate Investment Instrument, where such consent shall be required from the investor, without, in each case, obtaining the prior approval of the holders of at least a majority in liquidation preference of the Partnership Preferred Securities; provided, however, that if the Property Trustee on behalf of the Trust is the holder of the Partnership Preferred Securities, such waiver, consent or amendment or other action shall not be effective without the prior or concurrent approval of at least a majority in liquidation amount of the outstanding Trust Preferred Securities having a right to vote on such matters. The General Partner shall not revoke any action previously authorized or approved by a vote of the holders of the Partnership Preferred Securities. The General Partner shall notify all holders of the Partnership Preferred Securities of any notice of an Investment Event of Default received with respect to any Affiliate Investment Instrument. Any required approval of holders of Partnership Preferred Securities may be given at a separate meeting of holders of Partnership Preferred Securities convened for such purpose, at a meeting of all of the partners in the Partnership or pursuant to written consent. The Partnership will cause a notice of any meeting at which holders of Partnership Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Partnership Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matters upon which written consent is sought and (iii) instruction for the delivery of proxies or consents. 60 No vote or consent of the holders of Partnership Preferred Securities will be required for the Partnership to redeem and cancel Partnership Preferred Securities in accordance with the Limited Partnership Agreement. Notwithstanding that holders of Partnership Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Partnership Preferred Securities at such time that are owned by the Company or by any entity more than 50% of which is owned by the Company, either directly or indirectly, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding; provided, however, that persons (other than affiliates of the Company) to whom the Company or any of its subsidiaries have pledged Trust Preferred Securities may vote or consent with respect to such pledged Trust Preferred Securities under any of the circumstances described herein. Holders of the Partnership Preferred Securities will have no rights to remove or replace the General Partner. MERGER, CONSOLIDATION OR AMALGAMATION OF THE PARTNERSHIP The Partnership may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any corporation or other body, except as described below. The Partnership may, without the consent of the holders of the Partnership Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by a limited partnership, limited liability company or trust organized as such under the laws of any state of the United States of America, provided that (i) such successor entity either (x) expressly assumes all of the obligations of the Partnership under the Partnership Preferred Securities or (y) substitutes for the Partnership Preferred Securities other securities having substantially the same terms as the Partnership Preferred Securities (the 'Partnership Successor Securities') so long as the Partnership Successor Securities are not junior to any other equity securities of the successor entity, with respect to participation in the profits and distributions, and in the assets, of the successor entity, (ii) the Investment Affiliates expressly acknowledge such successor entity as the holder of the Affiliate Investment Instruments, (iii) the Partnership Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Partnership Preferred Securities, if so listed, are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Trust Preferred Securities (or, in the event that the Trust is liquidated in connection with a Trust Special Event, the Partnership Preferred Securities (including any Partnership Successor Securities)) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and other special rights of the holders of the Trust Preferred Securities or Partnership Preferred Securities (including any Partnership Successor Securities)) in any material respect (other than, in the case of the Partnership Preferred Securities, with respect to any dilution of the holders' interest in the new resulting entity), (vi) such successor entity has a purpose substantially identical to that of the Partnership, (vii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of nationally recognized independent counsel to the Partnership experienced in such matters to the effect that (A) such successor entity will be treated as a partnership for United States federal income tax purposes, (B) such merger, consolidation, amalgamation or replacement would not cause the Trust to be classified as an association taxable as a corporation for United States federal income tax purposes, (C) following such merger, consolidation, amalgamation or replacement, the Company and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company, and (D) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of the holders of the Partnership Preferred Securities and (viii) the Company guarantees the obligations of such successor entity under the Partnership Successor Securities at least to the extent provided by the Partnership Guarantee. 61 BOOK-ENTRY AND SETTLEMENT If the Partnership Preferred Securities are distributed to holders of Trust Preferred Securities in connection with the involuntary or voluntary dissolution, winding-up or liquidation of the Trust as a result of the occurrence of a Trust Special Event, the Partnership Preferred Securities will be issued in the form of one or more global certificates (each a 'Global Partnership Security') registered in the name of DTC as the depository or its nominee. For a description of DTC and the specific terms of the Depository arrangements, see 'Description of the Trust Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company.' As of the date of this Prospectus, the description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Trust Preferred Securities apply in all material respects to any Partnership Preferred Securities represented by one or more Global Partnership Securities. REGISTRAR, TRANSFER AGENT AND PAYING AGENT The General Partner will act as registrar, transfer agent and paying agent for the Partnership Preferred Securities for so long as the Partnership Preferred Securities are held by the Trust or, if the Trust is liquidated in connection with a Trust Special Event, for so long as the Partnership Preferred Securities remain in book-entry only form. In the event the Partnership Preferred Securities are distributed in connection with a Trust Special Event and the book-entry system for the Partnership Preferred Securities is discontinued, it is anticipated that The First National Bank of Chicago, N.A. or one of its affiliates will act as registrar, transfer agent and paying agent for the Partnership Preferred Securities. Registration of transfers of Partnership Preferred Securities will be effected without charge by or on behalf of the Partnership, but upon payment (with the giving of such indemnity as the Partnership or the General Partner may require) in respect of any tax or other governmental charges that may be imposed in relation to it. The Partnership will not be required to register or cause to be registered the transfer of Partnership Preferred Securities after such Partnership Preferred Securities have been called for redemption. MISCELLANEOUS The General Partner is authorized and directed to conduct its affairs and to operate the Partnership in such a way that (i) the Partnership will not be deemed to be an 'investment company' required to be registered under the 1940 Act or characterized as an association taxable as a corporation for United States federal income tax purposes, (ii) the Affiliate Investment Instruments that are debt instruments will be treated as indebtedness of the issuer of such debt instruments for United States federal income tax purposes and (iii) the Partnership will not be treated as an association or as a 'publicly traded partnership' (within the meaning of Section 7704 of the Code) taxable as a corporation. In this connection, the General Partner is authorized to take any action, not inconsistent with applicable law, the certificate of limited partnership of the Partnership or the Limited Partnership Agreement, that the General Partner determines in its discretion to be necessary or desirable for such purposes as long as such action does not adversely affect the interests of the holders of the Partnership Preferred Securities. DESCRIPTION OF THE PARTNERSHIP GUARANTEE Set forth below is a summary of information concerning the Partnership Guarantee that will be executed and delivered by the Company for the benefit of the holders from time to time of Partnership Preferred Securities. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Partnership Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. The General Partner will hold the Partnership Guarantee for the benefit of the holders of the Partnership Preferred Securities. 62 GENERAL Pursuant to the Partnership Guarantee, the Company will irrevocably agree, on a subordinated basis to the extent set forth therein, to pay in full to the holders of the Partnership Preferred Securities (without duplication of amounts theretofore paid by the Partnership), as and when due, regardless of any defense, right of set-off or counterclaim that the Partnership may have or assert, the following payments (the 'Partnership Guarantee Payments'): (i) any accrued and unpaid distributions that have theretofore been declared on the Partnership Preferred Securities out of funds legally available therefor, (ii) the redemption price with respect to any Partnership Preferred Securities called for redemption by the Partnership out of funds legally available therefor, and (iii) upon a liquidation of the Partnership, the lesser of (a) the aggregate of the liquidation preference and all accrued and unpaid distributions on the Partnership Preferred Securities to the date of payment and (b) the amount of assets of the Partnership after satisfaction of all liabilities remaining available for distribution to holders of Partnership Preferred Securities in liquidation of the Partnership. The Company's obligation to make a Partnership Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Partnership Preferred Securities or by causing the Partnership to pay such amounts to such holders. The Partnership Guarantee will be a guarantee on a subordinated basis with respect to the Partnership Preferred Securities from the time of issuance of such Partnership Preferred Securities but will not apply to any payment of distributions or Redemption Price, or to payments upon the dissolution, winding-up or termination of the Trust, except to the extent the Partnership shall have funds available therefor. If Investment Affiliates (including, where applicable, the Company, as guarantor) of the Affiliate Investment Instruments in which the Partnership invests fail to make any payment in respect of such securities (or, if applicable, guarantees), the Partnership may not declare or pay dividends on the Partnership Preferred Securities. In such event, holders of the Partnership Preferred Securities would not be able to rely upon the Partnership Guarantee for payment of such amounts. Instead, holders of the Partnership Preferred Securities will have the remedies described herein under 'Description of the Partnership Preferred Securities -- Partnership Enforcement Events,' including the right to direct the General Partner or the Special Representative, as the case may be, to enforce the covenant restricting certain payments by the Company and its majority owned subsidiaries. See ' -- Certain Covenants of the Company' below. The Guarantees, when taken together with the Company Debenture and the Company's obligations to pay all fees and expenses of the Trust and the Partnership, constitute a guarantee to the extent set forth herein by the Company of the distribution, redemption and liquidation payments payable to the holders of the Trust Preferred Securities. The Guarantees do not apply, however, to current distributions by the Partnership unless and until such distributions are declared by the Partnership out of funds legally available for payment or to liquidating distributions unless there are assets available for payment in the Partnership, each as more fully described under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets Available to Partnership.' CERTAIN COVENANTS OF THE COMPANY The Company will covenant in the Partnership Guarantee that if (a) for any distribution period, full distributions on a cumulative basis on any Partnership Preferred Securities have not been paid or declared and set apart for payment, (b) an Investment Event of Default by any Investment Affiliate in respect of any Affiliate Investment Instrument has occurred and is continuing or (c) the Company is in default of its obligations under the Trust Guarantee, the Partnership Guarantee or any Investment Guarantee, then, during such period the Company shall not, nor permit any majority owned subsidiary to (i) declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its capital stock or comparable equity interest (except for dividends or distributions in shares of its capital stock, conversions or exchanges of common stock of one class into common stock of another class and dividends, distributions with respect to the Partnership or the Trust or dividends and distributions on the common stock of wholly owned subsidiaries of the Company), (ii) make, or permit the making of, any Affiliated Restricted Payments 63 except for Permissible Affiliated Payments, and (iii) make any guarantee payments with respect to the foregoing. EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEE An event of default under the Partnership Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of a majority in liquidation amount of the Partnership Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Special Representative in respect of the Partnership Guarantee or to direct the exercise of any trust or power conferred upon the Special Representative under the Partnership Guarantee. If the Special Representative fails to enforce its rights under the Partnership Guarantee, after a holder of Partnership Preferred Securities has made a written request, such holder of Partnership Preferred Securities may institute a legal proceeding directly against the Company to enforce the Special Representative's rights under the Partnership Guarantee without first instituting a legal proceeding against the Partnership, the Special Representative or any other person or entity. Notwithstanding the foregoing, if the Company has failed to make a guarantee payment, a holder of Partnership Preferred Securities may directly institute a proceeding against the Company for enforcement of the Partnership Guarantee for such payment. STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATION The Partnership Guarantee will constitute an unsecured obligation of the Company and will rank subordinate and junior to all other liabilities of the Company and will rank pari passu with the most senior preferred stock issued from time to time by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred stock of any affiliate of the Company. The Limited Partnership Agreement provides that each holder of Partnership Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Partnership Guarantee. The Partnership Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may directly institute a legal proceeding against the Company to enforce its rights under the Partnership Guarantee without instituting a legal proceeding against any other person or entity). The Partnership Guarantee will be deposited with the General Partner to be held for the benefit of the holders of the Partnership Preferred Securities. In the event of the appointment of a Special Representative to, among other things, enforce the Partnership Guarantee, the Special Representative may take possession of the Partnership Guarantee for such purpose. If no Special Representative has been appointed to enforce the Partnership Guarantee, the General Partner has the right to enforce the Partnership Guarantee on behalf of the holders of the Partnership Preferred Securities. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not adversely affect the rights of holders of Partnership Preferred Securities (in which case no consent will be required), the Partnership Guarantee may be amended only with the prior approval of the holders of not less than a majority in liquidation preference of the outstanding Partnership Preferred Securities. All guarantees and agreements contained in the Partnership Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Partnership Preferred Securities then outstanding. Except in connection with any permitted merger or consolidation of the Company with or into another entity or any permitted sale, transfer or lease of the Company's assets to another entity as described above under 'Description of the Partnership Preferred Securities -- Merger, Consolidation or Amalgamation of the Partnership,' the Company may not assign its rights or delegate its obligations under the Partnership Guarantee without the prior approval of the holders of at least a majority of the aggregate stated liquidation amount of the Partnership Preferred Securities then outstanding. 64 TERMINATION OF THE PARTNERSHIP GUARANTEE The Partnership Guarantee will terminate and be of no further force and effect as to the Partnership Preferred Securities upon (i) full payment of the redemption price of all Partnership Preferred Securities or (ii) full payment of the amounts payable in accordance with the Limited Partnership Agreement upon liquidation of the Partnership. The Partnership Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Partnership Preferred Securities must in accordance with the Partnership Act restore payment of any sums paid under the Partnership Preferred Securities or the Partnership Guarantee. The Partnership Act provides that a limited partner of a limited partnership who wrongfully receives a distribution may be liable to the limited partnership for the amount of such distribution. GOVERNING LAW The Partnership Guarantee will be governed by and construed in accordance with the laws of the State of New York. 65 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS GENERAL In the opinion of Simpson Thacher & Bartlett, special tax counsel to the Company, the Trust and the Partnership ('Tax Counsel'), the following summary accurately describes the material United States federal income tax consequences that may be relevant to the purchase, ownership and disposition of Trust Preferred Securities. Unless otherwise stated, this summary deals only with Trust Preferred Securities held as capital assets by United States Persons (defined below) who purchase the Trust Preferred Securities upon original issuance. As used herein, a 'United States Person' means a person that is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust the income of which is subject to United States federal income taxation regardless of its source. The tax treatment of a holder may vary depending on its particular situation. This summary does not address all the tax consequences that may be relevant to holders who may be subject to special tax treatment, such as banks, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors, or foreign investors. This summary does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the Trust Preferred Securities. This summary is based on the Internal Revenue Code of 1986, as amended (the 'Code'), the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. The Trust Preferred Securities are not being marketed to persons that are not United States Persons ('non-United States Persons') and, consequently, the following discussion does not discuss the tax consequences that might be relevant to non-United States Persons. Moreover, in order to protect the Trust and the Partnership from potential adverse consequences, non-United States Persons will be subject to withholding on distributions on the Trust Preferred Securities held by such non-United States Persons at a rate of 30%. In determining a holder's status, the United States entity otherwise required to withhold taxes may rely on an IRS form W-8, an IRS form W-9, or a holder's certification of its non-foreign status signed under penalty of perjury. Non-United States Persons should consult their own tax advisors as to the specific United States federal income tax consequences of the purchase, ownership, and disposition of Trust Preferred Securities. Tax Counsel has advised that there is no authority directly on point dealing with securities such as the Trust Preferred Securities or transactions of the type described herein and that the opinions of Tax Counsel are not binding on the Internal Revenue Service ('IRS') or the courts, either of which could take a contrary position. No rulings have been or will be sought from the IRS. Accordingly, there can be no assurance that the IRS will not challenge the opinions expressed herein or that a court would not sustain such a challenge. Nevertheless, Tax Counsel has advised that it is of the view that, if challenged, the opinions expressed herein would be sustained by a court with jurisdiction in a properly presented case. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE TRUST PREFERRED SECURITIES OR REDEMPTION OF THE PARTNERSHIP PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS SEE 'DESCRIPTION OF THE TRUST PREFERRED SECURITIES -- TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION' AND 'DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES -- PARTNERSHIP SPECIAL EVENT' RESPECTIVELY. 66 CLASSIFICATION OF THE TRUST Tax Counsel is of the opinion that, under current law, and based on certain representations, facts and assumptions set forth in such opinion, the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for United States federal income tax purposes, each holder of Trust Preferred Securities will be considered the owner of an undivided interest in the Partnership Preferred Securities held by the Trust, and each holder will be required to include in its gross income its distributive share of income attributable to the Partnership, which generally will be equal to such holder's allocable share of amounts accrued on the Partnership Preferred Securities. No amount included in income with respect to the Trust Preferred Securities will be eligible for the corporate dividends-received deduction. CLASSIFICATION OF THE PARTNERSHIP Tax Counsel is of the opinion that, under current law, and based on certain representations, facts and assumptions set forth in such opinion, the Partnership will be classified for United States federal income tax purposes as a partnership and not as an association or publicly traded partnership taxable as a corporation. Tax Counsel's opinion is based on certain factual assumptions relating to the organization and operation of the Partnership and is conditioned upon certain representations made by the General Partner and the Partnership as to factual matters, such as the organization and the operation of the Partnership and the type and frequency of investments made by the Partnership. The General Partner has represented that it intends to operate the Partnership in a manner such that it will continue to constitute a partnership for all future taxable periods in which any Partnership Preferred Securities remain outstanding. In particular, pursuant to the Limited Partnership Agreement, the General Partner is prohibited from taking any action that would cause the Partnership to constitute a 'publicly traded partnership' taxable as a corporation under section 7704(a) of the Code. Accordingly, it is expected that the Partnership will continue to qualify as a partnership, and therefore will not constitute a publicly traded partnership taxable as a corporation, for all taxable years in which the Partnership Preferred Securities remain outstanding. If, however, the Partnership were to constitute a publicly traded partnership taxable as a corporation with respect to a future taxable year, the Partnership's net income would be subject to United States federal income tax at the applicable corporate rates. CLASSIFICATION OF THE DEBENTURES The Partnership, the Company, the relevant Investment Affiliates and the holders of the Trust Securities (by acceptance of a beneficial interest in a Trust Security) will agree to treat the Debentures as indebtedness for all United States tax purposes. In connection with the issuance of the Debentures, Tax Counsel is of the opinion that, under current law, and based on certain representations, facts and assumptions set forth in such opinion, the Debentures will be classified as indebtedness for United States federal income tax purposes. INCOME AND DEDUCTIONS A holder's distributive share of income attributable to the Partnership generally will equal the amount of the cash distributions payable with respect to the Trust Preferred Securities. Accordingly, if quarterly distributions on the Trust Preferred Securities are paid currently, the amount of income recognized by a holder during a taxable year generally will equal the cash distributions received by the holder with respect to its Trust Preferred Securities. Holders who are individuals, trusts or estates may be subject to limitations on the deductibility of their pro rata share of the expenses attributable to the Trust. The nature and timing of the income that is allocated to holders of Trust Preferred Securities, however, will depend on the United States federal income tax characterization of the Debentures held by the Partnership during the period in question. Because the Partnership will be an accrual basis 67 taxpayer for United States federal income tax purposes, income will accrue on the Trust Preferred Securities and will be allocated to holders of Trust Preferred Securities on a daily accrual basis, generally at a rate that is expected to be equal to (and that will not be greater than) the distribution rate on the Trust Preferred Securities, regardless of the holders' method of accounting. Actual cash distributions on the Trust Preferred Securities, however, will not be separately reported as taxable income to the holders at the time they are received. If distributions on the Partnership Preferred Securities are not made currently, the corresponding distributions on the Trust Preferred Securities will not be made currently. Because the Partnership is an accrual basis taxpayer it can be expected that during a period in which payment on the Debentures or distributions on the Partnership Preferred Securities are deferred (for whatever reason), holders will generally recognize income in advance of their receipt of any cash distributions with respect to their Trust Preferred Securities. The amount of income that will be allocated to holders of Trust Preferred Securities during any such deferral period will equal their pro rata share of the amount accruing on the Partnership Preferred Securities during such deferral period. RECEIPT OF PARTNERSHIP PREFERRED SECURITIES UPON LIQUIDATION OF THE TRUST Under certain circumstances, as described under the caption 'Description of the Trust Preferred Securities -- Trust Special Event Redemption or Distribution', Partnership Preferred Securities may be distributed to holders of Trust Preferred Securities in exchange for their Trust Preferred Securities and in liquidation of the Trust. Unless the liquidation of the Trust occurs as a result of the Trust being subject to United States federal income tax with respect to income accrued or received on the Partnership Preferred Securities, such a distribution to holders would, for United States federal income tax purposes, be treated as a nontaxable event to each holder, each holder would receive an aggregate tax basis in the Partnership Preferred Securities equal to such holder's aggregate tax basis in its Trust Preferred Securities, and a holder's holding period in the Partnership Preferred Securities so received in liquidation of the Trust would include the period during which the Trust Preferred Securities were held by such holder. If, however, the liquidation of the Trust were to occur because the Trust is subject to United States federal income tax with respect to income accrued or received on the Partnership Preferred Securities, the distribution of Partnership Preferred Securities to holders by the Trust would be a taxable event to each holder, and a holder would recognize gain or loss as if the holder had exchanged its Trust Preferred Securities for the Partnership Preferred Securities it received upon the liquidation of the Trust. REDEMPTION OF TRUST PREFERRED SECURITIES FOR CASH Under certain circumstances, as described under the caption 'Description of the Trust Preferred Securities -- Optional Redemption', 'Description of the Trust Preferred Securities -- Trust Special Event Redemption or Distribution' and 'Description of the Partnership Preferred Securities -- Partnership Special Event Redemption', the General Partner may cause the Partnership to redeem the Partnership Preferred Securities for cash, in which event the Trust would use the proceeds of such redemption to redeem the Trust Preferred Securities. Under current law, such a redemption would constitute, for United States federal income tax purposes, a taxable disposition, and a holder would recognize gain or loss as if it sold the holder's proportionate interest in the redeemed Partnership Preferred Securities for an amount of cash equal to the proceeds received upon redemption. See ' -- Disposition of Trust Preferred Securities.' DISPOSITION OF TRUST PREFERRED SECURITIES A holder that sells Trust Preferred Securities will recognize gain or loss equal to the difference between the amount realized on the sale of the Trust Preferred Securities and the holder's adjusted tax basis in such Trust Preferred Securities. Such gain or loss will be a capital gain or loss and will be a long- term capital gain or loss if the Trust Preferred Securities have been held for more than one year at the time of the sale. A holder will be required to include accrued but unpaid interest on the Debentures through the date of disposition in income as ordinary income, and to add such amount to the adjusted 68 tax basis of its Trust Preferred Securities. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. A holder's tax basis in its Trust Preferred Securities generally will equal (i) the amount paid by such holder for its Trust Preferred Securities, (ii) increased by the amount includible in income by such holder, and (iii) reduced by the amount of cash or other property distributed to such holder with respect to its Trust Preferred Securities. OTHER PARTNERSHIP PROVISIONS Section 708. Under Section 708 of the Code, the Partnership will be deemed to terminate for United States federal income tax purposes if 50% or more of the capital and profits interests in the Trust are sold or exchanged within a 12-month period. If such a deemed termination were to occur, the Partnership would be considered to have distributed its assets to the partners who would then be treated as having recontributed those assets to a new partnership. If any such constructive termination occurs, the General Partner does not intend to comply with certain technical requirements that might be applicable for various reasons including the likely lack of relevant data. As a result, the Partnership may be subject to certain tax penalties and may incur additional expenses, which would be the obligation of the General Partner. Proposed Treasury regulations, should they become effective, will mitigate some of the effects of a constructive termination. Section 701. The Department of Treasury has promulgated regulations under Section 701 of the Code that permit it to disregard or recast a transaction if a partnership is 'formed or availed of' with 'a principal purpose to reduce substantially the present value of the partners' aggregate tax liability in a manner inconsistent with the intent of [the partnership provisions of the Code]'. The Partnership has been formed for, and will engage in, activities typical for partnerships. Although there is no precedent that applies to the transactions contemplated herein, Tax Counsel believes that the Partnership is not of the type intended to fall within the scope of these regulations. INFORMATION REPORTING AND BACKUP WITHHOLDING Income on the Trust Preferred Securities will be reported to holders on an IRS Form 1099-MISC, which form should be mailed to holders of Trust Preferred Securities by January 31 following each calendar year. Payments made on and proceeds from the sale of Trust Preferred Securities may be subject to a 'back-up' withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amount generally will be allowed as a credit against the holder's United States federal income tax, provided the required information is timely filed with the IRS. PROPOSED LEGISLATION On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget Proposal, the Treasury Department proposed legislation (the 'Proposed Legislation') that would, among other things, deny the borrower an interest deduction with respect to certain types of debt instruments that are payable in stock of the issuer or a related party. The Proposed Legislation also would treat as equity for United States federal income tax purposes instruments with a maximum term of more than 20 years that are not shown as indebtedness on the consolidated balance sheet of the issuer. On March 29, 1996, Senate Finance Committee Chairman William V. Roth and House Ways and Means Committee Chairman Bill Archer issued a joint statement (the 'Joint Statement') indicating their intent that certain legislative proposal initiated by the Clinton administration, including the Proposed Legislation, that may be adopted by either of the tax-writing committees of Congress, would have an effective date that is no earlier than the date of 'appropriate Congressional action'. In addition, subsequent to the publication of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury Department officials concurring with the view expressed in the Joint Statement (the 'Democrat Letters'). If the principles contained in the Joint Statement and the Democrat Letters were followed and the Proposed Legislation were enacted, such legislation would not apply to the Debentures. There can be no assurances, however, that legislation enacted after the date hereof will not adversely affect the tax treatment of the Debentures, or whether such tax treatment 69 would cause a Partnership Tax Event or a Trust Tax Event that may result in the redemption of the Partnership Preferred Securities and, consequently, the Trust Preferred Securities. UNDERWRITING Subject to the terms and conditions set forth in a purchase agreement (the 'Purchase Agreement'), the Trust has agreed to sell to each of the Underwriters named below, and each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Lehman Brothers, PaineWebber Incorporated and Prudential Securities Incorporated are acting as representatives (the 'Representatives'), has severally agreed to purchase the number of Trust Preferred Securities set forth opposite its name below. In the Purchase Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Trust Preferred Securities offered hereby if any of the Trust Preferred Securities are purchased. In the event of default by an Underwriter, the Purchase Agreement provides that, in certain circumstances, the purchase commitments of the non-defaulting Underwriters may be increased or the Purchase Agreement may be terminated.
NUMBER OF TRUST UNDERWRITERS PREFERRED SECURITIES ------------ -------------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated................................................ Goldman, Sachs & Co....................................................... Lehman Brothers........................................................... PaineWebber Incorporated.................................................. Prudential Securities Incorporated........................................ -------------------- Total....................................................... 8,000,000 -------------------- --------------------
The Underwriters propose to offer the Trust Preferred Securities, in part, directly to the public at the initial public offering price set forth on the cover page of this Prospectus, and, in part, to certain securities dealers at such price less a concession of $. per Trust Preferred Security. The Underwriters may allow, and such dealers may re-allow, a concession not in excess of $. per Trust Preferred Security to certain brokers and dealers. After the Trust Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. In view of the fact that the proceeds of the sale of the Trust Preferred Securities will ultimately be used to purchase the investment instruments of the Company and its subsidiaries, the Purchase Agreement provides that Company will pay as compensation ('Underwriters' Compensation') to the Underwriters arranging the investment therein of such proceeds, an amount in immediately available funds of $ per Trust Preferred Security (or $ in the aggregate) for the accounts of the several Underwriters; provided that, such compensation for sales of 10,000 or more Trust Preferred Securities to any single purchaser will be $ per Trust Preferred Security. Therefore, to the extent of such sales, the actual amount of Underwriters' Compensation will be less than the aggregate amount specified in the preceding sentence. During a period of 30 days from the date of the Prospectus, neither the Trust nor the Company will, without the prior written consent of the Underwriters, directly or indirectly, sell, offer to sell, grant any option for sale of, or otherwise dispose of, any Trust Preferred Securities, any Partnership Preferred Securities, any preferred stock of the Company or any security convertible into or exchangeable into or exercisable for Trust Preferred Securities or Partnership Preferred Securities or any preferred stock of the Company. 70 The Trust Preferred Securities have been approved, subject to issuance, for listing on the New York Stock Exchange. Trading of the Trust Preferred Securities on the New York Stock Exchange is expected to commence within a 30-day period after the initial delivery of the Trust Preferred Securities. The Representatives have advised the Trust that they intend to make a market in the Trust Preferred Securities prior to the commencement of trading on the New York Stock Exchange. The Representatives will have no obligation to make a market in the Trust Preferred Securities, however, and may cease market making activities, if commenced, at any time. Prior to this offering there has been no public market for the Trust Preferred Securities. In order to meet one of the requirements for listing the Trust Preferred Securities on the New York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more Trust Preferred Securities to a minimum of 400 beneficial holders. The Trust, the Company, and the Partnership have agreed to indemnify the Underwriters against, or contribute to payments that the Underwriters may be required to make in respect of, certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Underwriters have agreed to reimburse the Company for $ in expenses incurred in connection with the issuance and sale of the Trust Preferred Securities offered hereby. Certain of the Underwriters engage in transactions with, and, from time to time, have performed services for, the Company and its subsidiaries in the ordinary course of business. LEGAL MATTERS Certain legal matters in connection with this offering will be passed upon for the Company by Robert J. Ingato, Senior Vice President, General Counsel and Secretary of the Company. Certain matters of Delaware law relating to the legality of the Trust Preferred Securities, the validity of the Trust Agreement, the formation of the Trust and the Partnership and the legality under state law of the Trust Preferred Securities and the Partnership Preferred Securities are being passed upon by Richards, Layton & Finger, special Delaware counsel to the Trust, the Partnership and the Company. The legality under state law of the Trust Guarantee, the Partnership Guarantee, the Company Debenture and the Investment Guarantees with respect to the Affiliate Debentures will be passed upon on behalf of the Trust, the Partnership and the Company by Simpson Thacher & Bartlett (a partnership which includes professional corporations), New York, New York. The validity of the Trust Preferred Securities, the Partnership Preferred Securities and the Trust Guarantee, the Partnership Guarantee, the Company Debenture and the Investment Guarantees with respect to the Affiliate Debentures will be passed upon on behalf of the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New York, New York, counsel to the Underwriters. Simpson Thacher & Bartlett and Skadden, Arps, Slate, Meagher & Flom will rely upon the opinion of Richards, Layton & Finger as to certain matters of Delaware law. EXPERTS The consolidated balance sheets as of December 31, 1995 and 1994 and the consolidated statements of income, changes in shareowners' equity and cash flows for each of the three years in the period ended December 31, 1995 of AT&T Capital Corporation which are incorporated by reference in this Prospectus and Registration Statement have been incorporated herein by reference in reliance on the reports of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The balance sheet of each of the Trust and the Partnership, each dated as of October 14, 1996 and included in this Prospectus have been so included in reliance on the reports of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. 71 INDEX OF DEFINED TERMS
DEFINED TERMS PAGE NO. - ------------------------------------------------------------------------------------------------------- -------- Affiliate.............................................................................................. 51 Affiliate Debentures................................................................................... 55 Affiliated Restricted Payments......................................................................... 51 AT&T................................................................................................... 7 AT&T Restructuring..................................................................................... 8 AT&T Capital........................................................................................... 1 AT&T Entities.......................................................................................... 8 Babcock & Brown........................................................................................ 7 Change in 1940 Act Law................................................................................. 42 Code................................................................................................... 34 Commission............................................................................................. 4 Common Stock........................................................................................... 7 Company................................................................................................ 1 Company Debenture...................................................................................... 55 Debentures............................................................................................. 55 Declaration............................................................................................ 36 Delaware Trustee....................................................................................... 36 DTC.................................................................................................... 46 Duff & Phelps.......................................................................................... 16 Eligible Institution................................................................................... 56 Eligible Debt Securities............................................................................... 55 Exchange Act........................................................................................... 4 Fitch.................................................................................................. 16 General Partner........................................................................................ 1 GRSH................................................................................................... 7 Guarantees............................................................................................. 2 Holdings............................................................................................... 7 Initial Partnership Proceeds........................................................................... 55 Intercompany Agreement................................................................................. 8 Investment Affiliates.................................................................................. 56 Investment Event of Default............................................................................ 55 Investment Guarantees.................................................................................. 2 IRS.................................................................................................... 66 License Agreement...................................................................................... 8 Limited Partnership Agreement.......................................................................... 36 Lucent................................................................................................. 8 Management Investors................................................................................... 7 Merger................................................................................................. 7 Merger Agreement....................................................................................... 7 Merger Sub............................................................................................. 7 Moody's................................................................................................ 16 NCR.................................................................................................... 8 New York Stock Exchange................................................................................ 1 1940 Act............................................................................................... 13 Nomura................................................................................................. 7 Non-United States Persons.............................................................................. 66 Operating Agreements................................................................................... 8 Partnership............................................................................................ 1 Partnership Act........................................................................................ 37 Partnership Enforcement Event.......................................................................... 54 Partnership Guarantee.................................................................................. 2 Partnership Guarantee Payments......................................................................... 62
72
DEFINED TERMS PAGE NO. - ------------------------------------------------------------------------------------------------------- -------- Partnership Investment Company Event................................................................... 58 Partnership Preferred Securities....................................................................... 1 Partnership Special Event.............................................................................. 23 Partnership Successor Securities....................................................................... 61 Partnership Tax Event.................................................................................. 58 Property Account....................................................................................... 36 Property Trustee....................................................................................... 36 Purchase Agreement..................................................................................... 70 Redemption Price....................................................................................... 3 Registration Statement................................................................................. 4 Regular Trustees....................................................................................... 36 Representatives........................................................................................ 70 S&P.................................................................................................... 16 Securities Act......................................................................................... 4 Special Representative................................................................................. 54 Tax Action............................................................................................. 42 Tax Counsel............................................................................................ 66 Trust.................................................................................................. 1 Trust Act.............................................................................................. 36 Trust Common Securities................................................................................ 1 Trust Dissolution Tax Opinion.......................................................................... 41 Trust Enforcement Event................................................................................ 40 Trust Guarantee........................................................................................ 2 Trust Guarantee Trustee................................................................................ 36 Trust Indenture Act.................................................................................... 36 Trust Investment Company Event......................................................................... 41 Trust Liquidation...................................................................................... 43 Trust Liquidation Distribution......................................................................... 10 Trust Preferred Securities............................................................................. 1 Trust Redemption Tax Opinion........................................................................... 41 Trust Securities....................................................................................... 1 Trust Special Event.................................................................................... 41 Trust Tax Event........................................................................................ 41
73 [THIS PAGE INTENTIONALLY LEFT BLANK] INDEX TO FINANCIAL STATEMENTS
PAGE NO. -------- CAPITA PREFERRED FUNDING L.P. Report of Independent Accountants................................................................. F-2 Balance Sheet of the Partnership.................................................................. F-3 Notes to Balance Sheet of the Partnership......................................................... F-3 CAPITA PREFERRED TRUST Report of Independent Accountants................................................................. F-4 Balance Sheet of the Trust........................................................................ F-5 Notes to Balance Sheet of the Trust............................................................... F-5
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the General Partner and Initial Limited Partner of CAPITA PREFERRED FUNDING L.P. We have audited the accompanying balance sheet of Capita Preferred Funding L.P. (the 'Partnership') as of October 14, 1996. This balance sheet is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this balance sheet based on our audit. We conducted our audit 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 statement is 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 audit provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Capita Preferred Funding L.P. at October 14, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. 1301 Avenue of the Americas New York, New York October 14, 1996 F-2 BALANCE SHEET OF CAPITA PREFERRED FUNDING L.P. OPENING BALANCE SHEET OCTOBER 14, 1996 Assets -- cash............................................................................................ $100 ---- ---- Partnership securities Limited partnership interest......................................................................... $ 85 General partnership interest......................................................................... 15 ---- $100 ---- ----
NOTES TO BALANCE SHEET OF THE PARTNERSHIP ------------------------ Capita Preferred Funding L.P. (the 'Partnership') is a limited partnership that was formed under the Delaware Revised Uniform Limited Partnership Act on August 29, 1996 for the exclusive purposes of purchasing certain eligible securities of AT&T Capital Corporation (the 'Company') and wholly owned subsidiaries of the Company (the 'Affiliate Investment Instruments') with the proceeds from the sale of Partnership Preferred Securities (the 'Partnership Preferred Securities') to Capita Preferred Trust (the 'Trust') and a capital contribution from the Company in exchange for the general partnership interest in the Partnership (collectively, the 'Partnership Proceeds'). The Partnership Proceeds will be used initially to purchase debt instruments from the Company and certain domestic wholly owned subsidiaries of the Company. The Partnership shall have a perpetual existence subject to certain termination events. The Company serves as the sole general partner of the Partnership. The Company, in its capacity as General Partner of the Partnership, has agreed to pay all fees and expenses related to the organization and operations of the Partnership (including any taxes, duties, assessments or government charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Partnership) and the offering of the Partnership Preferred Securities and be responsible for all debts and other obligations of the Partnership (other than with respect to the Partnership Preferred Securities). The General Partner has agreed to indemnify certain officers and agents of the Partnership. F-3 REPORT OF INDEPENDENT ACCOUNTANTS To the Trustee of CAPITA PREFERRED TRUST We have audited the accompanying balance sheet of Capita Preferred Trust (the 'Trust'), as of October 14, 1996. This balance sheet is the responsibility of the Trust's management. Our responsibility is to express an opinion on this balance sheet based on our audit. We conducted our audit 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 statement is 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 audit provides a reasonable basis for our opinion. In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Capita Preferred Trust at October 14, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. 1301 Avenue of the Americas New York, New York October 14, 1996 F-4 BALANCE SHEET OF CAPITA PREFERRED TRUST OPENING BALANCE SHEET OCTOBER 14, 1996 Assets....................................................................................................... $ 0 --- --- Trust securities............................................................................................. $ 0 --- ---
NOTES TO BALANCE SHEET OF THE TRUST ------------------------ Capita Preferred Trust (the 'Trust') is a statutory business trust formed on August 29, 1996 under the laws of the State of Delaware for the exclusive purposes of (i) issuing the Trust Originated Preferred Securities (the 'Trust Preferred Securities') and the Trust Common Securities (together with the Trust Preferred Securities, the 'Trust Securities') representing undivided beneficial ownership interests in the assets of the Trust, (ii) purchasing Partnership Preferred Securities (the 'Partnership Preferred Securities') representing the limited partnership interests of Capita Preferred Funding L.P. (the 'Partnership') with the proceeds from the sale of the Trust Securities and (iii) engaging in only those other activities necessary or incidental thereto. The Trust has a perpetual existence, subject to certain termination events as provided in the Declaration of Trust under which it was formed. Subsequent to October 14, 1996, the Trust intends to issue and sell its Trust Preferred Securities in a public offering. No Trust Preferred Securities have been authorized or issued as of October 14, 1996. The proceeds from the Trust's sale of the Trust Securities will be used to purchase the Partnership Preferred Securities from the Partnership. AT&T Capital Corporation (the 'Company') will be obligated to pay compensation to the underwriters of the offering of the Trust Preferred Securities. The Company will pay all fees and expenses related to the organization and operations of the Trust (including any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States or any other domestic taxing authority upon the Trust) and the offering of the Trust Preferred Securities and be responsible for all debts and other obligations of the Trust (other than the Trust Securities). The Company has also agreed to indemnify the Trustees and certain other persons. F-5 _____________________________________ _____________________________________ NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE TRUST PREFERRED SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information....................................................................................................... 4 Incorporation of Certain Documents By Reference............................................................................. 5 Prospectus Summary.......................................................................................................... 6 Risk Factors................................................................................................................ 17 Use of Proceeds............................................................................................................. 26 Capitalization.............................................................................................................. 26 Ratio of Earnings to Fixed Charges of the Company........................................................................... 27 Selected Financial Data..................................................................................................... 28 Business of the Company..................................................................................................... 30 The Merger.................................................................................................................. 33 Relationship With AT&T Entities............................................................................................. 34 Capita Preferred Trust...................................................................................................... 36 Capita Preferred Funding L.P................................................................................................ 37 Description of the Trust Preferred Securities............................................................................... 38 Description of the Trust Guarantee.......................................................................................... 50 Description of the Partnership Preferred Securities......................................................................... 53 Description of the Partnership Guarantee.................................................................................... 62 Certain Federal Income Tax Considerations................................................................................... 66 Underwriting................................................................................................................ 70 Legal Matters............................................................................................................... 71 Experts..................................................................................................................... 71 Index of Defined Terms...................................................................................................... 72 Index to Financial Statements............................................................................................... F-1
8,000,000 TRUST PREFERRED SECURITIES CAPITA PREFERRED TRUST % TRUST ORIGINATED PREFERRED SECURITIES'SM' ('TOPrS'SM'') GUARANTEED TO THE EXTENT SET FORTH HEREIN BY [LOGO] --------------------------- PROSPECTUS --------------------------- MERRILL LYNCH & CO. GOLDMAN, SACHS & CO. LEHMAN BROTHERS PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED , 1996 _____________________________________ _____________________________________ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Set forth below are estimates of other expenses of issuance and distribution, all of which will be paid by AT&T Capital: Securities and Exchange Commission Filing Fee................................... $ 60,607 Printing and Distributing Registration Statement, Prospectus, and Miscellaneous Material...................................................................... 175,000 Accountants' Fee................................................................ 50,000 Legal Fees and Expenses......................................................... 500,000 Blue Sky Fees and Expenses...................................................... 15,000 New York Stock Exchange Listing Fee............................................. 58,300 Rating Agency Fee............................................................... 255,000 Miscellaneous Expenses.......................................................... 25,000 ---------- Total................................................................. $1,138,907 ---------- ----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General Corporation Law of Delaware and the Company's Restated Certificate of Incorporation and By-Laws provide for the indemnification of directors and officers of the Company under certain circumstances, and on a case by case basis, against expenses reasonably incurred in connection with a civil or criminal action to which they were a party, or threatened to be made a party, by reason of being a director or officer. The Company's Restated Certificate of Incorporation and By-Laws provide for indemnity of directors and officers to the fullest extent permitted by law. The Amended and Restated Declaration of Trust of Capita Preferred Trust (the 'Trust') provides, to the fullest extent permitted by applicable law, for indemnity of the Regular Trustees, any Affiliate of any Regular Trustee, any officer, director, shareholder, member, partner, employee, representative or agent of any Regular Trustee, or any officer, director, shareholder, member, partner, employee, representative or agent of the Trust or its Affiliates (each a 'Company Indemnified Person'), from and against losses and expenses incurred by such Company Indemnified Person in connection with any action, suit or proceeding, except that if such action, suit or proceeding is by or in the right of the Trust, the indemnity shall be limited to expenses of such Company Indemnified Person. The Limited Partnership Agreement of Capita Preferred Funding L.P. (the 'Partnership') provides that to the fullest extent permitted by applicable law, the Partnership shall indemnify and hold harmless II-1 each of the General Partner, and any Special Representative, any Affiliate of the General Partner or any Special Representative, any officer, director, shareholder, member, partner, employee, representative or agent of the General Partner or any Special Representative, or any of their respective Affiliates, or any employee or agent of the Partnership or its Affiliates (each a 'Partnership Indemnified Person'), from and against any loss, damage or claim incurred by such Partnership Indemnified Person by reason of any act or omission performed or omitted by such Partnership Indemnified Person in good faith on behalf of the Partnership and in a manner such Partnership Indemnified Person reasonably believed to be within the scope of authority conferred on such Partnership Indemnified Person by the Limited Partnership Agreement, except that no Partnership Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Partnership Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions. The Limited Partnership Agreement also provides that, to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Partnership Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of an undertaking by or on behalf of the Partnership Indemnified Person to repay such amount if it shall be determined that the Partnership Indemnified Person is not entitled to be indemnified as authorized in the Limited Partnership Agreement. The directors and officers of the Company and the Regular Trustees of the Trust are covered by insurance policies indemnifying them against certain liabilities, including certain liabilities arising under the Act, which might be incurred by them in such capacities and against which they cannot be indemnified by the Company or the Trust. Any agents, dealers or underwriters who execute the agreement filed as Exhibit 1.1 of this Registration Statement will agree to indemnify the Company's directors and their officers and the Trustees who signed the Registration Statement against certain liabilities that may arise under the Securities Act with respect to information furnished to the Company or the Trust by or on behalf of any such indemnifying party. ITEM 16. EXHIBITS.
EXHIBIT NO. - ------- 1.1 -- Form of Purchase Agreement for the offering of the Trust Preferred Securities being registered under this Registration Statement. 4.1'D' -- Certificate of Trust dated August 29, 1996, of Capita Preferred Trust. 4.2 -- Form of Amended and Restated Declaration of Trust of Capita Preferred Trust. 4.3'D' -- Certificate of Limited Partnership, dated as of August 28, 1996, of Capita Preferred Funding L.P. 4.4'D' -- Amended and Restated Certificate of Limited Partnership of Capita Preferred Funding L.P. dated as of October 2, 1996. 4.5 -- Form of Amended and Restated Agreement of Limited Partnership of Capita Preferred Funding L.P. 4.6 -- Form of Trust Preferred Securities Guarantee Agreement by AT&T Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee. 4.7 -- Form of Partnership Guarantee Agreement by AT&T Capital Corporation. 4.8 -- Form of Indenture between AT&T Capital Corporation and The First National Bank of Chicago, N.A., as trustee. 4.9 -- Form of Affiliate Debenture Guarantee Agreement by AT&T Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee.
II-2 4.10 -- Form of Trust Preferred Security (included in Exhibit 4.2 above). 4.11 -- Form of Partnership Preferred Security (included in Exhibit 4.5 above). 4.12 -- Form of Subordinated Debenture (included in Exhibit 4.8 above). 5.1 -- Opinion of Simpson Thacher & Bartlett. 5.2 -- Opinion of Richards Layton & Finger. 8.1 -- Opinion of Simpson Thacher & Bartlett as to certain federal income tax matters. 12.1 -- Computation of Ratio of Earnings to Fixed Charges of AT&T Capital Corporation. 23.1'D' -- Consent of Coopers & Lybrand L.L.P. 23.2 -- Consent of Simpson Thacher & Bartlett (contained in Exhibits No. 5.1 and 8.1). 23.3 -- Consent of Richards, Layton & Finger (contained in Exhibit 5.2). 24.1'D' -- Powers of Attorney. 25.1 -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, N.A., under the Amended and Restated Declaration of Trust. 25.2 -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, N.A., under the Trust Preferred Securities Guarantee Agreement. 25.3 -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, N.A, under the Indenture. 25.4 -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, N.A., under the Affiliate Debenture Guarantee Agreements.
- ------------ 'D' Previously filed. ITEM 17. UNDERTAKINGS. The undersigned registrants hereby undertake: 1. that for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; 2. that for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; and 3. that for purposes of determining any liability under the Securities Act of 1933, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. ------------------------ Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of a registrant pursuant to the foregoing provisions or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted against a registrant by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, on the 18th day of October, 1996. AT&T CAPITAL CORPORATION By: /s/ ROBERT J. INGATO ................................... ROBERT J. INGATO SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
SIGNATURE TITLE - ------------------------------------------ -------------------------------------------- * Chairman of the Board of Directors and Chief ......................................... Executive Officer (THOMAS C. WAJNERT) (Principal Executive Officer) * Senior Vice President and Chief ......................................... Financial Officer (Principal (EDWARD M. DWYER) Financial Officer) * Vice President, Controller (Principal ......................................... Accounting Officer) (RAMON OLIU) * Director ......................................... (HIROMI YAMAJI) * Director ......................................... (JOHN APPLETON) * Director ......................................... (GUY HANDS) * Director ......................................... (JEFFERY NASH) * Director ......................................... (DAVID BANKS) *By power of attorney By: /s/ ROBERT J. INGATO ......................................... (ROBERT J. INGATO) ATTORNEY-IN-FACT Date: October 18, 1996
II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, on the 18th day of October, 1996. CAPITA PREFERRED FUNDING L.P. By: AT&T CAPITAL CORPORATION, as General Partner By: /s/ ROBERT J. INGATO ................................... ROBERT J. INGATO SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
SIGNATURE TITLE - ------------------------------------------ -------------------------------------------- * Director ......................................... (THOMAS C. WAJNERT) * Director ......................................... (HIROMI YAMAJI) * Director ......................................... (JOHN APPLETON) * Director ......................................... (GUY HANDS) * Director ......................................... (JEFFERY NASH) * Director ......................................... (DAVID BANKS) *By power of attorney By: /S/ ROBERT J. INGATO ......................................... (ROBERT J. INGATO) ATTORNEY-IN-FACT Date: October 18, 1996
II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, on the 18th day of October, 1996. CAPITA PREFERRED TRUST By: /s/ JEFFERY F. NASH ................................... JEFFERY F. NASH REGULAR TRUSTEE II-6 STATEMENT OF DIFFERENCES ------------------------ The dagger symbol shall be expressed as......... `D' The service mark symbol shall be expressed as ...'SM' The section mark symbol shall be expressed as ...'ss' EX-1 2 EXHIBIT 1.1 ================================================================================ AT&T Capital Corporation (a Delaware corporation) Capita Preferred Funding L.P. (a Delaware limited partnership) Capita Preferred Trust (a Delaware business trust) __% Trust Originated Preferred Securitites ("TOPrS")'SM' PURCHASE AGREEMENT Dated: October __, 1996 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ----- SECTION 1. Representations and Warranties......................................... .. 4 (a) Representations and Warranties by the Company............................. 4 (i) Compliance with Registration Requirements.......................... 4 (ii) Incorporated Documents............................................. 4 (iii) Independent Accountants............................................ 5 (iv) Good Standing of the Company and Subsidiaries...................... 5 (v) Authorization of Agreement......................................... 5 (vi) Authorization of the Debentures and Indentures..................... 5 (vii) Authorization of Investment Guarantees............................. 5 (viii) Absence of Defaults and Conflicts; Absence of Further Requirements. 5 (ix) The Operating Agreements, the Intercompany Agreement and the License Agreement........................................................ 6 (x) Absence of Conflicts; Operating Agreements, Etc.................... 6 (xi) Material Adverse Change............................................ 6 (xii) Rating of Securities............................................... 7 (xiii) Investment Company Act............................................. 7 (b) Representations and Warranties by the Trust, Partnership and Company...... 7 (i) Good Standing of Trust............................................. 7 (ii) Authorization of Declaration....................................... 7 (iii) Authorization of Trust Common Securities........................... 7 (iv) Authorization of Trust Preferred Securities........................ 7 (v) Authorization of Trust Guarantee................................... 8 (vi) Regular Trustees................................................... 8 (vii) Good Standing of the Partnership................................... 8 (viii) Authorization of Partnership Agreement............................. 8 (ix) Authorization of Partnership Preferred Securities.................. 8 (x) Authorization of Partnership Guarantee............................. 8 (xi) General Partner Status............................................. 9 (xii) Investment Company Act............................................. 9 (xiii) Absence of Conflicts............................................... 9 (xiv) Absence of Further Requirements.................................... 9 (xv) Absence of Proceedings............................................. 9 SECTION 2. Sale and Delivery to Underwriters; Closing................................ 9 (a) Securities................................................................ 9 (b) Payment................................................................... 10 (c) Denominations; Registration............................................... 10 SECTION 3. Covenants of the Offerors................................................. 10 (a) Compliance with Securities Regulations and Commission Requests............ 10 (b) Filing of Amendments...................................................... 11 (c) Delivery of Registration Statements....................................... 11 (d) Delivery of Prospectuses.................................................. 11 (e) Continued Compliance with Securities Laws................................. 11
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Page ---- (f) Blue Sky Qualifications.............................................. 12 (g) Rule 158............................................................. 12 (h) Use of Proceeds...................................................... 12 (i) Listing.............................................................. 12 (j) Restriction on Sale of Securities.................................... 12 (k) Reporting Requirements............................................... 12 SECTION 4. Payment of Expenses.................................................. 13 (a) Expenses............................................................. 13 (b) Termination of Agreement............................................. 13 SECTION 5. Conditions of Underwriters' Obligations.............................. 13 (a) Effectiveness of Registration Statement.............................. 13 (b) Opinion of Counsel for Company....................................... 13 (c) Opinion of Counsel for Underwriters.................................. 14 (d) Opinion of Counsel for the Property of Trustee....................... 14 (e) Officers' Certificate................................................ 14 (f) Accountant's Comfort Letter.......................................... 14 (g) Bring-down Comfort Letter............................................ 14 (h) Maintenance of Rating................................................ 14 (i) Approval of Listing.................................................. 15 (j) Additional Documents................................................. 15 (k) Termination of Agreement............................................. 15 SECTION 6. Indemnification...................................................... 15 (a) Indemnification of Underwriters...................................... 15 (b) Indemnification of Company, Directors and Officers................... 16 (c) Actions against Parties; Notification................................ 16 (d) Settlement without Consent if Failure to Reimburse................... 17 SECTION 7. Contribution......................................................... 17 SECTION 8. Representations, Warranties and Agreements to Survive Delivery....... 18 SECTION 9. Termination of Agreement............................................. 18 (a) Termination; General................................................. 18 (b) Liabilities.......................................................... 19 SECTION 10. Default by One or More of the Underwriters........................... 19 SECTION 11. Notices.............................................................. 19 SECTION 12. Parties.............................................................. 20 SECTION 13. GOVERNING LAW AND TIME............................................... 20
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Page ---- SECTION 14. Effect of Headings................................................... 20 SCHEDULE A.................................................................Schedule A-1 SCHEDULE B.................................................................Schedule B-1 EXHIBIT A...........................................................................A-1 ANNEX A ......................................................................Annex A-1 Miscellaneous Riders........................................................Page 1 of 1
iii Capita Preferred Trust (a Delaware business trust) ________ Trust Preferred Securities __% Trust Originated Preferred Securities ("TOPrS") sm (Liquidation Amount of $25 per Preferred Security) PURCHASE AGREEMENT October __, 1996 Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Goldman, Sachs & Co. Lehman Brothers PaineWeber Incorporated Prudential Securities Incorporated c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Ladies and Gentlemen: Capita Preferred Trust (the "Trust"), a statutory business trust organized under the Business Trust Act (the "Delaware Trust Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. 'ss' 'ss' 3801 et seq.), Capita Preferred Funding L.P. (the "Partnership"), a limited partnership organized under the Revised Uniform Limited Partnership Act (the "Delaware Partnership Act") of the State of Delaware (Chapter 17, Title 6, of the Delaware Code, 6 Del. C. 'ss' 'ss' 17- 101 et seq.), and AT&T Capital Corporation, a Delaware corporation (the "Company" and, together with the Trust and the Partnership, the "Offerors") confirm their agreement (the "Agreement") with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (together, "Merrill Lynch") and each - ------------------- 'SM' "Trust Originated Preferred Securities" and "TOPrS" are service marks of Merrill Lynch & Co., Inc. of the other Underwriters named in Schedule A hereto (collectively, the "Underwriters", which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch, Goldman, Sachs & Co., Lehman Brothers, PaineWeber Incorporated and Prudential Securities Incorporated are acting as representatives (in such capacity, they shall hereinafter be referred to as the "Representatives"), with respect to the sale by the Trust and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of [ ]% Trust Originated Preferred Securities (liquidation amount of $25 per preferred security) representing preferred undivided beneficial ownership interests in the assets of the of the Trust ("TOPrS" or the "Trust Preferred Securities") set forth in said Schedule A. The Company will own all the common securities (the "Trust Common Securities" and, together with the Trust Partnership Securities, the "Trust Securities"), representing undivided beneficial ownership interests in the assets of the Trust. The Trust Preferred Securities and the Trust Common Securities will be issued pursuant to the amended and restated declaration of trust of the Trust, dated as of October ___, 1996 (the "Declaration"), among the Company, as Sponsor, [ ], as regular trustees (the "Regular Trustees"), First National Bank of Chicago, N.A., a national banking corporation, as institutional trustee (the "Property Trustee") and First Chicago Delaware Inc., a Delaware corporation, as Delaware trustee (the "Delaware Trustee" and, together with the Regular Trustees and the Property Trustee, the "Issuer Trustees"), and the holders from time to time of undivided beneficial interests in the assets of the Trust. The Trust Preferred Securities will be guaranteed by the Company, to the extent set forth in the Prospectus with respect to distributions and payments upon liquidation, redemption and otherwise pursuant to the Trust Preferred Securities Guarantee Agreement (the "Trust Guarantee"), dated as of October __, 1996, between the Company and The First National Bank of Chicago, N.A., as trustee (the "Guarantee Trustee"). The proceeds from the sale of the Trust Securities will be used by the Trust to purchase partnership preferred securities ("Partnership Preferred Securities"), representing all of the limited partnership interests of the Partnership. All of the general partnership interests will be owned by the Company, which shall be sole general partner (in such capacity, the "General Partner"). The Partnership Preferred Securities will be issued pursuant to an amended and restated agreement of limited partnership, dated as of October __, 1996 (the "Partnership Agreement"), among the Company, as general partner, and Jeffrey F. Nash, as initial limited partner, and such other persons who become limited partners thereto, and will be guaranteed by the Company, to the extent set forth in the Prospectus, with respect to distributions and payments upon liquidation and redemption pursuant to the Partnership Guarantee Agreement (the "Partnership Guarantee" and, together with the Trust Guarantee, the "Guarantees"). The Trust Preferred Securities and the related Trust Guarantee, together with the Partnership Preferred Securities and the related Partnership Guarantee, are referred to herein as the "Offered Securities." The Partnership will use the proceeds from the sale of the Partnership Preferred Securities and the capital contribution of the General Partner to acquire, among other things, (i) a subordinated debenture of the Company, (ii) a senior debenture of Subsidiary I ("Subsidiary I"), a wholly owned subsidiary of the Company, and (iii) a senior debenture of Subsidiary II ("Subsidiary II"), a wholly owned subsidiary of the Company, and, together with the Company and Subsidiary I, the "Investment Affiliates"). The debentures to be issued (collectively, the "Subsidiary Debentures") by Subsidiary I and Subsidiary II (collectively the "Investment Subsidiaries") are to be fully and unconditionally guaranteed by the Company (the "Investment Guarantees"). Each of the debentures (the "Debentures") shall be issued pursuant to an indenture (each an "Indenture"), to be dated as of October , 1996, among the applicable Investment Affiliate, The First National Bank of Chicago, N.A., as trustee (the "Debt Trustee"), and in the case of the Debentures issued by Subsidiary I and Subsidiary II, the Company, as guarantor (the "Debenture Guarantor"). 2 The Offerors have filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-11243) covering the registration under the Securities Act of 1933 (the "1933 Act") of (i) the Trust Preferred Securities, (ii) the Trust Guarantee, (iii) the Partnership Preferred Securities, (iv) the Partnership Guarantee, (v) the Debentures of the Company, and (vi) the Investment Guarantees. The Offerors understand that the Underwriters propose to make a public offering of the Offered Securities as soon as the Representative(s) deem(s) advisable after this Agreement has been executed and delivered and the Declaration and Trust Guarantee Agreement have been qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"). Promptly after execution and delivery of this Agreement, the Offerors will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The information included in such prospectus or in such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus." Such registration statement, including the exhibits thereto, schedules thereto, if any, and the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is herein called the "Registration Statement." Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final prospectus, including the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the form first furnished to the Underwriters for use in connection with the offering of the Securities is herein called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the preliminary prospectus dated October ___, 1996 together with the Term Sheet and all references in this Agreement to the date of the Prospectus shall mean the date of the Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus or the Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus or the Prospectus, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to mean and include the filing of any document 3 under the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectus, as the case may be. SECTION 1. Representations and Warranties. (a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter as of the date hereof, and as of the Closing Time referred to in Section 2(b) hereof, as follows: (i) Compliance with Registration Requirements. The Offerors meet the requirements for use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time, the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules and regulations of the Commission under the 1939 Act (the "1939 Act Regulations"), and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither the Prospectus nor any amendments or supplements thereto, at the time the Prospectus or any such amendment or supplement was issued and at the Closing Time, included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Offerors will comply with the requirements of Rule 434. The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through Merrill Lynch expressly for use in the Registration Statement or Prospectus. Each preliminary prospectus and the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (ii) Incorporated Documents. The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Prospectus, at the time the Registration Statement became effective, at the time the Prospectus was issued and at the Closing Time, did not and will not contain an 4 untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (iii) Independent Accountants. The accountants who certified the financial statements included in the Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (iv) Good Standing of the Company and Subsidiaries. Each of the Company and each of its subsidiaries has been duly incorporated, is validly existing and in good standing under the laws of its respective jurisdiction of incorporation, is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which its respective ownership of properties or the conduct of its respective businesses requires such qualification (except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole), and has the power and authority necessary to own or hold its respective properties and to conduct the businesses in which it is engaged, as described in the Prospectus. (v) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Offerors. (vi) Authorization of the Debentures and Indentures. Each Indenture has been duly authorized, and at the Closing Time, will have been duly executed and delivered by the applicable Investment Affiliate and, in the case of the Subsidiary Debentures, the Debenture Guarantor and, when duly executed and delivered by the Debt Trustee, will constitute a valid and binding agreement of such Investment Affiliate and, in the case of the Subsidiary Debentures, the Debenture Guarantor, enforceable against such Investment Affiliate and, in the case of the Subsidiary Debentures, the Debenture Guarantor, in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) (the "Bankruptcy Exceptions"). The Indenture of the Company has duly qualified under the 1939 Act. The Debentures have been duly authorized and, at the Closing Time, will have been duly executed by the applicable Investment Affiliate and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute valid and binding obligations of such Investment Affiliate, enforceable against such Investment Affiliate in accordance with their terms, except as the enforcement thereof may be limited by the Bankruptcy Exceptions. (vii) Authorization of Investment Guarantees. The Investment Guarantees have been duly authorized and, at the Closing Time, will have been duly executed and delivered by the Debenture Guarantor, and, when authenticated in the manner provided in the Investment Guarantee, will constitute a valid and binding obligation of the Debenture Guarantor, enforceable against the Debenture Guarantor in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (viii) Absence of Defaults and Conflicts; Absence of Further Requirements. The execution, delivery and performance of this Agreement, the Declaration, the Partnership Agreement, the Trust Guarantee, the Partnership Guarantee, the Debentures and the Indentures (collectively, the "Transaction Documents") by the Company and the execution, delivery and performance of the Deben- 5 tures and the Indentures by the applicable Investment Affiliate and the consummation of the transactions contemplated hereby and thereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties of assets, the effect of which breach, violation or default would be material to the Company and its subsidiaries taken as a whole; and except such as have been obtained or required under the 1983 Act or the 1933 Act Regulations, 1934 Act or the 1934 Act Regulations or state securities laws and the qualification of the Declaration, the Trust Preferred Guarantee Agreement and the Indentures under the 1939 Act, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required in connection with the offering, issuance, and sale of the Offered Securities, the Debentures and Investment Guarantees or, the consummation of the transactions contemplated by this Agreement or the execution, delivery and performance by the Company and, where applicable, the Investment Subsidiaries of the Transaction Documents. (ix) The Operating Agreements, the Intercompany Agreement and the License Agreement. Each of the Operating Agreements, the Intercompany Agreement and the License Agreement (each such term, as defined in the Registration Statement) has been duly authorized, executed and delivered by the Company and each such agreement constitutes a valid and binding agreement of the Company except as enforcement thereof may be limited by the Bankruptcy Exceptions. (x) Absence of Conflicts; Operating Agreements, Etc. The compliance by the Company with all of the provisions of the Operating Agreements, the Intercompany Agreement and the License Agreement will not conflict with or result in a breach or the violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is bound or to which the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the certificate of incorporation or by-laws of the Company or any statute or any orders rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets (except for such conflicts, breaches, violations and defaults as would not have a material adverse effect on the Company and its subsidiaries taken as a whole); and no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution and delivery by the Company of, and compliance by the Company with, the provisions of the Operating Agreements, the Intercompany Agreement and the License Agreements (except for such consents, approvals, authorizations, orders, filings, registrations and qualifications the failure to obtain which would not have a material adverse effect on the Company and its subsidiaries taken as a whole). (xi) Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein, there has been no material adverse change in the condition, financial or otherwise, or in the earnings or business affairs or business prospects of the Company and its subsidiaries taken as a whole, whether or not arising in the ordinary course of business. 6 (xii) Rating of Securities. Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Trust Preferred Securities or the Company's debt securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of rule 436(g)(2) under the Act and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Trust Preferred Securities or the any of the Company's debt securities. (xiii) Investment Company Act. Each of the Company and the Investment Subsidiaries is not, and after giving effect to the offering and sale of the Trust Preferred Securities and the application of the net proceeds therefrom as described in the Prospectus will not be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (b) Representations and Warranties by the Trust, Partnership and Company. The Offerors, jointly and severally, represent and warrant to each Underwriter as of the date hereof, as of the Closing Time referred to in Section 2(b) herein, as follows: (i) Good Standing of Trust. The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Trust Act with the power and authority to own property and to conduct its business as described in the Registration Statement and Prospectus and to enter into and perform its obligations under this Agreement, the Trust Preferred Securities, the Trust Common Securities and the Declaration; the Trust is duly qualified to transact business as a foreign business trust and is in good standing in any other jurisdiction in which such qualification is necessary, except to the extent that the failure to so qualify or be in good standing would not have a material adverse effect on the Trust; the Trust is not a party to or otherwise bound by any agreement other than those described in the Prospectus; and the Trust is and will be treated as a consolidated subsidiary of the Company pursuant to generally accepted accounting principles. (ii) Authorization of Declaration. The Declaration has been duly authorized by the Company and, at the Closing Time, will have been duly executed and delivered by the Company, as Sponsor, and the Trustees, and assuming due authorization, execution and delivery of the Declaration by the Property Trustee, the Declaration will, at the Closing Time, be a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions, and will conform to all statements relating thereto in the Prospectus; and at the Closing Time, the Declaration will have been duly qualified under the 1939 Act. (iii) Authorization of Trust Common Securities. The Trust Common Securities have been duly authorized by the Declaration and, when issued and delivered by the Trust to the Company against payment therefor as described in the Registration Statement and Prospectus, will be validly issued and (subject to the terms of the Declaration) fully paid undivided beneficial interests in the assets of the Trust and will conform to all statements relating thereto contained in the Prospectus; the issuance of the Trust Common Securities is not subject to preemptive or other similar rights; and at the Closing Time all of the issued and outstanding Trust Common Securities of the Trust will be directly owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (iv) Authorization of Trust Preferred Securities. The Trust Preferred Securities have been duly authorized by the Declaration and, when issued and delivered against payment of the consideration set forth in this Agreement, will be validly issued and (subject to the terms of the Declaration) fully paid and non-assessable undivided beneficial interests in the Trust, will be entitled to the benefits of the Declaration and will conform to all statements relating thereto contained in the Prospectus; the issuance of the Trust Preferred Securities 7 is not subject to preemptive or other similar rights; and (subject to the terms of the Declaration) holders of Trust Preferred Securities will be entitled to the same limitation of personal liability under Delaware law as extended to stockholders of private corporations for profit. (v) Authorization of Trust Guarantee. The Trust Guarantees has been duly authorized by the Company and, when validly executed and delivered by the Company, and, assuming due authorization, execution and delivery of the Trust Guarantee by the Guarantee Trustee, will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions, the Trust Guarantee will conform to all statements relating thereto contained in the Prospectus; and the Trust Preferred Guarantee Agreement, at the Closing Time, will have been duly qualified under the 1939 Act. (vi) Regular Trustees. Each of the Regular Trustees of the Trust is an employee of the Company; the Declaration has been duly executed and delivered by the Regular Trustees and is a valid and binding obligation of each Regular Trustee, enforceable against such Regular Trustee in accordance with its terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (vii) Good Standing of the Partnership. The Partnership has been duly formed and is validly existing in good standing as a limited partnership under the Delaware Partnership Act with the power and authority to own property and to conduct its business as described in the Registration Statement and Prospectus and to enter into and perform its obligations under this Agreement, the Partnership Preferred Securities and the Partnership Agreement; the Partnership is duly qualified to transact business as a foreign limited partnership and is in good standing in any other jurisdiction in which such qualification is necessary, except to the extent that the failure to so qualify or be in good standing would not have a material adverse effect on the Partnership; the Partnership is not a party to or otherwise bound by any agreement other than those described in the Prospectus; and the Partnership is and will be treated as a consolidated subsidiary of the Company pursuant to generally accepted accounting principles. (viii) Authorization of Partnership Agreement. The Partnership Agreement has been duly authorized by the Company as general partner and, on the Closing Date, will have been duly executed and delivered by the Company, and will be a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions, and will conform to the description thereof in the Prospectus. (ix) Authorization of Partnership Preferred Securities. The Partnership Preferred Securities have been duly authorized by the Partnership Agreement and, when issued and delivered pursuant to the Partnership Agreement against payment of the consideration set forth therein, will be duly issued and fully paid and not subject to assessment for additional capital contributions, will be entitled to the benefits of the Partnership Agreement and will conform to the description thereof in the Prospectus; the issuance of the Partnership Preferred Securities is not subject to preemptive or other similar rights; assuming that the holders of Partnership Preferred Securities in their capacities as such do not participate in the control of the business of the Company, the holders of the Partnership Preferred Securities, in their capacities as such, will have no liability in excess of their obligations to make payments provided for in the Limited Partnership Agreement (subject to the obligation of a holder of Partnership Preferred Securities to repay any funds distributed to it). (x) Authorization of Partnership Guarantee. The Partnership Guarantee has been duly authorized by the Company and, when validly executed and delivered by the Company will constitute a valid 8 and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by the Bankruptcy Exceptions. (xi) General Partner Status. The Company is the sole general partner of the Partnership. (xii) Investment Company Act. Neither the Trust nor the Partnership is and, after giving effect to the offering and sale of the Trust Preferred Securities and the application of the proceeds thereof as described in the Prospectus, neither will be an "investment company" under the 1940 Act. (xiii) Absence of Conflicts. The Trust is not in violation of the Declaration or its certificate of trust filed with the State of Delaware August 28, 1996 (the "Certificate of Trust"); the Partnership is not in violation of the Partnership Agreement or the certificate of limited partnership, dated August 28, 1996 (the "Certificate of Partnership"); and the execution, delivery and performance of applicable Transaction Documents by the Partnership and the Trust and the consummation of the transactions contemplated herein and therein and compliance by the Partnership and the Trust with their respective obligations hereunder and thereunder have been duly authorized by all necessary action on the part of the Partnership and the Trust and do not and will not result in any violation of the Declaration or Certificate of Trust or the Partnership Agreement or the Certificate of Partnership and do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Trust or the Partnership under any existing applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, or any regulatory body or administrative agency or other governmental body having jurisdiction over the Trust or the Partnership of their respective properties. (xiv) Absence of Further Requirements. No authorization, approval, consent or order of any court or governmental authority or agency is necessary in connection with the issuance, offer and sale of the Trust Securities and the Partnership Preferred Securities, the consummation of the transactions contemplated by this Agreement by the Partnership or the Trust, or the execution, delivery, and performance by the Partnership or the Trust of the applicable Transaction Documents, except such as may be required under the 1933 Act or the 1933 Act Regulations, the 1934 Act or the 1934 Act Regulations or state securities laws and the qualification of the Declaration and the Trust Preferred Securities Guarantee Agreement under the 1939 Act. (xv) Absence of Proceedings. Except as disclosed in the Prospectus, there is no action, suit or proceeding before or by any government, governmental instrumentality or court, domestic or foreign, now pending or, to the knowledge of the Trust or the Partnership, threatened against or affecting the Trust or the Partnership that is required to be disclosed in the Prospectus or that would result in any material adverse change in the condition (financial or otherwise), earnings or business affairs of the Trust or the Company and its subsidiaries, taken as a whole, or that could materially and adversely affect the properties or assets of the Trust or the Partnership, or that could adversely affect the consummation of the transactions contemplated in this Agreement. SECTION 2. Sale and Delivery to Underwriters; Closing. (a) Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Trust agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Trust, at the initial public offering price set forth in Schedule B, the number of Trust Preferred Securities set forth in Schedule A opposite the name of 9 such Underwriter, plus any additional number of Trust Preferred Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. (b) Payment. Payment of the purchase price for, and delivery of certificates for, the Trust Preferred Securities shall be made at the offices of Skadden, Arps, Slate, Meagher & Flom, or at such other place as shall be agreed upon by the Representative(s) and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Representative(s) and the Company (such time and date of payment and delivery being herein called "Closing Time"). Payment shall be made to the Trust by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to such persons designated by the Representative(s) for the respective accounts of the Underwriters of a certificate in global form for the Trust Preferred Securities to be purchased by them. It is understood that each Underwriter has authorized the Representative(s), for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Trust Preferred Securities which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Trust Preferred Securities to be purchased by any Underwriter whose funds have not been received by the Closing Time, but such payment shall not relieve such Underwriter from its obligations hereunder. The purchase price per Trust Preferred Security to be paid by the several Underwriters for the Preferred Securities shall be an amount equal to the initial public offering price as set forth in Schedule B. The initial public offering price per Preferred Security shall be a fixed price to be determined by agreement between the Representatives and the Offerors. The initial public offering price and the purchase price, when so determined, shall be set forth in Schedule B. As compensation to the Underwriters for their commitments hereunder and in view of the fact that the proceeds of the sale of the Trust Preferred Securities will ultimately be used to purchase the Debentures of the Company and the Investment Subsidiaries, the Company hereby agrees to pay at Closing Time to the Representatives, for the accounts of the several Underwriters, a commission per Trust Preferred Security set forth on Schedule B. At the Closing Time, the Company will pay, or cause to be paid, the commission payable at such time to the Underwriters under Section 2 hereof by wire transfer of immediately available funds to a bank account designated by Merrill Lynch, Pierce, Fenner & Smith Incorporated for the account of Underwriters. (c) Denominations; Registration. Certificates for the Trust Preferred Securities shall be in such denominations and registered in such names as the Representative(s) may request in writing at least one full business day before the Closing Time. The Trust Preferred Securities will be made available for examination and packaging by the Representative(s) in The City of New York not later than 9:00 A.M. (Eastern time) on the business day prior to the Closing Time. SECTION 3. Covenants of the Offerors. The Offerors covenant with each Underwriter as follows: (a) Compliance with Securities Regulations and Commission Requests. The Offerors, subject to Section 3(b), will comply with the requirements of Rule 430A or Rule 434, as applicable, and will notify the 10 Representative(s) immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Offered Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Offerors will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps they deem necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) Filing of Amendments. During the period when the Underwriters are required to deliver a prospectus with respect to the Offered Securities, the Offerors will give the Representative(s) notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Representative(s) with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representative(s) or counsel for the Underwriters shall reasonably object. (c) Delivery of Registration Statements. The Offerors have furnished or will deliver to the Representative(s) and counsel for the Underwriters, without charge, conformed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and conformed copies of all consents and certificates of experts, and will also deliver to the Representative(s), without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) Delivery of Prospectuses. The Offerors have delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Offerors hereby consent to the use of such copies for purposes permitted by the 1933 Act. The Offerors will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) Continued Compliance with Securities Laws. The Offerors will comply with the 1933 Act and the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations and the 1939 Act and the 1939 Act Regulations with respect to the offer of the Offered Securities so as to permit the completion of the distribution of the Trust Preferred Securities as contemplated in this Agreement and in the Prospectus. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Trust Preferred Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of 11 counsel for the Underwriters or for the Company, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. (f) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Offered Securities for offering and sale under the applicable securities laws of such states and other jurisdictions as the Representative(s) may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Offered Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement. (g) Rule 158. The Offerors will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) Use of Proceeds. The Company will use or cause to be used the net proceeds received from the sale of the Offered Securities in the manner specified in the Prospectus under "Use of Proceeds". (i) Listing. The Company will use its best efforts to effect the listing of the Offerors Securities on the New York Stock Exchange. (j) Restriction on Sale of Securities. During a period of 30 days from the date of the Prospectus, neither the Trust nor the Company will, without the prior written consent of the Underwriters, directly or indirectly, sell, offere to sell, grant any option for sale of, or otherwise dispose of, any Trust Preferred Securities, any Partnership Preferred Securities, any preferred stock of the Company or any security convertible into or exchangeable into or exercisable for Trust Preferred Securities or Partnership Preferred Securities or any preferred stock of the Company. (k) Reporting Requirements. The Company, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. 12 SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, the Declaration, the Partnership Agreement, and the Indentures and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities (other than fees and expenses of counsel for the Underwriters related thereto), (iii) the preparation, issuance and delivery of the certificates for the Trust Preferred Securities to the Underwriters, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Offered Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectus and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of the Property Trustee and the Trust Preferred Guarantee Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indentures, the Investment Guarantees and the Debentures, (ix) any fees payable in connection with the rating of the Trust Preferred Securities, and (x) the fees and expenses incurred in connection with the listing of the Offered Securities on the New York Stock Exchange; provided, however that the Underwriters shall reimburse the Company for certain expenses incurred in connection with the transactions contemplated by this Agreement as may be agreed upon in writing. (b) Termination of Agreement. If this Agreement is terminated by the Representative(s) in accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 5. Conditions of Underwriters' Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Offerors contained in Section 1 hereof or in certificates of any officer of the Company, the Trust, the Partnership or any subsidiary of the Company delivered pursuant to the provisions hereof, to the performance by the Offerors of its covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b). (b) Opinion of Counsel for Company. At Closing Time, the Representative(s) shall have received the favorable opinion, dated as of Closing Time, of (i) Simpson Thacher & Bartlett, counsel to the Company, the Trust and the Partnership, in form and substance satisfactory to counsel for the Underwriters, together with 13 signed or reproduced copies of such letter for each of the other Underwriters to the effect set forth in Exhibit A hereto and (ii) Richards, Layton & Finger, special Delaware counsel to the Company, the Trust, and the Partnership, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the Underwriters to the effect set forth in Exhibit B hereto. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (c) Opinion of Counsel for Underwriters. At Closing Time, the Representative(s) shall have received the favorable opinion, dated as of Closing Time, of Skadden, Arps, Slate, Meagher & Flom, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters in form and substance satisfactory to the Underwriters. (d) Opinion of Counsel for the Property of Trustee. At Closing Time, the Representative(s) shall have received the favorable opinion, dated as of Closing Time, of Pepper Hamilton & Scheetz, counsel for the Property Trustee in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letters for each of the other Underwriters to the effect set forth in Exhibit C hereto and to such further effect as counsel to the Underwriters may reasonably request. (e) Officers' Certificate. At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries taken as a whole, whether or not arising in the ordinary course of business, and the Representative(s) shall have received a certificate of the President or a Vice President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or are contemplated by the Commission. (f) Accountant's Comfort Letter. At the time of the execution of this Agreement, the Representative(s) shall have received from Coopers & Lybrand L.L.P. a letter dated such date, in form and substance satisfactory to the Representative(s), together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus. (g) Bring-down Comfort Letter. At Closing Time, the Representative(s) shall have received from Coopers & Lybrand L.L.P. a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (f) of this Section, except that the specified date referred to shall be a date not more than five business days prior to Closing Time. (h) Maintenance of Rating. At Closing Time, the Trust Preferred Securities shall be rated at least "ba2" by Moody's Investor's Service Inc., "BBB-" by Standard & Poor's Ratings Group, a division of McGraw- Hill, Inc., "BBB-" by Duff & Phelps Credit Rating Co. and "BBB-" by Fitch Investors Service, Inc. and the Company shall have delivered to the Representative(s) a letter dated on or prior to the Closing Time, from each such rating agency, or other evidence satisfactory to the Representative(s), confirming that the Trust Preferred 14 Securities have such ratings; and since the date of this Agreement, there shall not have occurred a downgrading in the rating assigned to the Trust Preferred Securities or the Company's debt securities by any "nationally recognized statistical rating agency," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Trust Preferred Securities or any of the Company's debt securities. (i) Approval of Listing. At Closing Time, the Trust Preferred Securities shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance. (j) Additional Documents. At Closing Time, counsel for the Underwriters shall have been furnished with such documents as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Representative(s) and counsel for the Underwriters. (k) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Representative(s) by notice to the Company at any time at or prior to Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6 and 7 shall survive any such termination and remain in full force and effect. SECTION 6. Indemnification. (a) Indemnification of Underwriters. The Offerors agree jointly and severally to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including, subject to Section 6(c) hereof, the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency 15 or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Offerors by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto). The foregoing indemnity with respect to any untrue statement or alleged untrue statement contained in or omission or alleged omission from a preliminary prospectus shall not inure to the benefit of the Underwriter (or any person controlling such Underwriter) from whom the person asserting any loss, liability, claim, damage or expense purchased any of the Offered Securities which are the subject thereof if the Company shall sustain the burden of proving that such person was not sent or given a copy of the Prospectus (or the Prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Offered Securities to such person and the untrue statement contained in or omission from such preliminary prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented) and the Company had previously furnished copies thereof to such Underwriter. (b) Indemnification of Company, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Offerors, directors of the Company, the General Partner of the Partnership, the Issuer Trustees of the Trust, each of the officers of the Offerors who signed the Registration Statement, and each person, if any, who controls any of the Offerors within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company provided that if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it and approved by the indemnified parties defendant in such action, unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them which are different from or in addition to those available to such indemnifying party. If an indemnifying party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party 16 shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for reasonable fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Offeror on the one hand and the Underwriters on the other hand from the offering of the Trust Preferred Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Offerors on the one hand and the Underwriters on the other hand in connection with the offering of the Trust Preferred Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Trust Preferred Securities pursuant to this Agreement (before deducting expenses but after deducting the total underwriting commission received by the Underwriters) received by the Offerors and the total underwriting commission received by the Underwriters, in each case as set forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet, bear to the aggregate initial public offering price of the Trust Preferred Securities as set forth on such cover. The relative fault of the Offerors on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the 17 Offerors or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Trust Preferred Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, the General Partner of the Partnership, the Issuer Trustees of the Trust, each officer of the Offerors who signed the Registration Statement, and each person, if any, who controls any of the Offerors within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule A hereto and not joint. SECTION 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Offerors or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Offerors, and shall survive delivery of the Trust Preferred Securities to the Underwriters. SECTION 9. Termination of Agreement. (a) Termination; General. The Representative(s) may terminate this Agreement, by notice to the Company, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings or business affairs or business prospects of the Company and its subsidiaries taken as a whole, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the 18 international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representative(s), impracticable to market the Trust Preferred Securities or to enforce contracts for the sale of the Trust Preferred Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) if a banking moratorium has been declared by either Federal or New York State authorities. (b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6 and 7 shall survive such termination and remain in full force and effect. SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at Closing Time to purchase the Trust Preferred Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Representative(s) shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representative(s) shall not have completed such arrangements within such 24-hour period, then: if the number of Defaulted Securities does not exceed 10% of the aggregate number of the Securities to be purchased hereunder, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or if the number of Defaulted Securities exceeds 10% of the aggregate number of the Securities to be purchased hereunder, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement, either the Representative(s) or the Company shall have the right to postpone Closing Time for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. As used herein, the term "Underwriter" includes any person substituted for an Underwriter under this Section 10. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representative(s) at North Tower, World Financial Center, New 19 York, New York 10281-1201, attention of Edward Higgins; and notice to the Company shall be directed to it at AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey, 07962, attention of Glenn Votek. SECTION 12. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Offerors and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Offerors and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters and the Offerors and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Trust Preferred Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION 14. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 20 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Underwriters and the Company in accordance with its terms. Very truly yours, AT&T CAPITAL CORPORATION By: -------------------------- Name: Title: CAPITA PREFERRED FUNDING L.P. By: -------------------------- Name: Title: CAPITA PREFERRED TRUST By: -------------------------- Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED GOLDMAN, SACHS & CO. LEHMAN BROTHERS PAINEWEBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By --------------------------------------- Authorized Signatory For themselves and as Representative(s) of the other Underwriters named in Schedule A hereto. 21 SCHEDULE A
Number of Name of Underwriter Trust Preferred Securities ------------------- -------------------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated........ ------------- Goldman, Sachs & Co....................................... ------------- Lehman Brothers........................................... ------------- PaineWeber Incorporated................................... ------------- Prudential Securities Incorporated........................ ------------- Total.............................................. =============
Schedule A-1 SCHEDULE B 1. The initial public offering price per security for the Trust Preferred Securities, determined as provided in said Section 2, shall be $25.00. 2. The purchase price per security for the Trust Preferred Securities to be paid by the several Underwriters shall be $25.00, being an amount equal to the initial public offering price set forth above. 3. The compensation per Trust Preferred Security to be paid by the Company to the several Underwriters in respect of their commitments hereunder shall be .7875; provided, however, that the compensation per Trust Preferred Security for sales of 10,000 or more Trust Preferred Securities to a single purchaser shall be .50. Schedule B-1 EX-4 3 EXHIBIT 4.2 [Form of Amended and Restated Declaration of Trust for non-convertible securities] ================================================ AMENDED AND RESTATED DECLARATION OF TRUST CAPITA PREFERRED TRUST Dated as of October __, 1996 ================================================ TABLE OF CONTENTS Page ---- ARTICLE I INTERPRETATION AND DEFINITIONS..................... 2 SECTION 1.1 Definitions........................................ 2 ARTICLE II TRUST INDENTURE ACT.......................... 12 SECTION 2.1 Trust Indenture Act; Application................... 12 SECTION 2.2 Lists of Holders of Trust Securities............... 12 SECTION 2.3 Reports by the Property Trustee.................... 13 SECTION 2.4 Periodic Reports to Property Trustee............... 13 SECTION 2.5 Evidence of Compliance with Conditions Precedent.......................................... 13 SECTION 2.6 Trust Enforcement Events; Waiver................... 13 SECTION 2.7 Trust Enforcement Event; Notice.................... 15 ARTICLE III ORGANIZATION.............................. 16 SECTION 3.1 Name............................................... 16 SECTION 3.2 Office............................................. 16 SECTION 3.3 Purpose............................................ 16 SECTION 3.4 Authority.......................................... 16 SECTION 3.5 Title to Property of the Trust..................... 17 SECTION 3.6 Powers and Duties of the Regular Trustees.......... 17 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees....................................... 21 SECTION 3.8 Powers and Duties of the Property Trustee.......... 22 SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee............................... 24 SECTION 3.10 Certain Rights of Property Trustee................. 26 SECTION 3.11 Delaware Trustee................................... 29 SECTION 3.12 Execution of Documents............................. 29 SECTION 3.13 Not Responsible for Recitals or Issuance of Trust Securities................................ 29 SECTION 3.14 Duration of Trust.................................. 29 SECTION 3.15 Mergers............................................ 29 i Page ---- ARTICLE IV SPONSOR................................ 32 SECTION 4.1 Responsibilities of the Sponsor.................... 32 SECTION 4.2 Indemnification and Expenses of the Trustees........................................... 32 ARTICLE V TRUSTEES................................ 33 SECTION 5.1 Company's Purchase of Trust Common Securities............................................ SECTION 5.2 Covenants of the Trust Common Securities Holder..................................... ARTICLE VI TRUSTEES SECTION 6.1 Number of Trustees................................. 33 SECTION 6.2 Delaware Trustee................................... 34 SECTION 6.3 Property Trustee; Eligibility...................... 34 SECTION 6.4 Qualifications of Regular Trustees and Delaware Trustee Generally......................... 35 SECTION 6.5 Regular Trustees................................... 35 SECTION 6.6 Delaware Trustee................................... 36 SECTION 6.7 Appointment, Removal and Resignation of Trustees........................................... 36 SECTION 6.8 Vacancies among Trustees........................... 37 SECTION 6.9 Effect of Vacancies................................ 38 SECTION 6.10 Meetings........................................... 38 SECTION 6.11 Delegation of Power................................ 39 SECTION 6.12 Compensation and Reimbursement..................... 39 SECTION 6.13 Merger, Conversion, Consolidation or Succession to Business............................. 40 ARTICLE VII DISTRIBUTIONS............................. 40 SECTION 7.1 Distributions...................................... 40 ARTICLE VIII ISSUANCE OF TRUST SECURITIES...................... 41 SECTION 8.1 Designation and General Provisions Re- garding Trust Securities........................... 41 SECTION 8.2 Redemption of Trust Securities..................... 44 ii Page ---- SECTION 8.3 Redemption Procedures.............................. 45 SECTION 8.4 Voting Rights of Trust Preferred Securities........ 47 SECTION 8.5 Voting Rights of Trust Common Securities........... 50 SECTION 8.6 Paying Agent....................................... 52 SECTION 8.7 Listing............................................ 53 SECTION 8.8 Acceptance of Guarantee and Agreements, Limited Partnership Agreement...................... 53 ARTICLE IX TERMINATION AND LIQUIDATION OF THE TRUST............. 53 SECTION 9.1 Termination of Trust............................... 53 SECTION 9.2 Liquidation Distribution Upon Termina- tion and Dissolution of the Trust.................. 54 ARTICLE X TRANSFER OF INTERESTS......................... 55 SECTION 10.1 Transfer of Trust Securities....................... 55 SECTION 10.2 Transfer of Certificates........................... 55 SECTION 10.3 Deemed Security Holders............................ 56 SECTION 10.4 Book Entry Interests............................... 56 SECTION 10.5 Notices to Clearing Agency......................... 57 SECTION 10.6 Appointment of Successor Clearing Agency........... 57 SECTION 10.7 Definitive Trust Preferred Security Certificates... 58 SECTION 10.8 Mutilated, Destroyed, Lost or Stolen Certificates....................................... 59 ARTICLE XI LIMITATION OF LIABILITY OF HOLDERS OF TRUST SECURITIES, TRUSTEES OR OTHERS......... 59 SECTION 11.1 Liability.......................................... 59 SECTION 11.2 Exculpation........................................ 60 SECTION 11.3 Fiduciary Duty..................................... 60 SECTION 11.4 Indemnification.................................... 61 SECTION 11.5 Outside Businesses................................. 65 ARTICLE XII ACCOUNTING............................... 66 SECTION 12.1 Fiscal Year........................................ 66 iii Page ---- SECTION 12.2 Certain Accounting Matters......................... 66 SECTION 12.3 Banking............................................ 67 SECTION 12.4 Withholding........................................ 67 ARTICLE XIII AMENDMENTS AND MEETINGS........................ 68 SECTION 13.1 Amendments......................................... 68 SECTION 13.2 Meetings of the Holders of Trust Securities; Action by Written Consent.......................... 70 ARTICLE XIV REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE....................... 72 SECTION 14.1 Representations and Warranties of Property Trustee............................................ 72 SECTION 14.2 Representations and Warranties of Delaware Trustee............................................ 73 ARTICLE XV MISCELLANEOUS............................. 74 SECTION 15.1 Notices............................................ 74 SECTION 15.2 Governing Law...................................... 75 SECTION 15.3 Intention of the Parties........................... 75 SECTION 15.4 Headings........................................... 76 SECTION 15.5 Successors and Assigns............................. 76 SECTION 15.6 Partial Enforceability............................. 76 SECTION 15.7 Counterparts....................................... 76 EXHIBIT A-1 FORM OF PREFERRED SECURITY CERTIFICATE.................................... A1-1 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE.............. A2-1 EXHIBIT B PURCHASE AGREEMENT............................... B-1 iv CROSS-REFERENCE TABLE* Section of Trust Indenture Act Section of of 1939, as amended Declaration - ------------------- ----------- 310(a) ........................................... 6.3(a) 310(c) ........................................... Inapplicable 311(c) ........................................... Inapplicable 312(a) ........................................... 2.2(a) 312(b) ........................................... 2.2(b) 313 ........................................... 2.3 314(a) ........................................... 2.4 314(b) ........................................... Inapplicable 314(c) ........................................... 2.5 314(d) ........................................... Inapplicable 314(f) ........................................... Inapplicable 315(a) ........................................... 3.9(b) 315(c) ........................................... 3.9(a) 315(d) ........................................... 3.9(a) 316(a) ........................................... Annex I 316(c) ........................................... 3.6(e) - ---------- * This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. v AMENDED AND RESTATED DECLARATION OF TRUST OF CAPITA PREFERRED TRUST October __, 1996 AMENDED AND RESTATED DECLARATION OF TRUST (the "Declaration") dated and effective as of October __, 1996, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the Holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, certain of the Trustees and the Sponsor established CAPITA PREFERRED TRUST (the "Trust"), a trust under the Delaware Business Trust Act (the "Trust Act") pursuant to a Declaration of Trust dated as of August 28, 1996, (the "Original Declaration") and a Certificate of Trust filed with the Secretary of State of the State of Delaware on August 29, 1996, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in the Partnership Preferred Securities; WHEREAS, as of the date hereof, no interests in the Trust have been issued; and WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration. NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the Holders, from time to time, of the securities representing undivided beneficial ownership interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa; and (g) a term used in this Agreement and not otherwise defined herein shall have the meaning ascribed to such term in the Partnership Agreement. "Affiliate" means, with respect to any specified person, any other person that directly or indirectly controls or is controlled by, or is under common control with such specified person provided that with respect to the Company, "Affiliate" shall be deemed to also include any entity of which at least 20% of the capital stock is owned by a person that directly or indirectly controls the Company. "Affiliate Investment Instrument" has the meaning set forth in Section 7.1 of the Limited Partnership Agreement. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. 2 "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as set forth in Section 10.4 of this Declaration. "Business Day" means any day other than a day on which banking institutions in The City of New York are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Certificate" means a Trust Common Security Certificate or a Trust Preferred Security Certificate. "Change in 1940 Act Law" means any change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority with the result that the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Trust Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of beneficial interests in the Trust Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of interest in securities deposited with the Clearing Agency. "Closing Date" means ____________, 1996. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Common Security Holder of the Trust" means the Company in its capacity as Holder of the Trust Common Security. 3 "Company" means AT&T Capital Corporation, successor by merger to Antigua Acquisition Corporation. "Company Indemnified Person" means (a) any Regular Trustee; (b) any Affiliate of any Regular Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Regular Trustee; or (d) any officer, director, shareholder, member, partner, employee, representative or agent of the Trust or its Affiliates. "Compounded Distributions" has the meaning set forth in Section 7.1(a) of this Declaration. "Corporate Trust Office" means the office of the Property Trustee at which the corporate trust business of the Property Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 153 West 53rd Street, New York, New York 10019. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Trust Securities. "Definitive Trust Preferred Security Certificates" has the meaning set forth in Section 10.4 of this Declaration. "Delaware Trustee" has the meaning set forth in Section 6.2 of this Declaration. "Distribution" has the meaning set forth in Section 7.1(a) of this Declaration. "DTC" means the Depository Trust Company, the initial Clearing Agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Fiduciary Indemnified Person" has the meaning set forth in Section 11.4(b) of this Declaration. "Fiscal Year" has the meaning set forth in Section 12.1 of this Declaration. "General Partner" means the AT&T Capital Corporation in its capacity as the general partner of the Partnership, its permitted successors, or any successor general partner in the 4 Partnership admitted as such pursuant to the Limited Partnership Agreement. "Global Certificate" has the meaning set forth in Section 10.4 of this Declaration. "Holder" means a Person in whose name a Certificate representing a Trust Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Initial Debentures" has the meaning set forth in Section 7.1(b) of the Limited Partnership Agreement. "Investment Affiliate" means the Company or any corporation, partnership, limited liability company or other entity (other than the Partnership or the Trust) that is controlled by the Company and is not an investment company by reason of Section 3(a) or 3(b) of the 1940 Act. "Investment Company" means an investment company as defined in the 1940 Act. "Investment Guarantee" means any guarantee by the Company with respect to (1) payment of interest, principal and other payment terms of Affiliate Investment Instruments that are debt securities of an Investment Affiliate and (2) the payment of dividends, distributions and other payment terms of Affiliate Investment Instruments that are preferred or preference stock of an Investment Affiliate when, as and if declared by such Investment Affiliate. "Legal Action" has the meaning set forth in Section 3.6(h) of this Declaration. "Limited Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of Capita Preferred Funding L.P. dated as of October __, 1996. "List of Holders" has the meaning set forth in Section 2.2(a) of this Declaration. "Majority in liquidation amount of the Trust Securities" means, except as provided in the terms of the Trust Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Trust 5 Preferred Securities or Holders of outstanding Trust Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Trust Securities of the relevant class. "Ministerial Action" means, a ministerial action (such as filing a form or making an election or pursuing some other similar reasonable measure) where the taking of such action does not involve a material cost. "Nasdaq" means the National Association of Securities Dealers Automated Quotation System. "1940 Act" means the Investment Company Act of 1940, as amended from time to time, or any successor legislation. "Officers' Certificate" means, with respect to any Person (who is not an individual), a certificate signed by two authorized officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Partnership" means Capita Preferred Funding L.P., a Delaware limited partnership formed pursuant to the Limited Partnership Agreement. "Partnership Enforcement Event" has the meaning set forth in Section 6.2(h)(i) of the Limited Partnership Agreement. 6 "Partnership Guarantee" means the Partnership Guarantee Agreement dated as of October __, 1996, by the Company in favor of the Partnership Preferred Security Holders with respect to the Partnership Preferred Securities, as amended or supplemented from time to time. "Partnership Preferred Securities" has the meaning set forth in Section 1.1 of the Limited Partnership Agreement. "Partnership Special Event" has the meaning set forth in Section 1.1 of the Limited Partnership Agreement. "Payment Amount" has the meaning set forth in Section 7.1(a) of this Declaration. "Paying Agent" has the meaning set forth in Section 3.8(g) of this Declaration. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, or each case in accordance with the rules of such Clearing Agency). "Property Account" has the meaning set forth in Section 3.8(c) of this Declaration. "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 6.3 of this Declaration. "Pro Rata" means, in reference to any distributions on or redemptions of Trust Securities or the distribution or any other payment with respect to Trust Securities in connection with a Trust Special Event, pro rata to each Holder of Trust Securities according to the aggregate liquidation amount of the Trust Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Trust Securities outstanding. "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both of them. 7 "Redemption Price" has the meaning set forth in Section 8.2(a) of this Declaration. "Regular Trustee" has the meaning set forth in Section 6.1 of this Declaration. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, any officer within the Corporate Trust Office of the Property Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers, who has direct responsibility for the administration of the Trust, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-5" means Rule 3a-5 under the 1940 Act. "Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation. "Special Representative" has the meaning set forth in Section 6.2(i) of the Limited Partnership Agreement. "Sponsor" means the Company or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust. "Successor Delaware Trustee" has the meaning set forth in Section 6.7(b) of this Declaration. "Successor Entity" has the meaning set forth in Section 3.15 of this Declaration. "Successor Property Trustee" has the meaning set forth in Section 6.7(b) of this Declaration. "Successor Trust Securities" has the meaning set forth in Section 3.15 of this Declaration. 8 "Super Majority" has the meaning set forth in Section 2.6(a)(ii) of this Declaration. "Tax Action" means (a) an amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) a judicial decision interpreting, applying or clarifying such laws or regulations, (c) an administrative pronouncement or action that represents an official position (including a clarification of an official position) of the governmental authority or regulatory body making such administrative pronouncement or taking such action, or (d) a threatened challenge asserted in connection with an audit of the Company or any of its subsidiaries, the Partnership, or the Trust, or a threatened challenge asserted in writing against any other taxpayer that has raised capital through the issuance of securities that are substantially similar to the Debentures, the Partnership Preferred Securities, or the Trust Preferred Securities, which amendment or change is adopted or which decision, pronouncement or proposed change is announced or which action, clarification or challenge occurs on or after the date of the prospectus related to the issuance of the Trust Preferred Securities. "10% in liquidation amount of the Trust Securities" means, except as provided in the terms of the Trust Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together as a single class or, as the context may require, Holders of outstanding Trust Preferred Securities or Holders of outstanding Trust Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Trust Securities of the relevant class. "Treasury Regulations" means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury Department, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust Common Security" has the meaning set forth in Section 8.1 of this Declaration. "Trust Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2. 9 "Trust Common Securities Guarantee" means the Trust Common Securities Guarantee Agreement dated as of October __, 1996, entered into by the Company, as Guarantor, for the benefit of the holders of the Trust Common Securities. "Trust Dissolution Tax Opinion" means an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that there has been a Trust Tax Event. "Trust Enforcement Event" means the occurrence, at any time, of (i) arrearages on distributions on the Trust Preferred Securities that shall exist for six quarterly distribution periods, (ii) a default by the Company in respect of any of its obligations under the Trust Guarantee or (iii) a Partnership Enforcement Event (as defined in the Limited Partnership Agreement). "Trust Guarantees" means the Trust Common Securities Guarantee and The Trust Preferred Securities Guarantee, collectively. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. "Trust Investment Company Event" means that the Company shall have requested and received and shall have delivered to the Regular Trustees an opinion of nationally recognized independent legal counsel experienced in such matters to the effect that as a result of a Change in 1940 Act Law, the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act. "Trust Liquidation" has the meaning set forth in Section 9.2(a) of this Declaration. "Trust Preferred Securities Guarantee" has the meaning set forth in Section 1.1 of the Limited Partnership Agreement. "Trust Liquidation Distribution" has the meaning set forth in Section 9.2(a) of this Declaration. "Trust Preferred Security" has the meaning set forth in Section 8.1 of this Declaration. "Trust Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency 10 Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Trust Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Exhibit A-1. "Trust Redemption Tax Opinion" means an opinion of nationally recognized independent tax counsel experienced in such matters that there has been a Trust Tax Event, and following such Trust Tax Event there is more than an insubstantial risk that interest payable by one or more of the Investment Affiliates with respect to the Debentures is not, or will not be deductible by an Investment Affiliate for United States federal income tax purposes even if the Partnership Preferred Securities were distributed to the Holders of the Trust Securities in liquidation of such Holders' interests in the Trust. "Trust Securities" means the Trust Common Securities and the Trust Preferred Securities. "Trust Special Event" means a Trust Tax Event or a Trust Investment Company Event. "Trust Tax Event" means that there has been a Tax Action which relates to any of the items described in (i) through (iii) below, and that there is more than an insubstantial risk that (i) the Trust is, or will be subject to United States federal income tax with respect to income accrued or received on the Partnership Preferred Securities, (ii) the Trust is, or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable by one or more of the Investment Affiliates with respect to the Debentures is not, or will not be, deductible by such Investment Affiliate for United States federal income tax purposes. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. ARTICLE II TRUST INDENTURE ACT 11 SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Sections 310 to ___, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Trust Securities. (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Trust Securities ("List of Holders") as of such record date, provided that neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity) provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. 12 Within 60 days after May 1 of each year, the Property Trustee shall provide to the Holders of the Trust Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Trust Enforcement Events; Waiver. (a) The Holders of a Majority in liquidation amount of Trust Preferred Securities may, by vote, on behalf of the Holders of all of the Trust Preferred Securities, waive any past Trust Enforcement Event in respect of the Trust Preferred Securities and its consequences, provided that, if the underlying event of default or Partnership Enforcement Event: (i) is not waivable under the Trust Preferred Securities Guarantee or the Limited Partnership Agreement, the Trust Enforcement Event under this Declaration shall also not be waivable; or (ii) requires the consent or vote of the Holders of greater than a Majority in liquidation amount of the Trust Preferred Securities to be waived under the Trust Preferred Securities Guarantee or the Partnership Preferred Securities to be waived under the Limited Partnership Agreement (a 13 "Super Majority"), the Trust Enforcement Event under this Declaration may only be waived by the vote of the Holders of at least the relevant Super Majority in liquidation amount of the Trust Preferred Securities. The foregoing provisions of this Section 2.6(a) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Trust Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such default shall cease to exist, and any Trust Enforcement Event with respect to the Trust Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Trust Enforcement Event with respect to the Trust Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Trust Preferred Securities of Trust Enforcement Events with respect to the Trust Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Trust Common Securities of any such Trust Enforcement Event with respect to the Trust Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Trust Common Securities. (b) The Holders of a Majority in liquidation amount of the Trust Common Securities may, by vote, on behalf of the Holders of all of the Trust Common Securities, waive any past Trust Enforcement Event with respect to the Trust Common Securities and its consequences, provided that, if the underlying event of default or Partnership Enforcement Event: (i) is not waivable under the Trust Common Securities Guarantee or the Limited Partnership Agreement, except where the Holders of the Trust Common Securities are deemed to have waived such Trust Enforcement Event under this Declaration as provided below in this Section 2.6(b), the Trust Enforcement Event under this Declaration shall also not be waivable; or (ii) requires the consent or vote of the Holders of a Super Majority to be waived, except where the Holders of the Trust Common Securities are deemed to have waived such Trust Enforcement Event under the Declaration as provided below in this Section 2.6(b), the Trust Enforcement Event under this Declaration may only be waived by the vote of the Holders of at least the relevant Super Majority in liquidation amount of the Trust Common Securities; 14 provided further, each Holder of Trust Common Securities will be deemed to have waived any such Trust Enforcement Event and all Trust Enforcement Events with respect to the Trust Common Securities and its consequences until all Trust Enforcement Events with respect to the Trust Preferred Securities have been cured, waived or otherwise eliminated, and until such Trust Enforcement Events have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Trust Preferred Securities and only the Holders of the Trust Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Trust Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Trust Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such waiver, any such default shall cease to exist and any Trust Enforcement Event with respect to the Trust Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Trust Enforcement Event with respect to the Trust Common Securities or impair any right consequent thereon. (c) A waiver of Partnership Enforcement Events under the Limited Partnership Agreement by the Property Trustee at the direction of the Holders of the Trust Preferred Securities constitutes a waiver of the corresponding Trust Enforcement Event under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Trust Securities, as permitted by the Trust Indenture Act. SECTION 2.7 Trust Enforcement Event; Notice. The Property Trustee shall, within 90 days after the occurrence of a Trust Enforcement Event, transmit by mail, first class postage prepaid, to the Holders of the Trust Securities, notices of all defaults with respect to the Trust Securities actually known to a Responsible Officer of the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7 being hereby defined to be defaults as defined in the Trust Guarantees or the Limited Partnership Agreement, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided that, except for a default in the payment of principal of (or premium, if any) or 15 interest on any of the Affiliate Investment Instruments or in the payment of any sinking fund installment established for the Affiliate Investment Instruments, the Property Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Trust Securities. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust is named "Capita Preferred Trust," as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Trust Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. On ten Business Days written notice to the Holders of Trust Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and to use the proceeds from such sale to acquire the Partnership Preferred Securities, and (b) except as otherwise limited herein, to engage in only those other activities necessary, or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. SECTION 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Proper- 16 ty Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Partnership Preferred Securities and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial ownership interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Regular Trustees. The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Trust Preferred Securities and the Trust Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Trust Preferred Securities and no more than one series of Trust Common Securities, and, provided further, that there shall be no interests in the Trust other than the Trust Securities, and the issuance of Trust Securities shall be limited to a one-time, simultaneous issuance of both Trust Preferred Securities and Trust Common Securities on the Closing Date; (b) in connection with the issue and sale of the Trust Preferred Securities, at the direction of the Sponsor, to: (i) execute and file with the Commission the registration statement on Form S-3 prepared by the Sponsor, including any amendments thereto, pertaining to the Trust Preferred Securities; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Trust Preferred Securities in any 17 State in which the Sponsor has determined to qualify or register such Trust Preferred Securities for sale; (iii) execute and file an application, prepared by the Sponsor, to the New York Stock Exchange, Inc. or any other national stock exchange or the Nasdaq Stock Market's National Market for listing upon notice of issuance of any Trust Preferred Securities; (iv) execute and file with the Commission a registration statement on Form 8-A, including any amendments thereto, prepared by the Sponsor, relating to the registration of the Trust Preferred Securities, the Partnership Preferred Securities, the Trust Preferred Securities Guarantee and the Partnership Guarantee under Section 12(b) of the Exchange Act; and (v) execute and enter into an underwriting agreement providing for the sale of the Trust Preferred Securities and perform the duties and obligations of the Trust thereunder; (c) to acquire the Partnership Preferred Securities with the proceeds of the sale of the Trust Preferred Securities and the Trust Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Partnership Preferred Securities to be held of record in the name of the Property Trustee for the benefit of the Holders of the Trust Preferred Securities and the Holders of Trust Common Securities; (d) to give the Sponsor and the Property Trustee prompt written notice of the occurrence of a Trust Special Event; provided that the Regular Trustees shall consult with the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Trust Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of Section 316(c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Trust Preferred Securities and Holders of Trust Common Securities as to such actions and applicable record dates; (f) to give prompt written notice to the Holders of the Trust Securities of any notice received from the Part- 18 nership of the General Partner's election not to make a current, quarterly distribution on the Partnership Preferred Securities under the Limited Partnership Agreement; (g) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Trust Securities; (h) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(f), the Property Trustee has the exclusive power to bring such Legal Action; (i) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (j) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (k) to give the certificate required by Section 314(a)(4) of the Trust Indenture Act to the Property Trustee, which certificate may be executed by any Regular Trustee; (l) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust; (m) to act as, or appoint another Person to act as, registrar and transfer agent for the Trust Securities; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Trust Preferred Securities or to enable the Trust to effect the purposes for which the Trust was created; 19 (p) to take any action, or to take no action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the 1940 Act; and (ii) taking no action which would be reasonably likely to cause the Trust to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes; provided that such action does not adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. Any expenses incurred by the Regular Trustees pursuant to this Section 3.6 shall be reimbursed by the Sponsor pursuant to Section 10.1. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall cause the Trust not to: 20 (i) invest any proceeds received by the Trust from holding the Partnership Preferred Securities, but shall distribute all such proceeds to Holders of Trust Securities pursuant to the terms of this Declaration and of the Trust Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness or acquire any securities other than the Partnership Preferred Securities; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Trust Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Trust Securities; (vii) other than as set forth herein, (A) cause the Special Representative to direct the time, method and place of conducting any proceeding for any remedy available to the Special Representative or exercising any trust or power conferred upon the Special Representative with respect to the Partnership Preferred Securities, the Affiliate Investment Instruments, and the Investment Guarantees, (B) cause the Special Representative to waive any past default that is waivable under the Limited Partnership Agreement, the Affiliate Investment Instruments or the Investment Guarantees, (C) cause the Special Representative to exercise any right to rescind or annul any declaration that the principal of, or other amounts in respect of, any Affiliate Investment Instruments is due and payable or (D) consent to any amendment, modification or termination of the Limited Partnership Agreement or the Partnership Preferred Securities where such consent shall be required; and (viii) other than in connection with the liquidation of the Trust pursuant to a Trust Special Event or upon redemption of all the Trust Securities, file a certificate of cancellation of the Trust. 21 SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Partnership Preferred Securities shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Trust Securities. The right, title and interest of the Property Trustee to the Partnership Preferred Securities shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Section 6.7. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Partnership Preferred Securities have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Partnership Preferred Securities to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Property Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Trust Securities and, upon the receipt of payments of funds made in respect of the Partnership Preferred Securities held by the Property Trustee, deposit such funds into the Property Account and make payments to the Holders of the Trust Preferred Securities and Holders of the Trust Common Securities from the Property Account in accordance with Section 7.1. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Account shall be an account that is maintained with a banking institution authorized to exercise corporate trust powers and having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or state authority; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Trust Preferred Securities and the Trust Common Securities to the extent the Partnership Preferred Securities are redeemed; and (iii) upon written notice of distribution issued by the Regular Trustees in accordance with the terms of the Trust Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution 22 of the Partnership Preferred Securities to Holders of Trust Securities upon the occurrence of a Trust Special Event. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Trust Securities. (e) The Property Trustee shall take any Legal Action which arises out of or in connection with a Trust Enforcement Event of which a Responsible Officer of the Property Trustee has actual knowledge or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act. (f) The Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a Holder of Partnership Preferred Securities and, if a Trust Enforcement Event occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Trust Securities, enforce its rights as Holder of the Partnership Preferred Securities subject to the rights of the Holders pursuant to the terms of such Trust Securities. (g) The Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to all Trust Securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee. (h) The Property Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Trust Securities pursuant to the terms of the Trust Securities; or (ii) a Successor Property Trustee has been appointed and has accepted that appointment in accordance with Section 6.7. (i) Subject to this Section 3.8, the Property Trustee shall have none of the duties, liabilities, powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the 23 purposes and functions of the Trust set out in Section 3.3, and the Property Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee. (a) The Property Trustee, before the occurrence of any Trust Enforcement Event and after the curing of all Trust Enforcement Events that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Property Trustee. In case a Trust Enforcement Event has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer of the Property Trustee has actual knowledge, the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of a Trust Enforcement Event and after the curing or waiving of all such Trust Enforcement Events that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property 24 Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) subject to the requirement of the Property Trustee receiving a tax opinion as set forth in Section 8.4(d) or 8.5(c), as the case may be, the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Trust Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Property Trustee against such risk or liability is not reasonably assured to it; (v) the Property Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Partnership Preferred Securities and the Property Account shall be to deal with such property in a similar manner as the Property Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Property Trustee under this Declaration and the Trust Indenture Act; (vi) the Property Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Partnership Preferred Securities or the payment of any taxes or assessments levied thereon or in connection therewith; 25 (vii) money held by the Property Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (viii) the Property Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Property Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees acting on behalf of the Trust contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; (v) the Property Trustee may consult with counsel or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within 26 the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless (a) such Holder shall have provided to the Property Trustee security and indemnity, reasonably satisfactory to the Property Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Property Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Property Trustee and (b) the Property Trustee has obtained the legal opinions, if any, required by Section 8.4(b) or 8.5(c), as the case may be, of this Agreement; provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee, upon the occurrence of a Trust Enforcement Event, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Trust Securities, and the signature of the Property Trustee 27 or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Property Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Property Trustee (i) may request instructions from the Holders of the Trust Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Trust Securities as would be entitled to direct the Property Trustee under the terms of the Trust Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in or accordance with such instructions; provided, however, that the Property Trustee shall not be required to take any action unless it shall have received such legal opinions, if any, required by Sections 8.4(d) or 8.5(c), as the case may be, of this Agreement; and (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. Notwithstanding any provision of this Declaration other than Section 6.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the 28 Property Trustee described in this Declaration. Except as set forth in Section 6.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12 Execution of Documents. Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act, any Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6; provided that, the registration statement referred to in Section 3.6(b)(i), including any amendments thereto, shall be signed by or on behalf of a majority of the Regular Trustees. SECTION 3.13 Not Responsible for Recitals or Issuance of Trust Securities. The recitals contained in this Declaration and the Trust Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Trust Securities. SECTION 3.14 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have perpetual existence. SECTION 3.15 Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15(b) and (c). (b) The Trust may, with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees and without the consent of the Holders of the Trust Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State of the United States; provided that: 29 (i) if the Trust is not the survivor, such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Trust Securities; or (B) substitutes for the Trust Preferred Securities other securities having substantially the same terms as the Trust Preferred Securities (the "Successor Trust Securities") so long as the Successor Trust Securities rank the same as the Trust Preferred Securities rank with respect to Distributions, assets and payments upon liquidation, redemption and otherwise; (ii) the Company expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Property Trustee as the Holder of the Partnership Preferred Securities; (iii) the Trust Preferred Securities or any Successor Trust Securities are listed, or any Successor Trust Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Trust Preferred Securities are then listed or quoted; (iv) such merger, consolidation, amalgamation or replacement does not cause the Trust Preferred Securities (including any Successor Trust Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Trust Preferred Securities (including any Successor Trust Securities) in any material respect; (vi) such Successor Entity has a purpose identical to that of the Trust; (vii) the Company guarantees the obligations of such Successor Entity under the Successor Trust Securities at least to the extent provided by the Trust Guarantees; and (viii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of 30 a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement will not adversely affect the rights, preferences and privileges of the Holders of the Trust Preferred Securities (including any Successor Trust Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company under the 1940 Act; (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will not be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes; and (D) following such merger, consolidation, amalgamation or replacement, the Partnership will not be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the Trust Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. ARTICLE IV SPONSOR SECTION 4.1 Responsibilities of the Sponsor. In connection with the issue and sale of the Trust Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: 31 (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Trust Preferred Securities, including any amendments thereto; (b) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Trust Preferred Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing, Partnership Preferred Securities, the Trust Preferred Securities Guarantee and the Partnership Guarantee upon notice of issuance of any Trust Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Trust Preferred Securities, the Partnership Preferred Securities, the Trust Preferred Securities Guarantee, and the Partnership Guarantee under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of an underwriting agreement and any pricing agreement providing for the sale of the Trust Preferred Securities. SECTION 4.2 Indemnification and Expenses of the Trustee The Partnership agrees, and to the extent the Partnership fails to do so, the Sponsor agrees to indemnify the Property Trustee and the Delaware Trustee for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Property Trustee or the Delaware Trustee, as the case may be, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending either of them against any claim or liability in connection with the exercise or performance of any of their respective powers or duties hereunder; the provisions of this Section 4.2 shall survive the resignation or removal of the 32 Delaware Trustee or the Property Trustee or the termination of this Declaration. ARTICLE V TRUST COMMON SECURITIES HOLDER SECTION 5.1 Company's Purchase of Trust Common Securities. On the Closing Date the Company will purchase all of the Trust Common Securities issued by the Trust, for an amount at least equal to 3% of the capital of the Trust, at the same time as the Trust Preferred Securities are sold. SECTION 5.2 Covenants of the Trust Common Securities Holder. For so long as the Trust Preferred Securities remain outstanding, the Company will covenant (i) to maintain directly 100 percent ownership of the Trust Common Securities, (ii) to cause the Trust to remain a statutory business trust and not to voluntarily dissolve, wind up, liquidate, or be terminated, except as permitted by this Declaration, (iii) to use its commercially reasonable efforts to ensure that the Trust will not be an investment company for purposes of the 1940 Act, and (iv) to take no action which would be reasonably likely to cause the Trust to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes. ARTICLE VI TRUSTEES SECTION 6.1 Number of Trustees. The number of Trustees initially shall be five (5), and: (a) at any time before the issuance of any Trust Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Trust Securities, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Trust Common Securities voting as a class at a meeting of the Holders of the Trust Common Securities; provided, however, that the number of Trustees shall in no event be less than 33 three (3); provided further that (1) if required by the Business Trust Act, one Trustee is the Delaware Trustee; (2) there shall be at least one Trustee who is an employee or officer of, or is affiliated with the Company (each, a "Regular Trustee"); and (3) one Trustee shall be the Property Trustee for so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, and such Property Trustee may also serve as Delaware Trustee if it meets the applicable requirements. SECTION 6.2 Delaware Trustee. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law, provided that, if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, then the Property Trustee may also be the Delaware Trustee (in which case Section 3.11 shall have no application). SECTION 6.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 34 6.3(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 6.3(a), the Property Trustee shall immediately resign in the manner and with the effect set forth in Section 6.7(c). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Trust Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. (d) The Trust Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. (e) The initial Property Trustee shall be: The First National Bank of Chicago, N.A. SECTION 6.4 Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 6.5 Regular Trustees. The initial Regular Trustees shall be: Robert J. Ingato Glenn A. Votek Edward M. Dwyer (a) Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. 35 (b) Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6, provided, that, the registration statement referred to in Section 3.6(b)(i), including any amendments thereto, shall be signed by or on behalf of a majority of the Regular Trustees. SECTION 6.6 Delaware Trustee. The initial Delaware Trustee shall be: First Chicago Delaware Inc. SECTION 6.7 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 6.7(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Trust Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Trust Securities, by vote of the Holders of a Majority in liquidation amount of the Trust Common Securities voting as a class at a meeting of the Holders of the Trust Common Securities. (b)(i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 6.7(a) until a successor Trustee possessing the qualifications to act as Property Trustee under Section 6.3 (a "Successor Property Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 6.7(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 6.2 and 6.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, 36 removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Property Trustee shall be effective: (A) until a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Trust Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Trust Common Securities shall use their best efforts to promptly appoint a Successor Delaware Trustee or Successor Property Trustee, as the case may be, if the Property Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 6.7. (e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 6.7 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Property Trustee or Delaware Trustee, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. (f) No Property Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Property Trustee or successor Delaware Trustee, as the case may be. 37 SECTION 6.8 Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 6.1, or if the number of Trustees is increased pursuant to Section 6.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 6.7. SECTION 6.9 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 6.7, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 6.10 Meetings. If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or 38 without a meeting by the unanimous written consent of the Regular Trustees. Notwithstanding the foregoing, any and all actions of the Regular Trustees may be taken by the unanimous written consent of all Regular Trustees. SECTION 6.11 Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6, including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. Section 6.12 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Property Trustee or the Delaware Trustee, as the case may be, may be merged or converted or with which either may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Property Trustee or the Delaware Trustee, as the case may be, shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Property Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Property Trustee or the Delaware Trustee, as the case may be, hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE VII DISTRIBUTIONS SECTION 7.1 Distributions. (a) Holders of Trust Securities shall be entitled to receive cumulative cash distributions at the rate per annum of % of the stated liquidation amount of $25 per Trust Security, 39 calculated on the basis of a 360-day year consisting of twelve 30-day months. For any period shorter than a full 90-day quarter, distributions will be computed on the basis of the actual number of days elapsed in such 90-day quarter. Distributions shall be made on the Trust Preferred Securities and the Trust Common Securities on a Pro Rata basis. Distributions on the Trust Securities shall, from the date of original issue, accrue and be cumulative and shall be payable quarterly only to the extent that the Trust has funds available for the payment of such Distributions in the Property Account. Distributions not paid on the scheduled payment date will accumulate and compound quarterly at the rate of __% per annum ("Compounded Distributions"). "Distributions" shall mean ordinary cumulative distributions in respect of each Fiscal Period together with any Compounded Distributions. If and to the extent that the Partnership makes a distribution on the Partnership Preferred Securities held by the Property Trustee or the Company makes a payment under the Partnership Guarantee (the amount of any such partnership distribution, including any compounded partnership distributions or guarantee payment being a "Payment Amount"), the Trust shall and the Property Trustee is directed, to the extent funds are available for that purpose, to make a Pro Rata Distribution of the Payment Amount to Holders. (b) Distributions on the Trust Securities will be cumulative, will accrue from the date of initial issuance and will be payable quarterly in arrears on each March 31, June 30, September 30 and December 31, commencing December 31, 1996, when, as and if available for payment, by the Property Trustee, except as otherwise described below. If Distributions are not paid when scheduled, the accrued Distributions shall be paid to the Holders of record of Trust Securities as they appear on the books and records of the Trust on the record date as determined under Section 7.1(d) below. (c) Amounts available to the Trust for distribution to the Holders of the Trust Securities will be limited to payments received by the Trust from the Partnership on the Partnership Preferred Securities or from the Company on the Partnership Guarantees paid by the Company to the Trust. If the Property Trustee, as the holder of the Partnership Preferred Securities for the benefit of the Holders of the Trust Securities, receives notice of any determination by the Partnership not to pay distributions on such Partnership Preferred Securities, the Property Trustee shall give notice of such determination to the Holders. (d) Distributions on the Trust Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates, which relevant 40 record date, as long as the Trust Preferred Securities remain in book-entry only form, will be one Business Day prior to the relevant payment dates. Such distributions will be paid through the Property Trustee who will hold amounts received in respect of the Partnership Preferred Securities in the Property Account for the benefit of the Holders of the Trust Securities. In the event that the Trust Securities do not remain in book-entry only form, the relevant record dates shall be the 15th of the month of the relevant payment dates. In the event that any date on which distributions are payable on the Trust Securities is not a Business Day, payment of the distribution payable on such date will be made on the next succeeding day which is a Business Day (without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. ARTICLE VIII ISSUANCE OF TRUST SECURITIES SECTION 8.1 Designation and General Provisions Regarding Trust Securities. (a) The Regular Trustees shall on behalf of the Trust issue one class of preferred securities representing undivided beneficial ownership interests in the assets of the Trust (the "Trust Preferred Securities") and one class of common securities representing undivided beneficial ownership interests in the assets of the Trust (the "Trust Common Securities") as follows: (i) Trust Preferred Securities. [________________] Trust Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of [_______________] dollars ($[_________________]) and a liquidation amount with respect to the assets of the Trust of $25 per preferred security, are hereby designated for the purpose of identification only as ___% Trust Originated Preferred Securities'SM' (the "Trust Preferred Securities"). The Trust Preferred Security Certificates evidencing the Trust Preferred Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Trust Preferred Securities are listed. 41 (ii) Trust Common Securities. [________________] Trust Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of [_______________] dollars ($[_______________]) and a liquidation amount with respect to the assets of the Trust of $25 per common security, are hereby designated for the purposes of identification only as ___% Trust Common Securities (the "Trust Common Securities" and, together with the Trust Preferred Securities, the "Trust Securities"). The Trust Common Security Certificates evidencing the Trust Common Securities shall be substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. (b) Except as provided in Section 8.2(b) of this Declaration, the Trust Preferred Securities rank pari passu and payment thereon shall be made Pro Rata with the Trust Common Securities. The Trust shall issue no securities or other interests in the assets of the Trust other than the Trust Preferred Securities and the Trust Common Securities. (c) Any Regular Trustee shall sign the Trust Securities for the Trust by manual or facsimile signature. In case any Regular Trustee of the Trust who shall have signed any of the Trust Securities shall cease to be a Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Trust Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Trust Securities may be listed, or to conform to usage. A Trust Security shall not be valid until authenticated by the manual signature of an authorized officer of the Property Trustee. Such signature shall be conclusive evidence that the Trust Security has been authenticated under this Declaration. 42 Upon a written order of the Trust signed by one Regular Trustee, the Property Trustee shall authenticate the Trust Securities for original issue as set forth in paragraph 5 of the Securities. The aggregate number of Preferred Securities outstanding at any time shall not exceed the number set forth in the Terms of the Trust Securities. The Property Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Trust Securities. An authenticating agent may authenticate Trust Preferred Securities whenever the Property Trustee may do so. Each reference in this Declaration to authentication by the Property Trustee includes authentication by such agent. An authenticating agent has the same rights as the Property Trustee to deal with the Sponsor or an Affiliate of the Sponsor. (d) The consideration received by the Trust for the issuance of the Trust Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (e) Upon issuance of the Trust Securities as provided in this Declaration, the Trust Securities so issued shall be deemed to be validly issued, fully paid and non-assessable, subject to Section 11.1 with respect to the Trust Common Securities. (f) Every Person, by virtue of having become a Holder or a Trust Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. SECTION 8.2 Redemption of Trust Securities. (a) Upon a purchase of the Partnership Preferred Securities by the Partnership upon redemption or otherwise, the proceeds from such purchase shall be simultaneously applied Pro Rata to redeem Trust Securities having an aggregate liquidation amount equal to the Partnership Preferred Securities so purchased or redeemed for an amount equal to $25 plus an amount equal to accrued and unpaid Distributions, including any Compounded Distributions thereon through the date of the redemption or such lesser amount as shall be received by the Trust in respect of the Partnership Preferred Securities so purchased or redeemed (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days notice of such redemption. 43 (b) If fewer than all the outstanding Trust Securities are to be so redeemed, the Trust Common Securities and the Trust Preferred Securities will be redeemed Pro Rata and the Trust Preferred Securities to be redeemed will be redeemed as described in Section 8.3 below. (c) If, at any time, a Trust Special Event shall occur and be continuing, the Regular Trustees shall, unless the Partnership Preferred Securities are redeemed in the limited circumstances described below, within 90 days following the occurrence of such Trust Special Event elect to either (i) dissolve the Trust upon not less than 30 nor more than 60 days' notice with the result that, after satisfaction of creditors, if any, of the Trust, Partnership Preferred Securities with an aggregate principal amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid distributions on, and having the same record date for payment as, the Trust Preferred Securities and the Trust Common Securities outstanding at such time would be distributed on a Pro Rata basis to the Holders of the Trust Preferred Securities and the Trust Common Securities in liquidation of such Holders' interests in the Trust; provided, however, that if at the time there is available to the Trust the opportunity to eliminate, within such 90-day period, the Trust Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure which in the sole judgment of the Sponsor has or will cause no adverse effect on the Trust, the Partnership, the Sponsor or the Holders of the Trust Securities and will involve no material cost, the Trust will pursue such measure in lieu of dissolution or (ii) cause the Trust Preferred Securities to remain outstanding, provided that in the case of this clause (ii), the Sponsor shall pay any and all expenses incurred by or payable by the Trust attributable to the Trust Special Event. Furthermore, if in the case of the occurrence of a Trust Tax Event, the Regular Trustees have received a Trust Redemption Tax Opinion, then the General Partner shall have the right, within 90 days following the occurrence of such Trust Tax Event, to elect to cause the Partnership to redeem the Partnership Preferred Securities in whole (but not in part) for cash upon not less than 30 nor more than 60 days' notice and promptly following such redemption, the Trust Securities will be redeemed by the Trust at the Redemption Price. (d) If the Partnership Preferred Securities are distributed to the Holders of the Trust Preferred Securities, the Sponsor will use its best efforts to cause the Partnership Preferred Securities to be listed on the New York Stock Exchange 44 or on such other national securities exchange or similar organization as the Trust Preferred Securities are then listed or quoted. (e) On the date fixed for any distribution of Partnership Preferred Securities, upon dissolution of the Trust, (i) the Trust Preferred Securities and the Trust Common Securities will no longer be deemed to be outstanding and (ii) certificates representing Trust Securities will be deemed to represent the Partnership Preferred Securities having an aggregate principal amount equal to the stated liquidation amount of, and bearing accrued and unpaid distributions equal to accrued and unpaid distributions on, such Trust Securities until such certificates are presented to the Sponsor or its agent for transfer or reissuance. SECTION 8.3 Redemption Procedures. (a) Notice of any redemption of, or notice of distribution of Partnership Preferred Securities in exchange for, the Trust Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Trust Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Partnership Preferred Securities. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 8.3, a Redemption/ Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Trust Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Trust Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (b) In the event that fewer than all the outstanding Trust Securities are to be redeemed, the Trust Securities to be redeemed shall be redeemed Pro Rata from each Holder of Trust Securities, provided that, in respect of Preferred Securities registered in the name of and held of record by DTC or its nominee (or any successor Clearing Agency or its nominee) or any nominee, the distribution of the proceeds of such redemption will be made to each Clearing Agency Participant (or Person on whose behalf such nominee holds such securities) in accordance with the procedures applied by such agency or nominee. 45 (c) If Trust Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Partnership Preferred Securities are redeemed as set out in this Section 8.3 (which notice will be irrevocable), then (A) while the Trust Preferred Securities are in book-entry only form, by 12:00 noon, New York City time, on the redemption date, the Property Trustee will deposit irrevocably with the DTC or its nominee (or successor Clearing Agency or its nominee) funds sufficient to pay the applicable Redemption Price with respect to the Trust Preferred Securities and will give the DTC irrevocable instructions and authority to pay the Redemption Price to the Holders of the Trust Preferred Securities, and (B) with respect to Trust Preferred Securities issued in definitive form and Trust Common Securities, the Property Trustee will pay the relevant Redemption Price to the Holders of such Trust Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, distributions will cease to accrue on the Trust Securities so called for redemption and all rights of Holders of such Trust Securities will cease, except the right of the Holders of such Trust Securities to receive the Redemption Price, but without interest on such Redemption Price. If any date fixed for redemption of Trust Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of any Trust Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Trust Guarantee, Distributions on such Trust Securities will continue to accrue at the then applicable rate from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. For these purposes, the applicable Redemption Price shall not include Distributions which are being paid to Holders who were Holders on a relevant record date. Upon satisfaction of the foregoing conditions, then immediately prior to the close of business on the date of such deposit or payment, all rights of Holders of such Trust Preferred Securities so called for redemption will cease, except the right of the Holders to received the Redemption Price, but without interest on such 46 Redemption Price, and from and after the date fixed for redemption, such Trust Preferred Securities will not accrue distributions or bear interest. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Trust Securities that have been called for redemption. (d) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or its subsidiaries may at any time and from time to time purchase outstanding Trust Preferred Securities by tender, in the open market or by private agreement. SECTION 8.4 Voting Rights of Trust Preferred Securities. (a) Except as provided under Sections 6.1(b) and this Article VIII and as otherwise required by the Business Trust Act, the Trust Indenture Act and other applicable law, the Holders of the Trust Preferred Securities will have no voting rights. (b) Subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in Section 8.4(d) below, the Holders of a Majority in liquidation amount of the Trust Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as Holder of the Partnership Preferred Securities, to (i) exercise the remedies available to it under the Limited Partnership Agreement as a Holder of the Partnership Preferred Securities, including the right to direct the Special Representative of the Partnership as elected by the Holders of the Partnership Preferred Securities in accordance with the Limited Partnership Agreement (A) to enforce the Partnership's creditors rights and other rights with respect to the Affiliate Investment Instruments and any Investment Guarantees, (B) to enforce the rights of the Holders of the Partnership Preferred Securities under the Partnership Guarantee, and (C) to enforce the rights of the Holders of the Partnership Preferred Securities to receive distributions (if and to the extent such distributions have been declared out of funds legally available therefor by the General Partner in its sole discretion) on the Partnership Preferred Securities or (ii) consent to any amendment, modification, or termination of the Limited Partnership Agreement or the Partnership Preferred Securities where such consent shall be required; provided, however, that where a consent or action under the Limited Partnership Agreement would 47 require the consent or act of the Holders of more than a majority of the aggregate liquidation amount of Partnership Preferred Securities affected thereby, only the Holders of the percentage of the aggregate stated liquidation amount of the Trust Preferred Securities which is at least equal to the percentage required under the Limited Partnership Agreement may direct the Property Trustee to give such consent or take such action. (c) If the Property Trustee fails to enforce its rights under the Partnership Preferred Securities after a Holder of record of Trust Preferred Securities has made a written request, such Holder of record of Trust Preferred Securities may institute a legal proceeding directly against the General Partner or the Special Representative, to enforce the Property Trustee's rights under the Limited Partnership Agreement without first instituting any legal proceeding against the Property Trustee or any other person or entity. Notwithstanding the foregoing, if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of an Investment Affiliate to make any required payment when due on any Affiliate Investment Instrument, then a Holder of Trust Preferred Securities may directly institute a proceeding against such Investment Affiliate for enforcement of payment with respect to such Affiliate Investment Instrument. (d) The Property Trustee shall notify all Holders of the Trust Preferred Securities of any notice of any Partnership Enforcement Event received from the General Partner with respect to the Partnership Preferred Securities and the Affiliate Investment Instruments. Such notice shall state that such Partnership Enforcement Event also constitutes a Trust Enforcement Event. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy, the Property Trustee shall be under no obligation to take any of the actions described in clause 8.4(b)(i) and (ii) above unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that as a result of such action, the Trust will not fail to be classified as a grantor trust for United States federal income tax purposes and each Holder will be treated as owning an undivided beneficial ownership interest in the Partnership Preferred Securities. (e) In the event the consent of the Property Trustee, as the Holder of the Partnership Preferred Securities, is required under the Limited Partnership Agreement with respect to any amendment, modification or termination of the Limited Partnership Agreement, the Property Trustee shall request the direction of the Holders of the Trust Securities with respect to such amendment, modification or termination and shall vote with 48 respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Trust Securities voting together as a single class; provided, however, that where a consent under the Limited Partnership Agreement would require the consent of the Holders of more than a majority of the aggregate principal amount of the Partnership Preferred Securities, the Property Trustee may only give such consent at the direction of the Holders of at least the same proportion in aggregate stated liquidation amount of the Trust Securities. The Property Trustee shall not take any such action in accordance with the directions of the Holders of the Trust Securities unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. (f) A waiver of a Partnership Enforcement Event with respect to the Partnership Preferred Securities will constitute a waiver of the corresponding Trust Enforcement Event. (g) Any required approval or direction of Holders of Trust Preferred Securities may be given at a separate meeting of Holders of Trust Preferred Securities convened for such purpose, at a meeting of all of the Holders of Trust Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Trust Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Trust Preferred Securities. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. (h) No vote or consent of the Holders of Trust Preferred Securities will be required for the Trust to redeem and cancel Trust Preferred Securities or distribute Partnership Preferred Securities in accordance with the Declaration. (i) Notwithstanding that Holders of Trust Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Trust Securities that are owned at such time by the Company or any entity directly or indirectly controlled by, or under direct or indirect common control with, the Company, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be 49 treated as if such Trust Securities were not outstanding, provided, however that persons otherwise eligible to vote to whom the Company or any of its subsidiaries have pledged Trust Preferred Securities may vote or consent with respect to such pledged Trust Preferred Securities under any of the circumstances described herein. (j) Holders of the Trust Preferred Securities will have no rights to appoint or remove the Regular Trustees, who may be appointed, removed or replaced solely by the Company, as the Holder of all of the Trust Common Securities. SECTION 8.5 Voting Rights of Trust Common Securities. (a) Except as provided under this Section 8.5 or as otherwise required by the Business Trust Act, the Trust Indenture Act or other applicable law or provided by the Declaration, the Holders of the Trust Common Securities will have no voting rights. (b) The Holders of the Trust Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.6 of the Declaration and only after all Trust Enforcement Events with respect to the Trust Preferred Securities have been cured, waived, or otherwise eliminated and subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in this paragraph (c), the Holders of a Majority in liquidation amount of the Trust Common Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as Holder of the Partnership Preferred Securities, to (i) exercise the remedies available to it under the Limited Partnership Agreement as a Holder of the Partnership Preferred Securities, including the right to direct the Special Representative of the Partnership as elected by the Holders of the Partnership Preferred Securities in accordance with the Limited Partnership Agreement (A) to enforce the Partnership's creditors rights and other rights with respect to the Affiliate Investment Instruments and any Investment Guarantees, (B) to enforce the rights of the Holders of the Partnership Preferred Securities under the Partnership Guarantee, and (C) to enforce the rights of the Holders of the Partnership Preferred Securities to receive distributions (if and to the extent such distributions have been declared out 50 of funds legally available therefor by the General Partner in its sole discretion) on the Partnership Preferred Securities or (ii) consent to any amendment, modification, or termination of the Limited Partnership Agreement or the Partnership Preferred Securities where such consent shall be required; provided, however, that where a consent or action under the Limited Partnership Agreement would require the consent or act of the Holders of more than a majority of the aggregate liquidation amount of Partnership Preferred Securities affected thereby, only the Holders of the percentage of the aggregate stated liquidation amount of the Trust Common Securities which is at least equal to the percentage required under the Limited Partnership Agreement may direct the Property Trustee to give such consent or take such action. Except with respect to directing the time, method, and place of conducting a proceeding for a remedy, the Property Trustee shall be under no obligation to take any of the actions described in clause 8.5(c)(i) and (ii) above unless the Property Trustee has obtained an opinion of independent tax counsel to the effect that, as a result of such action, for United States federal income tax purposes the Trust will not fail to be classified as a grantor trust and each Holder will be treated as owning an undivided beneficial ownership interest in the Partnership Preferred Securities. (d) If the Property Trustee fails to enforce its rights under the Partnership Preferred Securities after a Holder of record of Trust Common Securities has made a written request, such Holder of record of Trust Common Securities may directly institute a legal proceeding directly against the Company, as General Partner of the Partnership or the Special Representative, to enforce the Property Trustee's rights under the Partnership Preferred Securities without first instituting any legal proceeding against the Property Trustee or any other person or entity. Notwithstanding the foregoing, if a Trust Enforcement Event has occurred and is continuing and such event is attributable to the failure of an Investment Affiliate to make any required payment when due on any Affiliate Investment Instrument, then a Holder of Trust Common Securities may directly institute a proceeding against such Investment Affiliate for enforcement of payment with respect to such Affiliate Investment Instrument. (e) A waiver of a Partnership Enforcement Event with respect to the Partnership Preferred Securities will constitute a waiver of the corresponding Trust Enforcement Event. (f) Any required approval or direction of Holders of Trust Common Securities may be given at a separate meeting of Holders of Trust Common Securities convened for such purpose, at a meeting of all of the Holders of Trust Securities or pursuant 51 to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Trust Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Trust Common Securities. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. (g) No vote or consent of the Holders of the Trust Common Securities shall be required for the Trust to redeem and cancel Trust Common Securities or to distribute Partnership Preferred Securities in accordance with the Declaration and the terms of the Trust Securities. SECTION 8.6 Paying Agent. In the event that the Trust Preferred Securities are not in book-entry only form, the Trust shall maintain in the Borough of Manhattan, City of New York, State of New York, an office or agency where the Trust Preferred Securities may be presented for payment ("Paying Agent). The Trust may appoint the Paying Agent and may appoint one or more additional paying agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent. The Trust may change any Paying Agent without prior notice to any Holder. The Trust shall notify the Property Trustee of the name and address of any Paying Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Paying Agent, the Property Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent. The First National Bank of Chicago, N.A. shall initially act as Paying Agent for the Trust Preferred Securities and the Trust Common Securities. SECTION 8.7 Listing The Sponsor shall use its best efforts to cause the Trust Preferred Securities to be listed for quotation on the New York Stock Exchange. SECTION 8.8 Acceptance of Guarantee and Agreements, Limited Partnership Agreement. Each Holder of Trust Preferred Securities and Trust Common Securities, by the acceptance thereof, agrees to the provisions of the applicable Trust Guarantee, the Partnership 52 Guarantee, and the Investment Guarantee, respectively, including the subordination provisions therein. ARTICLE IX TERMINATION AND LIQUIDATION OF THE TRUST SECTION 9.1 Termination of Trust. (a) The Trust shall terminate: (i) upon the bankruptcy of the Holder of Trust Common Securities or the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor, the filing of a certificate of cancellation with respect to the Trust after having obtained the consent of at least a Majority in Liquidation Amount of the Trust Securities, voting together as a single class, to file such certificate of cancellation, or the revocation of the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Sponsor or the Trust; (iv) when all of the Trust Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Trust Securities; (v) upon the election of the Regular Trustees, following the occurrence and continuation of a Trust Special Event, pursuant to which the Trust shall have been dissolved in accordance with the terms of the Trust Securities and all of the Partnership Preferred Securities shall have been distributed to the Holders of Trust Securities in exchange for all of the Trust Securities; or (vi) before the issuance of any Trust Securities, with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 9.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. 53 (c) The provisions of Section 3.9 and Article XI shall survive the termination of the Trust. SECTION 9.2 Liquidation Distribution Upon Termination and Dissolution of the Trust. (a) In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a "Trust Liquidation"), the Holders of the Trust Preferred Securities on the date of the Trust Liquidation will be entitled to receive, out of the assets of the Trust available for distribution to Holders of Trust Securities after satisfaction of the Trusts' liabilities and creditors, distributions in cash or other immediately available funds in an amount equal to the aggregate of the stated liquidation amount of $25 per Trust Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Trust Security Liquidation Distribution"), unless, in connection with such Trust Liquidation, Partnership Preferred Securities in an aggregate stated liquidation amount equal to the aggregate stated liquidation amount of, with a distribution rate identical to the distribution rate of, and accrued and unpaid distributions equal to accrued and unpaid distributions on, such Trust Securities shall be distributed on a Pro Rata basis to the Holders of the Trust Securities in exchange for such Trust Securities. (b) If, upon any such Trust Liquidation, the Trust Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Trust Liquidation Distribution, then the amounts payable directly by the Trust on the Trust Securities shall be paid on a Pro Rata basis. The Holders of the Trust Common Securities will be entitled to receive distributions upon any such Trust Liquidation Pro Rata with the Holders of the Trust Preferred Securities except that if the Company is in default on any of its obligations under the Trust Preferred Securities Guarantee, the Partnership Guarantee, or any Investment Guarantee, any Investment Event of Default has occurred and is continuing with respect to an Affiliate Investment Instrument, the Trust Preferred Securities shall have a preference over the Trust Common Securities with regard to such distributions as provided below. Such preference is effectuated by the Holder of the Trust Common Securities hereby agreeing to provide limited recourse guarantees as follows: (i) to the Holders of the Trust Preferred Securities, of the Company's obligations under the Trust Preferred Securities Guarantee; (ii) to the Trust and the Holders of the Trust Preferred Securities, of the Company's obligations under the Partnership Guarantee; and (iii) to the Partnership and the Holders of the Trust Preferred Securities, of the Company's 54 obligations under any Investment Guarantee and/or the obligations of any Investment Affiliate under an Affiliate Investment Instrument. In the case of the limited recourse guarantee given by the Holder of the Trust Common Securities to the Partnership and the Holder of the Trust Preferred Securities in respect of the Company's obligations under any Investment Guarantee and/or any Investment Affiliate's obligations under an Affiliate Investment Instrument, (i) the Trust Common Securities Holder will be deemed to have pledged the amount due in respect of its Trust Common Securities upon a liquidation of the Trust to the Partnership and the Holders of Trust Preferred Securities; (ii) the Trust Common Securities Holder will be deemed to have paid such amount to the Partnership in respect of such defaulted Investment Guarantee and/or Affiliate Investment Instrument, as the case may be; (iii) the Partnership will be deemed to have paid such amount to the Trust; and (iv) the Property Trustee is hereby authorized to distribute such amount to the Holders of Trust Preferred Securities (on a pro rata basis among such Trust Preferred Securities Holders) in respect of the Trust Common Securities Holder's pledge of such amounts to such Trust Preferred Securities Holders. In the case of a limited recourse guarantee given by the Holder of the Trust Common Securities to the Trust and the Holders of the Trust Preferred Securities in respect of the Company's obligations under the Partnership Guarantee, (i) the Holder of the Trust Common Securities will be deemed to have pledged the amount due in respect of its Trust Common Securities upon a liquidation of the Trust to the Trust and the Holders of the Trust Preferred Securities; (ii) the Holder of the Trust Common Securities will be deemed to have paid such amount to the Trust in respect of its obligations under the Partnership Guarantee; and (iii) the Property Trustee is hereby authorized to distribute such amount to the Holders of the Trust Preferred Securities (on a pro rata basis among such Trust Preferred Securities Holders) in respect of the Trust Common Securities Holder's pledge of such amount to such Trust Preferred Securities Holders. ARTICLE X TRANSFER OF INTERESTS SECTION 10.1 Transfer of Trust Securities. (a) Trust Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Trust Securities. Any transfer or purported transfer of any Trust Security not made in accordance with this Declaration shall be null and void. 55 (b) Subject to this Article X, Trust Preferred Securities shall be freely transferable. SECTION 10.2 Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 10.3 Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole Holder of such Certificate and of the Trust Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Trust Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 10.4 Book Entry Interests. Unless otherwise specified in the terms of the Trust Preferred Securities, the Trust Preferred Securities Certificates, on original issuance, will be issued in the form of one or more fully registered, global Trust Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee 56 of DTC, and no Trust Preferred Security Beneficial Owner will receive a definitive Trust Preferred Security Certificate representing such Trust Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 10.7. Unless and until definitive, fully registered Trust Preferred Security Certificates (the "Definitive Trust Preferred Security Certificates") have been issued to the Trust Preferred Security Beneficial Owners pursuant to Section 10.7: (a) the provisions of this Section 10.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Trust Preferred Securities and the sole Holder of the Global Certificates and shall have no obligation to the Trust Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 10.4 conflict with any other provisions of this Declaration, the provisions of this Section 10.4 shall control; and (d) the rights of the Trust Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Trust Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and the Clearing Agency shall receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. The Clearing Agency will make book entry transfers among the Clearing Agency Participants; provided, that solely for the purposes of determining whether the Holders of the requisite amount of Trust Preferred Securities have voted on any matter provided for in this Declaration, so long as Definitive Trust Preferred Security Certificates have not been issued, the Trustees may conclusively rely on, and shall be protected in relying on, any written instrument (including a proxy) delivered to the Trustees by the Clearing Agency setting forth the Trust Preferred Security Beneficial Owners' votes or assigning the right to vote on any matter to any other Persons either in whole or in part. 57 SECTION 10.5 Notices to Clearing Agency. Whenever a notice or other communication to the Trust Preferred Security Holders is required under this Declaration, unless and until Definitive Trust Preferred Security Certificates shall have been issued to the Trust Preferred Security Beneficial Owners pursuant to Section 10.7, the Regular Trustees shall give all such notices and communications specified herein to be given to the Trust Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Trust Preferred Security Beneficial Owners. SECTION 10.6 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Trust Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Trust Preferred Securities. SECTION 10.7 Definitive Trust Preferred Security Certificates. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Trust Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 10.6 or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Trust Preferred Securities, (c) there is a Trust Enforcement Event, then: (d) Definitive Trust Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Trust Preferred Securities; and (e) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Trust Preferred Security Certificates to be delivered to Trust Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the 58 Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, said instructions of the Clearing Agency. The Definitive Trust Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Trust Preferred Securities may be listed, or to conform to usage. SECTION 10.8 Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless, then, in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 10.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Trust Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. 59 ARTICLE XI LIMITATION OF LIABILITY OF HOLDERS OF TRUST SECURITIES, TRUSTEES OR OTHERS SECTION 11.1 Liability. (a) Except as expressly set forth in this Declaration, the Trust Guarantees and the terms of the Trust Securities, the Sponsor and the Trustees shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Trust Securities which shall be made solely from assets of the Trust; and (ii) required to pay to the Trust or to any Holder of Trust Securities any deficit upon dissolution of the Trust or otherwise. (b) Notwithstanding any other provision herein, the Holder of the Trust Common Securities, by entering into this Agreement, agrees that it shall be liable directly to any creditor or claimant of or against the Trust for the entire amount of all of the debts and obligations of the Trust (other than obligations to the Holders of Trust Securities in their capacities as Holders) to the extent not satisfied out of the Trust's assets as if the Holder of the Trust Common Securities were the General Partner of a limited partnership organized under the Delaware Revised Uniform Limited Partnership Act. (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Trust Preferred Securities shall be entitled to the same limitation of personal liability extended to shareholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 11.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of 60 the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Trust Securities might properly be paid. SECTION 11.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Person; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Trust Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term 61 so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 11.4 Indemnification. (a) (i) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person 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 if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (ii) The Sponsor shall indemnify, to the fullest extent permitted by law, any Company Indemnified Person who was or 62 is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person 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 Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (iii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 11.4(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the fullest extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iv) Any indemnification under paragraphs (i) and (ii) of this Section 11.4(a) (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Regular Trustees by a majority vote of a quorum consisting of such Regular Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Holder of the Trust Common Securities. (v) Expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding 63 referred to in paragraphs (i) and (ii) of this Section 11.4(a) shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 11.4(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Regular Trustees by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (iii) the Holder of the Trust Common Securities, that, based upon the facts known to the Regular Trustees, counsel or the Holder of the Trust Common Securities at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Regular Trustees, independent legal counsel or Holder of the Trust Common Securities reasonably determine that such person deliberately breached his duty to the Trust or Holders of Trust Common Securities. (vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 11.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of shareholders or disinterested directors of the Sponsor or Holders of the Trust Preferred Securities or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 11.4(a) shall be deemed to be provided by a contract between the Sponsor and each Company Indemnified Person who serves in such capacity at any time while this Section 11.4(a) is in effect. Any repeal or modification of this Section 11.4(a) shall not affect any rights or obligations then existing. (vii) The Sponsor or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Spon- 64 sor would have the power to indemnify him against such liability under the provisions of this Section 11.4(a). (viii) For purposes of this Section 11.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 11.4(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 11.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the Delaware Trustee, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Property Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on the part of the Trustee arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 11.4(b) shall survive the satisfaction and discharge of this Declaration. SECTION 11.5 Outside Businesses. Any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, indepen- 65 dently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Trust Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee, nor the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of Holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XII ACCOUNTING SECTION 12.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code or the Treasury Regulations. SECTION 12.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Sponsor shall cause to be prepared and delivered to each of the Holders of Trust Securities, within 90 days after the end of each Fiscal Year of the Company, annual financial statements of the Company, including a balance sheet of the 66 Company as of the end of such Fiscal Year, and the related statements of income or loss; (c) The Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Trust Securities, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Trust Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 12.3 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Partnership Preferred Securities held by the Property Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the signatories for the Property Account. SECTION 12.4 Withholding. The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority 67 with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. Notwithstanding anything herein to the contrary, the Trust and the Regular Trustees shall, absent receipt of an opinion of nationally recognized tax counsel to the contrary, withhold thirty percent (30%) (or such other rate as may be imposed as a result of an amendment to the Code or such lower rate as may be imposed under an applicable income tax treaty) on the gross amount of any Distributions on Trust Preferred Securities held by a Holder that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code. ARTICLE XIII AMENDMENTS AND MEETINGS SECTION 13.1 Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Trust Securities, this Declaration may only be amended by a written instrument approved and executed by: (i) the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee; (b) no amendment shall be made, and any such purported amendment shall be void and ineffective: (i) unless, in the case of any proposed amendment, the Property Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Trust Securities); 68 (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Property Trustee, the Property Trustee shall have first received an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Trust Securities); and (iii) to the extent the result of such amendment would be to: (A) cause the Trust to fail to continue to be classified for purposes of United States federal income taxation as a grantor trust; (B) cause the Partnership to be classified for purposes of United States federal income tax as an association or publicly traded partnership taxable as a corporation; (C) reduce or otherwise adversely affect the powers of the Property Trustee in contravention of the Trust Indenture Act; or (D) cause the Trust to be deemed to be an Investment Company required to be registered under the 1940 Act. (c) In the event the consent of the Property Trustee, as the Holder of the Partnership Preferred Securities is required under the Limited Partnership Agreement with respect to any amendment, modification or termination of the Limited Partnership Agreement or the Partnership Preferred Securities the Property Trustee shall request the direction of the Holders of the Trust Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Trust Securities voting together as a single class; provided, however, that where a consent under the Limited Partnership Agreement would require the consent of a Super Majority of the Holders of Partnership Preferred Securities the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Trust Securities which the relevant Super Majority represents of the aggregate liquidation amount of the Partnership Preferred Securities outstanding; provided, further, that the Property Trustee shall not be obligated to take any action in accordance with the directions of the Holders of the Trust Securities under this Section 13.1(c) unless the Property Trustee has obtained an 69 opinion of independent tax counsel to the effect that for United States federal income tax purposes the Trust will continue to be classified as a grantor trust after consummation of such action and each Holder will be treated as owning an undivided beneficial ownership interest in the Partnership Preferred Securities. (d) at such time after the Trust has issued any Trust Securities that remain outstanding, any amendment that would (I) adversely affect the powers, preferences or special rights of the Trust Securities or (II) provide for the dissolution, winding-up or termination of the Trust other than pursuant to the terms of this Declaration, may be effected only with the approval of the Holders of at least a Majority in liquidation amount of the Trust Securities affected thereby; provided, further, that if any amendment or proposal referred to in clause (I) hereof would adversely affect only the Trust Preferred Securities or the Trust Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Trust Securities; (e) Section 11.1(c) and this Section 13.1 shall not be amended without the consent of all of the Holders of the Trust Securities; (f) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Trust Common Securities and; (g) the rights of the Holders of the Trust Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Trust Common Securities; and (h) notwithstanding Section 13.1(c), this Declaration may be amended without the consent of the Holders of the Trust Securities: (i) to cure any ambiguity; (ii) to correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) to add to the covenants, restrictions or obliga- tions of the Sponsor; 70 (iv) to conform to any change in the 1940 Act or written change in interpretation or application of the rules and regulations promulgated thereunder by any legislative body, court, government agency or regulatory authority; (v) to conform to any change in the Trust Indenture Act or written change in interpretation or application of the rules and regulations promulgated thereunder by any legislative body, court, government agency or regulatory authority; and (vi) to modify, eliminate and add to any provision of this Declaration to such extent as may be necessary; provided that such amendments do not have a material adverse effect on the rights, preferences or privileges of the Holders. SECTION 13.2 Meetings of the Holders of Trust Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Trust Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Trust Securities) to consider and act on any matter on which Holders of such class of Trust Securities are entitled to act under the terms of this Declaration, the terms of the Trust Securities, the Limited Partnership Agreement, the rules of any stock exchange on which the Trust Preferred Securities are listed or admitted for trading, the Business Trust Act or other applicable law. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Trust Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Trust Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Trust Securities calling a meeting shall specify in writing the Certificates held by the Holders of Trust Securities exercising the right to call a meeting and only those Trust Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Trust Securities, the following provisions shall apply to meetings of Holders of Trust Securities: 71 (i) notice of any such meeting shall be given to all the Holders of Trust Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Any action that may be taken at a meeting of the Holders of Trust Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Trust Securities owning not less than the minimum amount of Trust Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Trust Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Trust Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Trust Security may authorize any Person to act for it by proxy on all matters in which a Holder of Trust Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Trust Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Trust Securities were shareholders of a Delaware corporation; (iii) each meeting of the Holders of the Trust Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Trust Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Trust Preferred Securities are then listed for trading, otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Trust Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Trust Securities, 72 waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIV REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 14.1 Representations and Warranties of Property Trustee. The Trustee that acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) the Property Trustee is a national banking association with trust powers, duly organized, validly existing and in good standing under the laws of the United States, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) the execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) the execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws of the Property Trustee; (d) no consent, approval or authorization of, or registration with or notice to, any State or Federal banking 73 authority is required for the execution, delivery or performance by the Property Trustee of the Declaration; and (e) the Property Trustee, pursuant to this Declaration, shall hold legal title to, and a valid ownership interest on behalf of the Holders of the Trust Securities, in the Partnership Preferred Securities and agrees that, except as expressly provided or contemplated by this Agreement, it will not create, incur or assume, or suffer to exist any mortgage, pledge, hypothecation, encumbrance, lien or other charge or security interest upon the Partnership Preferred Securities. SECTION 14.2 Representations and Warranties of Delaware Trustee. The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) The Delaware Trustee is a Delaware corporation with, duly organized, validly existing and in good standing under the laws of the State of Delaware, with power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) No consent, approval or authorization of, or registration with or notice to, any State or Federal banking authority is required for the execution, delivery or performance by the Delaware Trustee of the Declaration. (d) The Delaware Trustee is an entity which has its principal place of business in the State of Delaware. 74 ARTICLE XV MISCELLANEOUS SECTION 15.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Trust Securities): CAPITA PREFERRED TRUST c/o AT&T CAPITAL CORPORATION 44 Whippany Road Morristown, New Jersey 07962 Attention: [Robert J. Ingato] (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as the Delaware Trustee may give notice of to the other Trustees): First Chicago Delaware Inc. c/o FCC National Bank 300 King Street Wilmington, Delaware 19801 (c) if given to the Property Trustee, at its Corporate Trust Office to the attention of Mary R. Fonti, Assistant Vice President (or such other address as the Property Trustee may give notice of to the Holders of the Trust Securities and the other Trustee) (d) if given to the Holder of the Trust Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Trust Common Securities may give notice of to the Trust): AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Attention: Robert J. Ingato (e) if given to any other Holder, at the address set forth on the books and records of the Trust. 75 All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 15.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and construed in accordance with the internal laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 15.3 Intention of the Parties. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 15.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 15.5 Successors and Assigns Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 15.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. 76 SECTION 15.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees and a duly authorized officer of the Sponsor to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 77 IN WITNESS WHEREOF, each of the undersigned has caused these presents to be executed as of the day and year first above written. _____________________________________ Robert J. Ingato, as Regular Trustee _____________________________________ Glenn A. Votek, as Regular Trustee _____________________________________ Edward M. Dwyer, as Regular Trustee First Chicago Delaware Inc. as Delaware Trustee By:_________________________________ Name: Title: First National Bank of Chicago, as Property Trustee By:_________________________________ Name: Title: AT&T Capital Corporation, as Spon- sor By:_________________________________ Name: Title: 78 EXHIBIT A-1 FORM OF TRUST PREFERRED SECURITY CERTIFICATE [IF THE TRUST PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT: This Trust Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Trust Preferred Security is exchangeable for Trust Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Trust Preferred Security (other than a transfer of this Trust Preferred Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Trust Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Trust Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary and any payment hereon is made to Cede & Co. or such other name as requested by or authorized representations of the Depositary, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Trust Preferred Securities CUSIP NO. [ ] Certificate Evidencing Trust Preferred Securities of CAPITA PREFERRED TRUST ____% Trust Preferred Securities (liquidation amount $25 per Trust Preferred Security) CAPITA PREFERRED TRUST, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ______________ (the "Holder") is the registered owner of preferred securities of the Trust representing undivided beneficial ownership interests in the assets of the Trust designated the _____% Trust Preferred Securities (liquidation amount $25 per Trust Preferred Security) (the "Trust Preferred Securities"). The Trust Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Trust Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust dated as of October _, 1996, as the same may be amended from time to time (the "Declaration"). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Trust Preferred Securities Guarantee Agreement to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Trust Preferred Securities Guarantee Agreement and the Limited Partnership Agreement to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. 2 IN WITNESS WHEREOF, the Trust has executed this certificate this ___ day of __, 199_. CAPITA PREFERRED TRUST as Regular Trustee By:_________________________ Name: 3 [FORM OF REVERSE OF SECURITY] Holders of Trust Preferred Securities shall be entitled to receive cumulative cash distributions at a rate per annum of ______% of the stated liquidation amount of $25 per Trust Preferred Security. Distributions on the Trust Preferred Securities shall, from the date of original issue, accrue and be cumulative and shall be payable quarterly only to the extent that the Trust has funds available for the payment of such distributions in the Property Account. Distributions not paid on the scheduled payment date will accumulate and compound quarterly (to the extent permitted by applicable law) at the rate of ____ % per annum. The term "Distributions" as used herein shall mean ordinary cumulative distributions in respect of each Fiscal Period together with any Compounded Distributions. Amounts available to the Trust for distribution to the holders of the Trust Preferred Securities will be limited to payments received by the Trust from the Partnership on the Partnership Preferred Securities or from the Company on the Partnership Guarantee. Distributions on the Partnership Preferred Securities will be paid only if, as and when declared in the sole discretion of the Company, as the General Partner of the Partnership. If and to the extent that the Partnership makes a distribution on the Partnership Preferred Securities held by the Property Trustee or the Company makes a payment under the Partnership Guarantee (the amount of any such partnership distribution, including any compounded partnership distributions or guarantee payment being a "Payment Amount"), the Trust shall and the Property Trustee is directed, to the extent funds are available for that purpose, to make a Pro Rata Distribution of the Payment Amount to Holders. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 90-day quarter. Except as otherwise described below, distributions on the Trust Preferred Securities will be cumulative, will accrue from the date of initial issuance and will be payable quarterly in arrears, on March 31, June 4 30, September 30 and December 31 of each year, commencing on December 31, 1996 if, as and when available for payment by the Property Trustee. As long as the Trust Preferred Securities remain in book-entry-only form, Distributions will be payable to the Holders of record of Trust Preferred Securities as they appear on the books and records of the Trust on the relevant record dates, which will be one Business Day prior to the relevant payment dates. In the event that the Trust Preferred Securities do not remain in book-entry-only form, the relevant record dates shall be the 15th day of the month of the relevant payment dates. In the event that any date on which distributions are payable is not a Business Day, payment of the Distribution shall be made on the next succeeding day which is a Business Day (without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, with the same force and effect as if made on such date. Payments of accrued Distributions will be payable to Holders of record of Trust Preferred Securities as they appear on the books and records of the Trust on the record date with respect to the payment date for the Trust Preferred Securities which corresponds to the payment date fixed by the Partnership with respect to the payment of cumulative distributions on the Partnership Preferred Securities. The Trust Preferred Securities shall be redeem- able as provided in the Declaration. 5 --------------------- ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Trust Preferred Security Certificate to: - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- - ------------------------ (Insert assignee's social security or tax identification number) - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- - -------------------------------- (Insert address and zip code of assignee) and irrevocably appoints - --------------------------------------------------------- - --------------------------------------------------------- - --------------------------------------------------------- agent to transfer this Trust Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: _______________________ Signature: __________________ (Sign exactly as your name appears on the other side of this Trust Preferred Security Certificate) 1 EX-4 4 EXHIBIT 4.5 AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CAPITA PREFERRED FUNDING L.P. Dated as of October __, 1996 TABLE OF CONTENTS Page ---- ARTICLE I DEFINED TERMS...................................... 2 Section 1.1 DEFINITIONS.............................................. 2 ARTICLE II CONTINUATION OF THE PARTNERSHIP; ADMISSION OF PARTNERSHIP PREFERRED SECURITIES HOLDERS; WITHDRAWAL OF INITIAL LIMITED PARTNER...................... 11 Section 2.1 CONTINUATION OF THE PARTNERSHIP.......................... 11 Section 2.2 NAME..................................................... 11 Section 2.3 PURPOSES OF THE PARTNERSHIP.............................. 11 Section 2.4 TERM..................................................... 12 Section 2.5 REGISTERED AGENT AND OFFICE.............................. 12 Section 2.6 PRINCIPAL PLACE OF ACTIVITY.............................. 12 Section 2.7 NAME AND ADDRESS OF GENERAL PARTNER...................... 13 Section 2.8 QUALIFICATION TO CONDUCT ACTIVITIES...................... 13 Section 2.9 ADMISSION OF HOLDERS OF PARTNERSHIP PREFERRED SECURITIES; WITHDRAWAL OF INITIAL LIMITED PARTNER.................................. 13 ARTICLE III CAPITAL CONTRIBUTIONS; REPRESENTATION OF PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS................................. 14 Section 3.1 CAPITAL CONTRIBUTIONS.................................... 14 Section 3.2 PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST REPRESENTED BY PARTNERSHIP PREFERRED SECURITIES......................... 14 Section 3.3 CAPITAL ACCOUNTS......................................... 15 Section 3.4 INTEREST ON CAPITAL CONTRIBUTIONS........................ 15 Section 3.5 WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS............................................ 15 ARTICLE IV ALLOCATIONS....................................... 16 Section 4.1 PROFITS AND LOSSES....................................... 16 Section 4.2 SPECIAL ALLOCATION....................................... 17 Section 4.3 WITHHOLDING.............................................. 19 ARTICLE V DISTRIBUTIONS...................................... 20 Section 5.1 DISTRIBUTIONS............................................ 20 i Page ---- Section 5.2 LIMITATIONS ON DISTRIBUTIONS............................. 20 ARTICLE VI ISSUANCE OF PARTNERSHIP PREFERRED SECURITIES................... 20 Section 6.1 GENERAL PROVISIONS REGARDING PARTNERSHIP PREFERRED SECURITIES..................................... 20 Section 6.2 PARTNERSHIP PREFERRED SECURITIES......................... 22 ARTICLE VII PARTNERSHIP INVESTMENTS............................. 32 Section 7.1 INITIAL AFFILIATE INVESTMENT INSTRUMENTS................. 32 Section 7.2 REINVESTMENT OF PAYMENTS RECEIVED BY THE PARTNERSHIP....................................... 33 ARTICLE VIII BOOKS OF ACCOUNT, RECORDS AND REPORTS...................... 35 Section 8.1 BOOKS AND RECORDS........................................ 35 Section 8.2 ACCOUNTING METHOD........................................ 36 Section 8.3 ANNUAL AUDIT............................................. 36 ARTICLE IX PAYMENT OF EXPENSES............................... 36 Section 9.1 PAYMENT OF TRUST EXPENSES AND PARTNERSHIP TAXES.......... 36 Section 9.2 PAYMENT OF OTHER PARTNERSHIP EXPENSES.................... 36 ARTICLE X POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS............................. 37 Section 10.1 LIMITATIONS.............................................. 37 Section 10.2 LIABILITY................................................ 37 Section 10.3 PRIORITY................................................. 38 ARTICLE XI POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER.............................. 38 Section 11.1 AUTHORITY................................................ 38 Section 11.2 POWERS AND DUTIES OF GENERAL PARTNER..................... 38 Section 11.3 OBLIGATIONS AND EXPENSES PAYABLE BY GENERAL PARTNER.......................................... 40 ii Page ---- Section 11.4 LIABILITY................................................ 41 Section 11.5 OUTSIDE ACTIVITIES....................................... 42 Section 11.6 LIMITS ON GENERAL PARTNER'S POWERS....................... 42 Section 11.7 EXCULPATION.............................................. 43 Section 11.8 FIDUCIARY DUTY........................................... 44 Section 11.9 INDEMNIFICATION.......................................... 45 Section 11.10 TAX MATTERS ............................................. 45 Section 11.11 CONSOLIDATION, MERGER OR SALE OF ASSETS................................................... 46 ARTICLE XII TRANSFERS OF INTERESTS BY PARTNERS........................ 48 Section 12.1 TRANSFER OF INTERESTS.................................... 48 Section 12.2 TRANSFER OF L.P. CERTIFICATES............................ 48 Section 12.3 PERSONS DEEMED PARTNERSHIP PREFERRED SECURITY HOLDERS.... 49 Section 12.4 BOOK ENTRY PROVISIONS.................................... 50 Section 12.5 REGISTRAR, TRANSFER AGENT AND PAYING AGENT............... 53 ARTICLE XIII WITHDRAWAL, DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS...................... 54 Section 13.1 WITHDRAWAL OF PARTNERS................................... 54 Section 13.2 DISSOLUTION OF THE PARTNERSHIP........................... 54 Section 13.3 LIQUIDATION.............................................. 55 Section 13.4 DISTRIBUTION IN LIQUIDATION.............................. 56 Section 13.5 RIGHTS OF LIMITED PARTNERS............................... 56 Section 13.6 TERMINATION.............................................. 57 ARTICLE XIV AMENDMENTS AND MEETINGS............................. 57 Section 14.1 AMENDMENTS............................................... 57 Section 14.2 AMENDMENT OF CERTIFICATE................................. 57 Section 14.3 MEETINGS OF PARTNERS..................................... 58 ARTICLE XV MISCELLANEOUS...................................... 59 Section 15.1 NOTICES.................................................. 59 Section 15.2 POWER OF ATTORNEY........................................ 60 Section 15.3 ENTIRE AGREEMENT......................................... 60 Section 15.4 GOVERNING LAW............................................ 61 Section 15.5 EFFECT................................................... 61 Section 15.6 PRONOUNS AND NUMBER...................................... 61 Section 15.7 CAPTIONS................................................. 61 iii Page ---- Section 15.8 PARTIAL ENFORCEABILITY................................... 61 Section 15.9 COUNTERPARTS............................................. 61 Section 15.10 WAIVER OF PARTITION...................................... 62 Section 15.11 REMEDIES................................................. 62 Schedule 1 LIST OF PARTNERS Annex A FORM OF L.P. CERTIFICATE Exhibit A FORM OF INDENTURE OF AT&T CAPITAL CORPORATION Exhibit B FORM OF INDENTURE FOR SUBSIDIARIES iv AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CAPITA PREFERRED FUNDING L.P. AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Capita Preferred Funding L.P., a Delaware limited partnership (the "Partnership"), dated as of October __, 1996, among AT&T Capital Corporation, a Delaware corporation (the "Company"), as the general partner, Jeffery F. Nash, an individual, as the initial limited partner (the "Initial Limited Partner") and such other Persons (as defined herein) who become Limited Partners (as defined herein) as provided herein. WHEREAS, Antigua Acquisition Corporation, a corporation recently merged with and into the Company, and the Initial Limited Partner entered into an Agreement of Limited Partnership, dated as of August 29, 1996, as amended by that certain Amendment to Agreement of Limited Partnership of Capita Preferred Funding L.P., dated October 2, 1996 by and between the Company and the Initial Limited Partner (the "Original Partnership Agreement"), and the Partners (as defined herein) desire to continue the Partnership under the Act (as defined herein) and to amend and restate the Original Partnership Agreement in its entirety; WHEREAS, the Certificate of Limited Partnership of the Partnership was filed with the Office of the Secretary of State of the State of Delaware on August 29, 1996, as amended and restated by that certain Amended and Restated Certificate of Limited Partnership of Capita Preferred Funding L.P., dated October 2, 1996 and filed with the Office of the Secretary of State of the State of Delaware on October 3, 1996; NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Original Partnership Agreement as follows: ARTICLE I DEFINED TERMS Section 1.1 DEFINITIONS. Unless the context otherwise requires, the terms defined in this Article I shall, for the purposes of this Agreement, have the meanings herein specified. Terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to such terms in the Declaration. "Act" means the Delaware Revised Uniform Limited Partnership Act, Del. Code Ann. tit. 6, 'ss' 17-101 et seq., as amended from time to time. "Affiliate" has the meaning set forth in Section 1.1 of the Declaration. "Affiliate Investment Instruments" has the meaning set forth in Section 7.1 of this Agreement. "Agreement" means this Amended and Restated Agreement of Limited Partnership, as it may be amended or supplemented from time to time. "Beneficiaries" has the meaning set forth in Section 11.3 of this Agreement. "Book-Entry Interest" means a beneficial interest in the L.P. Certificates, ownership and transfers of which shall be maintained and made through book entries of a Clearing Agency as set forth in Section 12.4 of this Agreement. "Business Day" means a day other than a day on which banking institutions in The City of New York are authorized or required by law to close. "Capital Account" has the meaning set forth in Section 3.3 of this Agreement. "Certificate" means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware on August 29, 1996, as it may be amended and restated from time to time. 2 "Change in 1940 Act Law" has the meaning set forth in Section 1.1 of the Declaration. "Closing Date" has the meaning set forth in Section 1.1 of the Declaration. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. "Company" means AT&T Capital Corporation, a Delaware corporation. "Compounded Distributions" has the meaning set forth in Section 6.2 of this Agreement. "Declaration" means the Amended and Restated Declaration of Trust by and among the Company, as Sponsor, the Property Trustee, the Delaware Trustee, and the Regular Trustees, dated as of October __, 1996. "Definitive L.P. Certificates" has the meaning set forth in Section 12.4(a) of this Agreement. "Delaware Trustee" has the meaning set forth in Section 6.2 of the Declaration. "Distribution Payment Date" has the meaning set forth in Section 6.2(b)(ii) of this Agreement. "Distributions" means the right to receive the amount of the cumulative cash distributions payable by the Partnership with respect to the Interests represented by the Partnership Preferred Securities, which amounts will accrue on the $25 liquidation preference of each Partnership Preferred Security from the Closing Date and are payable quarterly in arrears in accordance with Sections 5.1 and 6.2(b) of this Agreement. "DTC" means the Depository Trust Company, the initial Clearing Agency. "Eligible Debt Securities" means cash or book-entry securities, negotiable instruments, or other securities of entities not affiliated with the Company represented by instruments in registered form which evidence any of the following: (a) any security issued or guaran- 3 teed as to principal or interest by the United States, or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States, or any certificate of deposit for any of the foregoing; (b) commercial paper issued pursuant to Section 3(a)(3) of the Securities Act of 1933 (the "Securities Act") and having, at the time of the investment or contractual commitment to invest therein, a rating from each of S&P and Moody's in the highest rating category granted by such rating agency and having a maturity not in excess of nine months; (c) demand deposits, time deposits and certificates of deposit which are fully insured by the FDIC; (d) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the Government of the United States of America or any agency or instrumentality thereof, the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company which is an Eligible Institution and the deposits of which are insured by the FDIC; and (e) any other security which is identified as a permitted investment of a finance subsidiary pursuant to Rule 3a-5 under the 1940 Act at the time it is acquired by the Partnership. "Eligible Institution" means a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), (1)(i) which has either (A) a long-term unsecured debt rating of AA or better by S&P and Aa or better by Moody's or (B) a short-term unsecured debt rating or a certificate of deposit rating of A-1+ or better by S&P and P-1 or better by Moody's and (ii) whose deposits are insured by the FDIC or (2)(i) the parent of which has a long-term or short-term unsecured debt rating which signifies investment grade and (ii) whose deposits are insured by the FDIC. "FDIC" means the Federal Deposit Insurance Corporation or any successor thereto. "Fiscal Period" means each calendar quarter. 4 "Fiscal Year" means (i) the period commencing upon the formation of the Partnership and ending on December 31, 1996, and (ii) any subsequent calendar year. "General Partner" means AT&T Capital Corporation in its capacity as the general partner of the Partnership, its permitted successors, or any successor general partner in the Partnership admitted as such pursuant to the terms of this Agreement. "General Partner Capital Contribution" means the contribution by the General Partner to the Partnership made contemporaneous with the issuance of the Partnership Preferred Securities. "General Partner Interest" means the Interest of the General Partner in the Partnership. "Holder" or "Partnership Preferred Security Holder" means a Limited Partner in whose name an L.P. Certificate representing Partnership Preferred Securities is registered. "Indentures" means the Indentures between the Company or certain of its subsidiaries, as the case may be, and ______________, as Indenture Trustee, dated as of ___________, 1996, four of which are attached hereto as Exhibits A and B, respectively. "Independent Financial Adviser" shall mean (i) Merrill Lynch, Pierce, Fenner & Smith Incorporated or (ii) such other nationally recognized investment banking firm which shall be designated by the Company and which firm (1) does not (and whose directors, officers, employees and affiliates do not) have a direct or indirect material equity interest in the Company or any of its subsidiaries and (2) is either (a) ranked among the five largest underwriters of debt or preferred securities (in terms of U.S. dollar value) in the United States for the immediately preceding calendar year or (b) is approved by the Holders of a Majority in Liquidation Preference of Partnership Preferred Securities. "Initial Affiliate Debentures" has the meaning set forth in Section 7.1(b) of this Agreement. 5 "Initial Company Debenture" has the meaning set forth in Section 7.1(b) of this Agreement. "Initial Debentures" means collectively, the Initial Company Debentures and the Initial Affiliate Debentures. "Initial Limited Partner" means Jeffery F. Nash, an individual. "Initial Partnership Proceeds" means the aggregate proceeds received by the Partnership from the sale of the Partnership Preferred Securities and the General Partner Capital Contribution. "Interest" means the entire ownership interest of a Partner in the Partnership at any particular time, including, without limitation, its interest in the capital, profits, and losses of, and distributions from, the Partnership. "Investment Affiliate" means the Company or any corporation, partnership, limited liability company or other entity (other than the Partnership or the Trust) that is controlled by the Company and is not an investment company by reason of Section 3(a) or 3(b) of the 1940 Act. "Investment Event of Default" means an event of default under any Affiliate Investment Instrument that is a debt instrument or the breach by an Investment Affiliate of its obligations under any Affiliate Investment Instrument that is an equity instrument. "Investment Guarantee" has the meaning specified in Section 1.1 of the Declaration. "Investment Offer" has the meaning specified in Section 7.2(b) of this Agreement. "Limited Partner" means any Person who is admitted to the Partnership as a limited partner pursuant to the terms of this Agreement, in such Person's capacity as a limited partner of the Partnership. "Liquidator" has the meaning specified in Section 13.3 of this Agreement. 6 "L.P. Certificate" means a certificate substantially in the form attached hereto as Annex A, evidencing the Partnership Preferred Securities held by a Limited Partner. "Majority in Liquidation Preference" means Holder(s) of Partnership Preferred Securities who are the record owners of Partnership Preferred Securities whose aggregate liquidation preferences represent more than 50% of the aggregate liquidation preference of all Partnership Preferred Securities then outstanding. "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "Net Income" and "Net Loss", respectively, for any Fiscal Period mean the income and loss, respectively, of the Partnership for such Fiscal Period as determined in accordance with the method of accounting followed by the Partnership for United States federal income tax purposes, including, for all purposes, the net income, if any, from the Affiliate Investment Instruments, Eligible Debt Securities and any income exempt from tax and any noncapital, nondeductible expenditures of the Partnership which are described in the Code. "1940 Act" has the meaning set forth in Section 1.1 of the Declaration. "Original Partnership Agreement" has the meaning set forth in the recitals to this Agreement. "Partners" means the General Partner and the Limited Partners, collectively, where no distinction is required by the context in which the term is used. "Partnership Covered Person" means any Partner, any Affiliate of a Partner or any officers, directors, shareholders, partners, members, employees, representatives or agents of a Partner of its respective Affiliates, or any employee or agent of the Partnership or its Affiliates or any Special Representative. "Partnership Enforcement Event" has the meaning set forth in Section 6.2(h)(i) of this Agreement. 7 "Partnership Guarantee" means the Partnership Guarantee Agreement dated as of October __, 1996 by the Company in favor of the Partnership Preferred Security Holders with respect to the Partnership Preferred Securities, as amended or supplemented from time to time. "Partnership Indemnified Person" means the General Partner, any Special Representative, any Affiliate of the General Partner or any Special Representative or any officers, directors, shareholders, members, partners, employees, representatives or agents of the General Partner or any Special Representative, or any of their respective Affiliates, or any employee or agent of the Partnership or its Affiliates. "Partnership Investment Company Event" means that the General Partner shall have requested and received an opinion of nationally recognized independent legal counsel experienced in such matters to the effect that as a result of the occurrence on or after the date hereof of a Change in 1940 Act Law, the Partnership is or will be considered an "investment company" which is required to be registered under the 1940 Act. "Partnership Liquidation Distribution" has the meaning set forth in Section 6.2(g) of this Agreement. "Partnership Preferred Securities" represent the Interests of Limited Partners and have the preference and designation set forth in Section 6.2(a) of this Agreement. "Partnership Preferred Securities Purchase Agreement" means the partnership purchase agreement between the Trust and the Partnership providing for the purchase of the Partnership Preferred Securities. "Partnership Preferred Security Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest as reflected on the books of DTC, or on the books of a Person maintaining an account with DTC (directly as a participant or as an indirect participant, in each case in accordance with the rules of DTC or such participant). 8 "Partnership Special Event" means either a Partnership Tax Event or a Partnership Investment Company Event. "Partnership Successor Securities" has the meaning set forth in Section 11.11 of this Agreement. "Partnership Tax Event" means that the General Partner shall have requested and received an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that there has been a Tax Action which affects any of the events described in (i) through (iii) below and that there is more than an insubstantial risk that (i) the Partnership is, or will be, subject to United States federal income tax with respect to income accrued or received on the Affiliate Investment Instruments or the Eligible Debt Securities, (ii) the Partnership is, or will be, subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable by an Investment Affiliate with respect to any Debenture issued by such Investment Affiliate to the Partnership is not, or will not be, deductible by such Investment Affiliate for United States federal income tax purposes. "Paying Agent" shall have the meaning set forth in Section 12.5 of this Agreement. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Power of Attorney" means the Power of Attorney granted pursuant to Section 15.2 of this Agreement. "Property Trustee" has the meaning set forth in Section 1.1 of the Declaration. "Record Date" means (i) as long as the Trust Preferred Securities remain (or, in the event that the Trust is liquidated in connection with a Trust Special Event, as long as the Partnership Preferred Securities remain) in book-entry only form, one Business Day prior to the relevant payment dates and (ii) in the event that 9 the Trust Preferred Securities (or in the event that the Trust is liquidated in connection with a Trust Special Event, the Partnership Preferred Securities) shall not continue to remain in book-entry only form, the 15th day of the month of the relevant payment date. "Redemption Notice" has the meaning set forth in Section 6.2(e) of this Agreement. "Redemption Price" has the meaning set forth in Section 6.2(c) of this Agreement. "Registrar" has the meaning set forth in Section 12.5 of this Agreement. "Regular Trustees" has the meaning set forth in Section 1.1 of the Declaration. "Reinvestment Criteria" has the meaning specified in Section 7.2(c) of this Agreement. "Special Representations" has the meaning set forth in Section 6.2(h)(i) of this Agreement. "Tax Action" has the meaning set forth in Section 1.1 of the Declaration. "Tax Matters Partner" means the General Partner designated as such in Section 11.10 of this Agreement. "10% in Liquidation Preference" means Holders of the Partnership Preferred Securities voting together as a single class representing 10% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Partnership Preferred Securities. "Treasury Regulations" has the meaning set forth in Section 1.1 of the Declaration. "Trust" means the Capita Preferred Trust, a Delaware business trust, formed under the Declaration. "Trust Common Securities" has the meaning specified in Section 8.1 of the Declaration. 10 "Trust Common Securities Guarantee" means the Trust Common Securities Guarantee Agreement dated as of October __, 1996, entered into by the Company, as Guarantor, for the benefit of the holders of the Trust Common Securities. "Trust Preferred Securities" has the meaning specified in Section 8.1 of the Declaration. "Trust Preferred Securities Guarantee" means the Trust Preferred Securities Guarantee Agreement dated as of October __, 1996, entered into by the Company, as Guarantor, for the benefit of the holders of the Trust Preferred Securities. ARTICLE II CONTINUATION OF THE PARTNERSHIP; ADMISSION OF PARTNERSHIP PREFERRED SECURITIES HOLDERS; WITHDRAWAL OF INITIAL LIMITED PARTNER Section 2.1 CONTINUATION OF THE PARTNERSHIP. The parties hereto agree to continue the Partnership in accordance with the terms of this Agreement. The General Partner, for itself and as agent for the Limited Partners, shall make every reasonable effort to assure that all certificates and documents are properly executed and shall accomplish all filing, recording, publishing and other acts necessary or appropriate for compliance with all the requirements for the continuation of the Partnership as a limited partnership under the Act and under all other laws of the State of Delaware or such other jurisdictions in which the General Partner determines that the Partnership may conduct activities. The rights and duties of the Partners shall be as provided herein and, subject to the terms hereof, under the Act. Section 2.2 NAME. The name of the Partnership is "Capita Preferred Funding L.P.", as such name may be modified from time to time by the General Partner following written notice to the Limited Partners. Section 2.3 PURPOSES OF THE PARTNERSHIP. The purposes of the Partnership are (a) to issue limited partnership interests in the Partnership in the form of Partnership Preferred Securities, (b) to receive the 11 General Partner Capital Contribution, (c) to use substantially all of the Initial Partnership Proceeds to purchase, as an investment, the Initial Debentures, (d) to invest, at all times, an amount equal to at least 1% of the Initial Partnership Proceeds in Eligible Debt Securities, (e) to receive interest and other payments on the Affiliate Investment Instruments and the Eligible Debt Securities held by the Partnership from time to time, (f) to make Distributions on the Partnership Preferred Securities and distributions on the General Partner Interest if, as and when declared by the General Partner in its sole discretion, (g) subject to the restrictions and conditions contained in this Agreement, to make additional investments in Affiliate Investment Instruments and Eligible Debt Securities and to dispose of any such investments and (h) except as otherwise limited herein, to enter into, make and perform all contracts and other undertakings, and engage in those activities and transactions as the General Partner may reasonably deem necessary or advisable for the carrying out of the foregoing purposes of the Partnership. The Partnership may not engage in any other activities or operations except as contemplated by the preceding sentence. Section 2.4 TERM. The term of the Partnership shall commence upon the filing of the Certificate in the Office of the Secretary of State of the State of Delaware and shall continue until the Partnership is dissolved in accordance with the provisions of this Agreement. Section 2.5 REGISTERED AGENT AND OFFICE. The Partnership's registered agent and office in Delaware shall be Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, New Castle County, Delaware 19805. At any time, the General Partner may designate another registered agent and/or registered office. Section 2.6 PRINCIPAL PLACE OF ACTIVITY. The principal place of activity of the Partnership shall be c/o AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. Upon ten days' written notice to the Partners, the General Partner may change the location of the Partnership's principal place of activity, provided that such change has no material adverse effect upon any Partner. 12 Section 2.7 NAME AND ADDRESS OF GENERAL PARTNER. The name and address of the General Partner are as follows: AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Attention: Treasurer The General Partner may change its name or address from time to time, in which event the General Partner shall promptly notify the Limited Partners of any such change. Section 2.8 QUALIFICATION TO CONDUCT ACTIVITIES. The General Partner shall cause the Partnership to become qualified, formed or registered under the applicable qualification, fictitious name or similar laws of any jurisdiction in which the Partnership conducts activities. Section 2.9 ADMISSION OF HOLDERS OF PARTNERSHIP PREFERRED SECURITIES; WITHDRAWAL OF INITIAL LIMITED PARTNER. (a) Without execution of this Agreement, upon the receipt of an L.P. Certificate by a Person, whether by purchase, gift, devise or other valid transfer, which receipt shall be deemed to constitute a request by such Person that the books and records of the Partnership reflect such Person's admission as a Limited Partner, such Person shall be admitted to the Partnership as a Limited Partner and shall become bound by this Agreement. (b) Following the first admission of a Partnership Preferred Security Holder to the Partnership as a Limited Partner, the Initial Limited Partner shall withdraw from the Partnership and shall receive the return of its capital contribution without interest or deduction. (c) The name and mailing address of each Partner and the amount contributed by such Partner to the capital of the Partnership shall be listed on the books and records of the Partnership. The General Partner shall be required to update the books and records from time to time as necessary to accurately reflect such information. 13 ARTICLE III CAPITAL CONTRIBUTIONS; REPRESENTATION OF PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS Section 3.1 CAPITAL CONTRIBUTIONS. (a) The General Partner has, prior to the date hereof, contributed an aggregate of $15.00 to the capital of the Partnership, which amount is equal to at least 15% of the total capital contributions to the Partnership, after taking into account the contribution of the Initial Limited Partner referred to in Section 3.1(b). Contemporaneous with the issuance of the Partnership Preferred Securities, the General Partner shall make the General Partner Capital Contribution. The General Partner shall, from time to time, make such additional capital contributions as are necessary to maintain at all times a positive Capital Account balance equal to at least one percent (1%) of the aggregate positive Capital Account balances of all Partners at the end of such period. (b) The Initial Limited Partner has, prior to the date hereof, contributed the amount of $85.00 to the capital of the Partnership, which amount shall be returned to the Initial Limited Partner as contemplated by Section 2.9(b). (c) On the Closing Date, the Trust shall, in exchange for a definitive L.P. Certificate contribute to the capital of the Partnership on behalf of the Trust an amount in cash equal to the gross proceeds from the sale of the Trust Preferred Securities and the Trust Common Securities (such amount being a capital contribution to the Partnership). On such date, immediately following the withdrawal of the Initial Limited Partner, the Trust shall be the sole Limited Partner. (d) No Limited Partner shall at any time be required to make any additional capital contributions to the Partnership, except as may be required by law. Section 3.2 PARTNERSHIP PREFERRED SECURITY HOLDER'S INTEREST REPRESENTED BY PARTNERSHIP PREFERRED SECURITIES. A Partnership Preferred Security Holder's Interest shall be represented by the Partnership Preferred Securities held by or on behalf of such Partner. Each Partnership Preferred Security Holder's respective ownership of Partnership Preferred Securities shall be 14 set forth on the books and records of the Partnership. Each Partner hereby agrees that its Interest in the Partnership shall for all purposes be personal property. No Partner shall have an interest in specific Partnership property. Section 3.3 CAPITAL ACCOUNTS. (a) Establishment and Maintenance of Capital Accounts. The Partnership shall establish and maintain a separate account (the "Capital Account") for each Partner. The initial balance of the Capital Account for each Partner shall be the amount as set out opposite the name of each of the Partners on Schedule 1 attached hereto. The Capital Account of each Partner shall be increased by (i) the dollar amount of any additional contributions made by such Partner and (ii) allocations to such Partner of income and gain (including income exempt from tax). The Capital Account of each Partner shall be decreased by (i) the dollar amount of any distributions made to such Partner, and (ii) allocations to such Partner of loss and deduction (including noncapital, nondeductible expenditures not deductible in computing the Partnership's income or loss for United States federal income tax purposes). (b) Compliance with Regulations. Notwithstanding any other provision of this Agreement to the contrary, the provisions of Section 3.3(a) hereof regarding the maintenance of Capital Accounts shall be construed so as to comply with the Treasury Regulations promulgated under section 704 of the Code. The General Partner, in its sole discretion, is authorized to modify such provisions to the minimum extent necessary to comply with such Treasury regulations. Section 3.4 INTEREST ON CAPITAL CONTRIBUTIONS. Except as provided herein, no Partner shall be entitled to interest on or with respect to any capital contribution to the Partnership. Section 3.5 WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS. Subject to Section 3.1(b) hereof, no Partner shall be entitled to withdraw any part of such Partner's capital contribution to the Partnership. No Partner shall be entitled to receive any distributions 15 from the Partnership, except as provided in this Agreement. ARTICLE IV ALLOCATIONS Section 4.1 PROFITS AND LOSSES. After giving effect to the special allocation provisions set forth in Section 4.2 which special allocations shall take precedence over any allocations made pursuant to this Section 4.1, (a) the Partnership's Net Income for each Fiscal Period of the Partnership shall be allocated as follows: (i) First, to each Holder of a Partnership Preferred Security in an amount equal to the excess, if any, of (x) all Net Losses, if any, allocated to each such Holder from the date of issuance of the Partnership Preferred Security through and including the close of such Fiscal Period pursuant to Section 4.1(b)(ii) below over (y) the amount of Net Income, if any, allocated to each such Holder pursuant to this Section 4.1(a)(i) in all prior Fiscal Periods. (ii) Second, to each Holder of a Partnership Preferred Security, an amount of Net Income equal to the excess of (x) the Distributions accrued on the Partnership Preferred Securities held by such Holder from the date of their issuance through and including the last day of such Fiscal Period, including any Compounded Distributions payable with respect thereto, over (y) the amount of Net Income allocated to the Holders of the Partnership Preferred Securities held by such Holder pursuant to this Section 4.1(a)(ii) in all prior Fiscal Periods. Amounts allocated to all Partnership Preferred Security Holders shall be allocated among such Holders in proportion to the number of Partnership Preferred Securities held by such Holders. (iii) Any remaining Net Income shall be allocated to the General Partner. 16 (b) The Partnership's Net Loss for any Fiscal Period shall be allocated as follows: (i) First, to the General Partner until the balance of the General Partner's Capital Account is reduced to zero, provided, however, that the aggregate amount of Net Losses allocated to the General Partner pursuant to this Section 4.1(b)(i) shall not exceed the sum of 14% of the total capital contributions of all Partners plus the aggregate Net Income allocated to the General Partner pursuant to this Section 4.1. (ii) Second, among the Holders in proportion to their respective aggregate Capital Account balances, until the Capital Account balances of such Holders are reduced to zero. (iii) Any remaining Net Loss shall be allocated to the General Partner. (c) DAILY DETERMINATION. For purposes of determining the profits, losses or any other items allocable to any period, profits, losses and any such other items shall be determined on a daily basis, unless the General Partner determines that another method is permissible under Section 704 of the Code and the Treasury Regulations promulgated thereunder. Unless otherwise specified, such profits, losses or other items shall be determined for each Fiscal Period. Section 4.2 SPECIAL ALLOCATION. (a) All expenditures that are (i) incurred by, or on behalf of, the Partnership and (ii) paid, or otherwise reimbursed, by the General Partner out of its own funds shall be allocated entirely to the General Partner. (b) In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Section 1.704- 1(b)(2)(ii)(d)(4), (5) or (6), items of the Partnership's Net Income shall be specially allocated to such Partner in a manner sufficient to eliminate the deficit, if any, in the balance of the Capital Account of such Partner as quickly as possible. The foregoing is intended to be a "qualified income offset" provision as described in Trea- 17 sury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in all respects in accordance with such Treasury Regulation. (c) SECTION 704 COMPLIANCE. While this Agreement does not specifically provide for certain provisions required by Treasury Regulation Sections 1.704-1(b) and 1.704-2 because those provisions apply to transactions that are not expected to occur as regards the Partnership, the Partners intend that the allocations under Section 4.1 conform to Treasury Regulations Sections 1.704-1(b) and 1.704-2 (including, without limitation, the minimum gain chargeback, chargeback of partner nonrecourse debt minimum gain and partner nonrecourse debt provisions of such Treasury Regulations), and, to the extent necessary due to the occurrence of unexpected events, the General Partner shall make such changes in the allocations under Section 4.1 as it believes are reasonably necessary to meet the requirements of such Treasury Regulations. (d) ADJUSTMENT OF ALLOCATIONS. If the allocations set forth in this Article IV are adjusted by the Internal Revenue Service and the Tax Matters Partner agrees to such adjustments, such allocations shall be amended to the minimum extent necessary to conform with such adjustments. (e) ADDITIONAL ALLOCATIONS. Notwithstanding the foregoing, if, upon the final dissolution and termination of the Partnership and after taking into account all allocations of Net Income and Net Losses (and other tax items) under this Article IV, the distributions to be made in accordance with the positive Capital Account balances would result in a distribution that would be different from a distribution under Article XIII, then gross items of income and gain (and other tax items) for the taxable year of the final dissolution and termination (and, to the extent permitted under section 761(c) of the Code, gross items of income and gain, and other tax items, for the immediately preceding taxable year) shall be allocated to the Partners to increase or decrease their respective Capital Account balances so that the final distribution will occur in the same manner as a distribution under Section 13.4. 18 (f) GENERAL PARTNER ALLOCATIONS. Notwithstanding any provision of this Agreement to the contrary, the interest of the General Partner in each item of Partnership income, gain, loss, deduction, or credit shall, at all times during the existence of the Partnership, be equal to at least (A) at any time that the aggregate capital contributions to the Partnership are equal to or less than $50,000,000, one percent (1%) of each such item and (B) at any time that the aggregate capital contributions to the Partnership are greater than $50,000,000, at least a percentage equal to the product of (i) one percent (1%) and (ii) a fraction (not exceeding 1 and not less the 0.2), the numerator of which is $50,000,000 and the denominator of which is the lesser of (x) the aggregate Capital Account balances of the Capital Accounts of all Partners at such time and (y) the aggregate capital contributions to the Partnership of all Partners at such time. Section 4.3 WITHHOLDING. The Partnership shall comply with withholding requirements under Federal, state and local law and shall remit amounts withheld to and file required forms with applicable jurisdictions. To the extent that the Partnership is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Partner, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Partner. In the event of any claimed over-withholding, Partners shall be limited to an action against the applicable jurisdiction. If the amount withheld was not withheld from actual distributions, the Partnership may reduce subsequent distributions by the amount of such withholding. Each Partner agrees to furnish the Partnership with any representations and forms as shall reasonably be requested by the Partnership to assist it in determining the extent of, and in fulfilling, its withholding obligations. 19 ARTICLE V DISTRIBUTIONS Section 5.1 DISTRIBUTIONS. Limited Partners shall receive periodic Distributions and Compounded Distributions, if any, redemption payments and liquidation distributions in accordance with the terms of the Partnership Preferred Securities set forth in Article VI. The General Partner shall in its sole discretion determine whether and when Distributions shall be payable; provided, however, that if the General Partner shall determine a Distribution will not be paid on a scheduled Distribution Payment Date, the General Partner shall give notice of its determination not to pay Distributions to Limited Partners of record as of the Record Date for the payment of such Distribution. Section 5.2 LIMITATIONS ON DISTRIBUTIONS. The Partnership shall not make a Distribution to any Partner on account of such Partner's Interest if such Distribution would violate Section 17-607 of the Act or other applicable law. ARTICLE VI ISSUANCE OF PARTNERSHIP PREFERRED SECURITIES Section 6.1 GENERAL PROVISIONS REGARDING PARTNERSHIP PREFERRED SECURITIES. (a) There is hereby authorized for issuance and sale Partnership Preferred Securities having an aggregate liquidation preference not greater than $________ and having the designation, annual distribution rate, liquidation preference, redemption terms, and other powers, preferences and special rights and limitations set forth in this Article VI. (b) The payment of Distributions (including payments of distributions by the Partnership in liquidation or on redemption in respect of Partnership Preferred Securities) shall be guaranteed by the Company pursuant to and to the extent set forth in the Partnership Guarantee. The Partnership Preferred Security Holders hereby authorize the General Partner to hold the Guarantee on 20 behalf of the Partnership Preferred Security Holders. In the event of an appointment of a Special Representative pursuant to Section 6.2(i), among other things, to enforce the Partnership Guarantee, the Special Representative may take possession of the Partnership Guarantee for such purpose. If no Special Representative has been appointed to enforce the Partnership Guarantee, the General Partner has the right to enforce the Partnership Guarantee on behalf of the Partnership Preferred Security Holders. The Partnership Preferred Security Holders, by acceptance of such Partnership Preferred Securities, acknowledge and agree to the subordination provisions in, and other terms of, the Partnership Guarantee. (c) The Partnership may not issue any interests in the Partnership other than the Partnership Preferred Securities and the General Partner Interest, provided that the Partnership may accept consideration for additional capital contributions from the General Partner with respect to the General Partner Interest. All Partnership Preferred Securities shall rank senior to all other Interests in the Partnership in respect of the right to receive Distributions or other distributions. All Partnership Preferred Securities redeemed, purchased or otherwise acquired by the Partnership shall be canceled. The Partnership Preferred Securities will be issued in registered form only. (d) No Holder shall be entitled as a matter of right to subscribe for or purchase, or have any preemptive right with respect to, any part of any new or additional limited partnership interests, or of securities convertible into any Partnership Preferred Securities or other limited partnership interests, whether now or hereafter authorized and whether issued for cash or other consideration or by way of a distribution. (e) Any of the Partnership Preferred Securities that are owned by the Company or by any entity more than 50% of which is owned by the Company, either directly or indirectly, shall not be entitled to vote or consent with respect to any Partnership Preferred Security owned by it, and shall, for purposes of such vote or consent, be treated as if they were not outstanding; provided, however, that persons otherwise eligible to vote to whom the Company or any of its subsidiaries have pledged Partnership Preferred Securities may vote or consent with 21 respect to such pledged Partnership Preferred Securities under any of the circumstances described in Section 6.2. Section 6.2 PARTNERSHIP PREFERRED SECURITIES. (a) DESIGNATION. A total of ______ Partnership Preferred Securities, liquidation preference $25 per Partnership Preferred Security, are hereby designated as "__% Partnership Preferred Securities". (b) DISTRIBUTIONS. (i) Partnership Preferred Security Holders shall be entitled to receive cumulative Distributions and Compounded Distributions (as defined below) (if any), if, as and when declared by the General Partner, in its sole discretion, out of the assets of the Partnership legally available therefor, at a rate per annum of ___% of the stated liquidation preference of $25 per Partnership Preferred Security, calculated on the basis of a 360-day year consisting of twelve 30-day months. For any period shorter than a full 90-day quarter, Distributions will be computed on the basis of the actual number of days elapsed in such 90-day quarter. Such Distributions shall, from the date of original issue, accrue and be cumulative and shall be payable quarterly, when, if, and as declared by the General Partner on the dates specified in Section 6.2(b)(ii) below. Distributions and Compounded Distributions (as defined below) (if any) on the Partnership Preferred Securities shall be cumulative from the Closing Date. Distributions not paid on the scheduled Distribution Payment Date will accumulate and compound quarterly at the rate of [___]% per annum ("Compounded Distributions"). In the event that any date on which Distributions are payable on the Partnership Preferred Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (ii) Distributions on the Partnership Preferred Securities will be payable quarterly in arrears if, as and when, declared by the General Partner on March 31, June 30, September 30 and December 31 of each year, com- 22 mencing on December 31, 1996 (each a "Distribution Payment Date"). Distributions will be payable to the Holders as they appear on the books and records of the Partnership on the relevant Record Date. If the Trust or the Property Trustee is the Holder of the Partnership Preferred Securities, all distributions of cash shall be made by wire transfer of same day funds to such Holder by 10:00 a.m., New York City time, on the applicable Distribution Payment Date. Distributions payable on any Partnership Preferred Securities that are not punctually paid on any Distribution Payment Date will cease to be payable to the Person in whose name such Partnership Preferred Securities are registered on the relevant record date, and such Distribution will instead be payable to the Person in whose name such Partnership Preferred Securities are registered on the special record date or other specified date for payment of such defaulted or accrued Distribution. (c) OPTIONAL REDEMPTION. Partnership Preferred Securities shall be redeemable at the option of the General Partner, in whole or in part, from time to time, on or after October 1, 2006, upon not less than 30 nor more than 60 days' notice, at an amount per Partnership Preferred Securities equal to $25 plus accrued and unpaid Distributions thereon, including any Compounded Distributions (the "Redemption Price"). The Partnership may not redeem the Partnership Preferred Securities in part unless all accumulated and unpaid Distributions, including any Compounded Distributions, have been paid in full on all Partnership Preferred Securities for all Fiscal Periods terminating on or prior to the date of redemption. If a partial redemption of the Partnership Preferred Securities would result in the delisting of the Trust Preferred Securities (or, if the Trust is liquidated in connection with a Trust Special Event, the delisting of the Partnership Preferred Securities), the Partnership may only redeem the Partnership Preferred Securities in whole but not in part. (d) SPECIAL EVENT REDEMPTIONS. (i) If, at any time, a Partnership Special Event shall occur and be continuing, the General Partner shall, within 90 days following the occurrence of such Partnership Special Event, elect to either (i) redeem the Partnership Pre- 23 ferred Securities in whole (but not in part), upon not less than 30 or more than 60 days' notice at the Redemption Price, provided that if at the time there is available to the Partnership the opportunity to eliminate, within such 90-day period, the Partnership Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that in the sole judgment of the General Partner has or will cause no adverse effect on the Partnership, the Trust, or the Company, the General Partner will pursue such measure in lieu of redemption; or (ii) cause the Partnership Preferred Securities to remain outstanding, provided that in the case of this clause (ii), the General Partner shall pay any and all costs and expenses incurred by or payable by the Partnership which are attributable to the Partnership Special Event. (e) REDEMPTION PROCEDURES. (i) Notice of any redemption of Partnership Preferred Securities (a "Redemption Notice") will be given by the Partnership by mail to each Holder of Partnership Preferred Securities to be redeemed not fewer than 30 nor more than 60 days before the date fixed for redemption. For purposes of the calculation of the date of redemption and the dates on which notices are given pursuant to this Section 6.2(e)(i), a Redemption Notice shall be deemed to be given on the day such notice is first mailed, by first-class mail, postage prepaid, to Holders of Partnership Preferred Securities. Each Redemption Notice shall be addressed to the Holders of Partnership Preferred Securities at the address of each such Holder appearing in the books and records of the Partnership. No defect in the Redemption Notice or in the mailing thereof with respect to any Holder shall affect the validity of the redemption proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Partnership Preferred Securities are to be redeemed, the Partnership Preferred Securities to be redeemed shall be redeemed pro rata provided, that, in the event Partnership Preferred Securities are held in book-entry only form by DTC or its nominee (or any successor Clearing Agency or its nominee), DTC will reduce, in accordance with DTC's customary procedures, the amount of the interest of each Clearing Agency Participant in the Partnership Preferred Securities to be redeemed; 24 provided, that if, as a result of such pro rata redemption, Holders would hold fractional interests in the Partnership Preferred Securities, the General Partner will adjust the amount of the interest of each Holder to be redeemed may be adjusted to avoid such fractional interests. (iii) If the Partnership gives a Redemption Notice (which notice will be irrevocable), then by 12:00 noon, New York City time, on the redemption date, the Partnership (A) if the Partnership Preferred Securities are in book-entry only form with DTC, will deposit irrevocably with DTC funds sufficient to pay the applicable Redemption Price and will give DTC irrevocable instructions and authority to pay the Redemption Price in respect of the Partnership Preferred Securities held through DTC in global form or (B) if the Partnership Preferred Securities are held in certificated form, will deposit with the Paying Agent, funds sufficient to pay the applicable Redemption Price of the amount of any such Partnership Preferred Securities and will give to the Paying Agent irrevocable instructions and authority to pay such amounts to the Holders of Partnership Preferred Securities, upon surrender of their certificates, by check, mailed to the address of the relevant Holder appearing on the books and records of the Partnership on the redemption date; provided, however, that for so long as the Trust or the Property Trustee of the Trust shall hold the Partnership Preferred Securities, payment of cash shall be made by wire in same day funds to the Holder by 12:00 Noon, New York City time, on the redemption date. For these purposes, the applicable Redemption Price shall not include Distributions which are being paid to Holders who were Holders on a relevant record date. Upon satisfaction of the foregoing conditions, then immediately prior to the close of business on the date of such deposit or payment, all rights of Holders of such Partnership Preferred Securities so called for redemption will cease, except the right of the Holders to receive the Redemption Price, but without interest on such Redemption Price, and from and after the date fixed for redemption, such Partnership Preferred Securities will not accrue distributions or bear interest. In the event that any date fixed for redemption of Partnership Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such 25 date will be made on the next succeeding Business Day (and without any interest in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day in each case, with the same force and effect as if made on such date fixed for redemption. In the event that payment of the Redemption Price is improperly withheld or refused and not paid by either the Partnership or the Company pursuant to the Partnership Guarantee, Distributions on the Partnership Preferred Securities called for Redemption will continue to accrue, to the extent that payment of such interest is legally available, from the original redemption date until the Redemption Price is actually paid. The Partnership shall not be required to register or cause to be registered the transfer of any Partnership Preferred Securities which have been called for redemption. (f) COMPANY PURCHASES. Subject to the provisions of this Section 6.2 and applicable law (including, without limitation, Federal securities laws), if Partnership Preferred Securities have been distributed to the Holders (as defined in the Declaration) of Trust Preferred Securities, the Company or any of its subsidiaries may at any time and from time to time purchase outstanding Partnership Preferred Securities by tender, in the open market, or by private agreement. (g) LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of the Partnership, the Holders of Partnership Preferred Securities at the time outstanding will be entitled to receive out of the assets of the Partnership such amount as is determined in accordance with Section 13.4 (the "Partnership Liquidation Distribution") payable in cash. (h) VOTING RIGHTS. (i) SPECIAL REPRESENTATIVE. (1) If one or more of the following events shall occur and be continuing (each a "Partnership Enforcement Event"): (i) arrearages on distributions on the Partnership Preferred Securities shall exist for six consecutive quarterly distribution periods, (ii) the Company is in default on 26 any of its obligations under the Partnership Guarantee or (iii) an Investment Event of Default occurs and is continuing on any Affiliate Investment Instrument or a default under any Investment Guarantee, as the case may be, the Holders of the Partnership Preferred Securities, upon the affirmative vote of at least a Majority in Liquidation Preference of the Partnership Preferred Securities, shall have the right, to the exclusion of the General Partner, (a) to appoint and authorize a special representative of the Partnership and the Limited Partners (a "Special Representative") to enforce (1) to the maximum extent permitted by applicable law, the Partnership's creditors' rights and other rights with respect to the Affiliate Investment Instruments and the Investment Guarantees, (2) the rights of the Holders of the Partnership Preferred Securities under the Partnership Guarantee, and (3) the rights of the Holders of the Partnership Preferred Securities to receive Distributions (only if, and to the extent, declared by the General Partner, in its sole discretion, out of funds legally available therefor) on the Partnership Preferred Securities, and (b) under the Partnership Guarantee to enforce the terms of the Partnership Guarantee, including the right to enforce the covenant restricting certain payments of the Company and its majority owned subsidiaries. Under no circumstances, however, shall the Special Representative have authority to cause the General Partner to declare Distributions on the Partnership Preferred Securities nor to have any authority concerning the selection of Partnership Investments. When the Special Representative acts to enforce the Partnership's creditors' rights and other rights with respect to the Affiliate Investment Instruments and the Investment Guarantees, the Special Representative acts as an agent of the Partnership. When the Special Representative acts to enforce the rights of the Holders of the Partnership Preferred Securities under the Partnership Guarantee or their rights to receive Distributions on the Partnership Preferred Securities, the Special Representative acts as an agent of the Holders of the Partnership Preferred Securities. In addition, the Special Representative shall not, by virtue of acting in such capacity, be admitted as a general or limited partner in the Partnership or otherwise be deemed to be a general or limited partner in the Partnership and shall have no liability for the debts, obligations, or liabilities of the Partnership. 27 (2) In furtherance of the foregoing, and without limiting the powers of any Special Representative so appointed and to avoid any doubt concerning the powers of the Special Representative, any Special Representative, in its own name, in the name of the Partnership, in the name of the Limited Partners, or otherwise, may institute, or cause to be instituted, a proceeding, including, without limitation, any suit in equity, an action at law or other judicial or administrative proceeding, to enforce on behalf of the Partnership the Partnership's rights directly against the Company or any other obligor in connection with its obligations to the Partnership, and may prosecute such proceeding to judgment or final decree, and enforce the same against the Company or any other obligor in connection with such obligations and collect, out of the property, wherever situated, of the Company or any such other obligor upon such obligations, the monies adjudged or decreed to be payable in the manner provided by law. The General Partner agrees to execute and deliver such documents as may be necessary, appropriate or convenient for the Special Representative to enforce the foregoing rights and obligations on behalf and in the name of the Partnership. (3) For purposes of determining whether the Partnership has deferred payment of Distributions for six (6) consecutive quarters, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions, including Compounded Distributions, have been or contemporaneously are paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such full cumulative Distributions. Not later than 30 days after such right to appoint a Special Representative arises, the General Partner will convene a meeting for election of a Special Representative. If the General Partner fails to convene such meeting within such 30-day period, the Holders of not less than 10% in Liquidation Preference of the Outstanding Partnership Preferred Securities will be entitled to convene such meeting. The provisions of Section 14.3 relating to the convening and conduct of meetings of the Partners will apply with respect to any such meeting. In the event that, at any such meeting, Holders of less than a Majority in Liquidation Preference of Partnership Preferred Securities entitled to vote for the appointment of a Special Representative vote for such appointment, no 28 Special Representative shall be appointed. Any Special Representative appointed shall cease to be a Special Representative of the Partnership and/or the Limited Partners if (x) the Partnership (or the Company pursuant to the Partnership Guarantee) shall have paid in full all accrued and unpaid Distributions on the Partnership Preferred Securities, (y) the relevant Investment Event of Default shall have been cured, and (z) the Company is in compliance with all its obligations under the Partnership Guarantee, and the Company, in its capacity as the General Partner, shall continue the activities of the Partnership without dissolution. Notwithstanding the appointment of any such Special Representative, the Company shall continue as General Partner and shall retain all rights under this Agreement, including the right to determine whether to declare, in its sole discretion, the payment of Distributions on the Partnership Preferred Securities. (ii) CERTAIN AMENDMENTS; WAIVER. (1) If any proposed amendment of this Agreement provides for, or the General Partner otherwise proposes to effect, (x) any action that would adversely affect the powers, preferences or special rights of the Holders of the Partnership Preferred Securities, whether by way of amendment of this Agreement or otherwise (including, without limitation, the authorization or issuance of any limited partnership interests in the Partnership ranking, as to participation in profits or distributions, or in the assets of the Partnership, senior to the Partnership Preferred Securities); or (y) the dissolution, winding-up or termination of the Partnership, other than (1) in connection with the occurrence of a Partnership Special Event or (2) as described under Sections 11.11 and 13.2 of this Agreement, then the Holders of outstanding Partnership Preferred Securities will be entitled to vote on such amendment or proposal of the General Partner (but not on any other amendment or proposal) as a class and such amendment or proposal shall not be effective except with the approval of Holders of a Majority in Liquidation Preference of such outstanding Partnership Preferred Securities having a right to vote on the matter; provided, however, that if the Property Trustee on behalf of the Trust is the Holder of the Partnership Preferred Securities, any such amendment or proposal not excepted by (1) or (2) above shall not be effective without the prior or concurrent approval of the Holders of a majority in liquidation amount of the 29 outstanding Trust Preferred Securities having a right to vote on such matters; provided, further that no such approval shall be required if the dissolution, winding-up or termination of the Partnership is proposed or initiated upon the initiation of proceedings, or after proceedings have been initiated, for the dissolution, winding-up, liquidation or termination of the Company. (2) The Holders of a Majority in Liquidation Preference of Partnership Preferred Securities may, by vote, on behalf of the Holders of all of the Partnership Preferred Securities, waive any past Partnership Enforcement Event with respect to the Partnership Preferred Securities and its consequences; provided that, if the underlying Investment Event of Default: (A) is not waivable under the related Affiliate Investment Instrument, such Partnership Enforcement Event shall also not be waivable; or (B) requires the consent or vote of the Holders of greater than a majority in principal amount or liquidation preference of the Affiliate Investment Instruments (a "Super Majority") to be waived under the related Affiliate Investment Instrument, the Partnership Enforcement Event may only be waived by the vote of the Holders of the relevant Super Majority in liquidation amount of the Partnership Preferred Securities. Upon such waiver, any such Partnership Enforcement Event shall cease to exist, and shall be deemed to have been cured, for every purpose of this Agreement, but no such waiver shall extend to any subsequent or other Partnership Enforcement Event or impair any right consequent thereon. (3) A waiver of an Investment Event of Default by the Special Representative, acting at the direction of the Holders of the Partnership Preferred Securities, constitutes a waiver of the corresponding Partnership Enforcement Event. (iii) GENERAL VOTING. (1) Neither the General Partner nor the Special Representative shall (i) direct the time, method and place of conducting any proceeding for any remedy available, (ii) waive any In- 30 vestment Event of Default that is waivable under the Affiliate Investment Instruments, (iii) exercise any right to rescind or annul a declaration that the principal of any Affiliate Investment Instruments that are debt instruments shall be due and payable, (iv) waive the breach of the covenant by the Company in the Partnership Guarantee to restrict certain payments by the Company and its majority owned subsidiaries, or (v) consent to any amendment, modification or termination of any Affiliate Investment Instrument, where such consent shall be required from the investor, without, in each case, obtaining the prior approval of the Holders of at least a Majority in Liquidation Preference of the Partnership Preferred Securities; provided, however, that if the Property Trustee on behalf of the Trust is the Holder of the Partnership Preferred Securities, such waiver, consent or amendment or other action shall not be effective without the prior or concurrent approval of at least a majority in liquidation amount of the outstanding Trust Preferred Securities having a right to vote on such matters. The General Partner shall not revoke any action previously authorized or approved by a vote of the Holders of the Partnership Preferred Securities. The General Partner shall notify all Holders of the Partnership Preferred Securities of any notice of an Investment Event of Default received with respect to any Affiliate Investment Instrument. (2) Any required approval of Holders of Partnership Preferred Securities may be given at a separate meeting of such Holders convened for such purpose or pursuant to written consent. The General Partner will cause a notice of any meeting at which Holders of Partnership Preferred Securities are entitled to vote, or of any matter upon which the action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Partnership Preferred Securities. Each such notice will include a statement setting forth (x) the date of such meeting or the date by which such action is to be taken, (y) a description of any matter proposed for adoption at such meeting on which such Holders are entitled to vote or of such matters upon which written consent is sought and (z) instructions for the delivery of proxies or consents. No vote or consent of the Holders of Partnership Preferred Securities will be required for the Partnership to redeem and cancel Partnership Preferred Securities in accordance with this Agreement. 31 (3) Notwithstanding that Holders of Partnership Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Partnership Preferred Securities at such time that are owned by the Company or by any entity more than 50% of which is owned by the Company, either directly or indirectly, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding; provided, however, that persons otherwise eligible to vote to whom the Company or any of its subsidiaries have pledged Partnership Preferred Securities may vote or consent with respect to such pledged Partnership Preferred Securities under any of the circumstances described herein. (4) Holders of the Partnership Preferred Securities shall have no rights to remove or replace the General Partner. (5) Holders of Partnership Preferred Securities shall have no preemptive rights. ARTICLE VII PARTNERSHIP INVESTMENTS Section 7.1 INITIAL AFFILIATE INVESTMENT INSTRUMENTS. (a) All Partnership funds will be invested in the securities of Investment Affiliates (the "Affiliate Investment Instruments") and Eligible Debt Securities. No more than 99% of the Initial Partnership Proceeds will be used by the Partnership to purchase the Initial Debentures meeting the criteria set forth in this Section 7.1. The remaining funds from the Initial Partnership Proceeds will be used to purchase Eligible Debt Securities in accordance with the terms of this Agreement. (b) The Partnership shall apply approximately 99% of the Initial Partnership Proceeds to purchase (1) a debt instrument of the Company (the "Initial Company Debenture") in the aggregate principal amount of $___________ and (2) a debt instrument of a wholly owned United States subsidiary of the Company and a debt instrument of a second wholly owned United States subsid- 32 iary of the Company (such debt instruments collectively referred to as the "Initial Affiliate Debentures"). The Initial Company Debenture and the Initial Affiliate Debentures are collectively referred to as the "Initial Debentures". The Partnership may purchase the Initial Debentures only upon receipt of an opinion of the Independent Financial Advisor to the effect that (i) if such Initial Debentures were to be rated, at least one Rating Agency would rate all the Initial Debentures investment grade at the time such Initial Debentures are purchased by the Partnership, (ii) the Company and each Investment Affiliate which is a subsidiary of the Company would have been capable of issuing and selling debt instruments with the same terms and conditions as the applicable Initial Debentures to unrelated third party investors, (iii) the terms and conditions of the Initial Debentures are consistent with the terms and conditions of a public offering or a private placement pursuant to Rule 144A under the Securities Act of 1933 of such Initial Debentures and are no more favorable to the relevant Investment Affiliate than could have been obtained by such Investment Affiliate from unrelated third party investors pursuant to such a public offering or private placement of such Initial Debentures. On the Closing Date, the Partnership shall invest at least 1% of such Initial Partnership Proceeds in Eligible Debt Securities. The terms of the Initial Debentures will be as set forth in the Indentures attached hereto as Exhibits A and B. Section 7.2 REINVESTMENT OF PAYMENTS RECEIVED BY THE PARTNERSHIP. (a) The Partnership must at all times invest an amount equal to at least 1% of the Initial Partnership Proceeds in Eligible Debt Securities. (b) The Partnership may reinvest any payments it receives in respect of its investments in (i) Eligible Debt Securities without limitation or (ii) additional Affiliate Investment Instruments but only upon (A) the acceptance of a written offer setting forth the terms and conditions on which an Investment Affiliate would be willing to issue an Affiliate Investment Instrument to the Partnership (an "Investment Offer") and (B) the receipt of an opinion of the Independent Financial Advisor that the terms of such Affiliate Investment Instru- 33 ment set forth in such Investment Offer satisfy the Reinvestment Criteria (as defined below). (c) If the Independent Financial Advisor determines that the terms of an Affiliate Investment Instrument (as set forth in the Investment Offer) do not satisfy the Reinvestment Criteria, the Partnership shall be prohibited from making any investment in such Affiliate Investment Instrument. (d) Each Affiliate Investment Instrument shall satisfy the following criteria (the "Reinvestment Criteria"): (i) the economic terms of each Affiliate Investment Instrument shall be no less favorable to the Partnership than terms that would otherwise be obtainable through a public offering or private placement under Rule 144A of the Securities Act of 1933 of securities by the requesting Investment Affiliate and any other the terms and conditions of each Affiliate Reinvestment Instrument are substantially similar to the terms and conditions of similar securities that are offered to the public in a public offering or private placement under Rule 144A of the Securities Act of 1933 of such securities; (ii) the Partnership shall not have held any Affiliate Investment Instruments of the Investment Affiliate submitting the Investment Offer within the three-year period ending on the date of the Investment Offer; (iii) there shall not have been a default on any debt obligation of the Investment Affiliate submitting the Investment Offer that was owned by the Partnership; (iv) no dividend arrearages shall have existed on any equity security of the Investment Affiliate submitting the Investment Offer that was owned by the Partnership; and (v) the Investment Affiliate submitting the Investment Offer shall not be deemed to be an investment company by reason of Section 3(a) or 3(b) of the 1940 Act. (e) Any payments received by the Partnership in respect of its investments that are not invested in additional Affiliate Investment Instruments, may be reinvested only in Eligible Debt Securities. 34 ARTICLE VIII BOOKS OF ACCOUNT, RECORDS AND REPORTS Section 8.1 BOOKS AND RECORDS. (a) Proper and complete records and books of account of the Partnership shall be kept by the General Partner, in which shall be entered fully and accurately all transactions and other matters relative to the Partnership's investments. The books and records of the Partnership, together with a certified copy of this Agreement and of the Certificate, shall at all times be maintained at the principal office of the General Partner and shall be open to the inspection and examination of the Partners or their duly authorized representatives for any proper purpose reasonably related to its Interest during reasonable business hours. (b) Notwithstanding any other provision of this Agreement to the contrary, the General Partner may, to the maximum extent permitted by applicable law, keep confidential from the Partners any information with respect to the Partnership, the disclosure of which the General Partner reasonably believes is not in the best interests of the Partnership, or is adverse to the interests of the Partnership, or which the Partnership or the General Partner is required by law or by an agreement with any Person to keep confidential. (c) (i) For so long as the Partnership Preferred Securities are held by the Property Trustee on behalf of the Trust, within one month after the close of each Fiscal Year, the General Partner shall transmit to each Partner a statement indicating such Partner's share of each item of Partnership income, gain, loss, deduction or credit, for United States federal income tax purposes, for such Fiscal Year. (ii) In the event that the Partnership Preferred Securities are no longer held by the Property Trustee on behalf of the Trust, as soon as reasonably possible after the close of the Fiscal Year, the General Partner shall transmit to each Partner the statement referred to in Section 8.1(c)(i) hereof. 35 Section 8.2 ACCOUNTING METHOD. For both financial and tax reporting purposes, the books and records of the Partnership shall be kept on the accrual method of accounting applied on a consistent basis and shall reflect all Partnership transactions. Section 8.3 ANNUAL AUDIT. As soon as practical after the end of each Fiscal Year, but not later than 90 days after such end, the financial statements of the Partnership shall be audited by a firm of independent certified public accountants selected by the General Partner in accordance with applicable law. The cost of such audits will be an expense of the Partnership and shall be paid by the General Partner. ARTICLE IX PAYMENT OF EXPENSES Section 9.1 PAYMENT OF TRUST EXPENSES AND PARTNERSHIP TAXES. Since the Trust is being formed solely to facilitate a direct investment in the Partnership Preferred Securities, the Partnership hereby agrees, at any time while the Property Trustee is the Holder of any Partnership Preferred Securities, to pay all the expenses of the Trust, including, but not limited to, any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed on the Trust by the United States, or any other taxing authority, so that the net amounts received and retained by the Trust and the Property Trustee after paying such expenses will be equal to the amounts the Trust and the Property Trustee would have received had no such costs or expenses been incurred by or imposed on the Trust. The General Partner shall be liable for, and shall pay all such expenses solely out of its own funds. In addition, if the Partnership is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the General Partner will pay such taxes, duties, assessments or other governmental charges out of its own funds. Section 9.2 PAYMENT OF OTHER PARTNERSHIP EXPENSES. In connection with the offering, sale and 36 issuance of the Partnership Preferred Securities by the Partnership, the General Partner shall: (a) pay all costs and expenses of the Partnership (including, but not limited to, costs and expenses relating to the organization of the Partnership, the offering, sale and issuance of the Partnership Preferred Securities (including commissions to the underwriters in connection therewith) the fees and expenses of the Special Representatives (if any), and the costs and expenses relating to the operation of the Partnership, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses; and (b) be primarily and fully liable for any indemnification obligations arising with respect to this Agreement. ARTICLE X POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS Section 10.1 LIMITATIONS. The Limited Partners shall not participate in the management or control of the Partnership's investment activity, property or other assets, nor shall the Limited Partners engage in any activities for the Partnership, nor shall the Limited Partners have the power to act for or bind the Partnership, such powers being vested solely and exclusively in the General Partner (and, upon appointment, and to the extent set forth herein, the Special Representative). The Limited Partners shall have such rights as are set forth herein and in the Partnership Guarantee. The Limited Partners shall have no interest in the properties or assets of the General Partner, or any equity therein, or in any proceeds of any sales thereof (which sales shall not be restricted in any respect), by virtue of acquiring or owning an Interest in the Partnership. Section 10.2 LIABILITY. Subject to the provisions of the Act, no Limited Partner shall be liable for 37 the repayment, satisfaction or discharge of any debts or other obligations of the Partnership in excess of the Capital Account balance of such Limited Partner. Section 10.3 PRIORITY. No Limited Partner shall have priority over any other Limited Partner as to Partnership allocations or distributions. ARTICLE XI POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER Section 11.1 AUTHORITY. Subject to the provisions of Section 6.2(h)(i) with respect to the Special Representative, the General Partner shall have exclusive and complete authority and discretion to manage the operations and affairs of the Partnership and to make all decisions regarding the investment activity of the Partnership. Any action taken by the General Partner shall constitute the act of and serve to bind the Partnership. In dealing with the General Partner acting on behalf of the Partnership no Person shall be required to inquire into the authority of the General Partner to bind the Partnership. Persons dealing with the Partnership are entitled to rely conclusively on the power and authority of the General Partner as set forth in this Agreement. Section 11.2 POWERS AND DUTIES OF GENERAL PARTNER. Subject to the provisions of Section 6.2(h)(i) with respect to the Special Representative, the General Partner shall have all rights and powers of a general partner under the Act, and shall have all authority, rights and powers in the management of the Partnership's investment activity to do any and all other acts and things necessary, proper, convenient or advisable to effectuate the purposes of this Agreement, including by way of illustration but not by way of limitation, the following: (a) to secure the necessary goods and services required in performing the General Partner's duties for the Partnership; (b) to exercise all powers of the Partnership, on behalf of the Partnership, in connection with 38 enforcing the Partnership's rights under the Affiliate Investment Instruments and the Partnership Guarantee; (c) to issue Partnership Preferred Securities and to admit Limited Partners in connection therewith in accordance with this Agreement; (d) to act as registrar and transfer agent for the Partnership Preferred Securities or designate an entity to act as registrar and transfer agent; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including with respect to Distributions and voting rights and to make determinations as to the payment of Distributions, and make or cause to be made all other required payments to Holders of the Partnership Preferred Securities and to the General Partner; (f) to open, maintain and close bank accounts and to draw checks and other orders for the payment of money; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Partnership; (h) to deposit, withdraw, invest, pay, retain and distribute the Partnership's funds in a manner consistent with the provisions of this Agreement; (i) to take all action that may be necessary or appropriate for the preservation and the continuation of the Partnership's valid existence, rights, franchises and privileges as a limited partnership under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Limited Partners or to enable the Partnership to invest in the Affiliate Investment Instruments and Eligible Debt Securities; (j) to take all action not inconsistent with applicable law, the Certificate or this Agreement, 39 that the General Partner or, upon appointment pursuant to Section 6.2(h)(i), the Special Representative determines in its sole discretion to be necessary or desirable to ensure, as long as such action does not adversely affect the interests of the Partnership Preferred Security Holders, or cause (i) the Partnership to be deemed to be an "investment company" required to be registered under the 1940 Act, (ii) any Initial Debenture (or any subsequent Affiliate Investment Instrument that is intended to be classified as debt) to not be treated as indebtedness for United States federal income tax purposes, or (iii) the Partnership to be treated as an association, or as a publicly traded partnership, taxable as a corporation; (k) to cause the Partnership to enter into and perform the Partnership Preferred Securities Purchase Agreement and to purchase Eligible Debt Securities and Affiliate Investment Instruments, as the case may be, without any further act, vote or approval of any Partner; and (l) to execute and deliver any and all documents or instruments, perform all duties and powers and do all things for and on behalf of the Partnership in all matters necessary or desirable or incidental to the foregoing. Section 11.3 OBLIGATIONS AND EXPENSES PAYABLE BY GENERAL PARTNER. (a) The General Partner hereby assumes and shall be liable for the debts, obligations and liabilities of the Partnership, including, but not limited to, any liabilities arising under the Securities Act or the Exchange Act and all costs and expenses relating to the investment by the Partnership in any Affiliate Investment Instruments (but not any losses related to any non-payment with respect to such investments), and agrees to pay to each Person to whom the Partnership is now or hereafter becomes indebted or liable (the "Beneficiaries"), whether such indebtedness, obligations or liabilities arise in contract, tort or otherwise (excluding payment obligations of the Company to Holders of the Partnership Preferred Securities in such Holders' capacities as Holders of such Partnership Preferred Securities, such obligations being separately guaranteed under the Partnership Guarantee), the full payment of such indebtedness 40 and any and all liabilities, when and as due. This Agreement is intended to be for the benefit of and to be enforceable by all such Beneficiaries whether or not such Beneficiaries have received notice hereof. (b) The General Partner agrees to pay and be responsible for: (i) all costs and expenses of the Partnership including, but not limited to, costs and expenses relating to the organization of the Partnership, the offering, sale and issuance of Partnership Preferred Securities, the costs and expenses relating to the operation of the Partnership (including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agents, duplicating, travel and telephone and other telecommunications expenses) and costs and expenses incurred in connection with the acquisition, financing, and disposition of the Partnership's assets; and (ii) any and all taxes (other than Federal, state and local withholding taxes) and all liabilities, costs and expenses with respect to such taxes of the Partnership. Section 11.4 LIABILITY. Except as expressly set forth in this Agreement or in the Guarantee Agreements, (a) the General Partner shall not be personally liable for the return of any portion of the capital contributions (or any return thereon) of the Limited Partners; (b) the return of such capital contributions (or any return thereon) shall be made solely from assets of the Partnership; and (c) the General Partner shall not be required to pay to the Partnership or to any Limited Partner any deficit in any Limited Partner's Capital Account upon dissolution, winding up or otherwise. Other than as expressly provided in this Agreement or under the Act, no Limited Partner shall have the right to demand or receive property other than cash for its respective Interest in the Partnership. The General Partner shall be liable to an unlimited extent for the debts and other obligations of the Partnership. 41 Section 11.5 OUTSIDE ACTIVITIES. Any Partner or Affiliate thereof may engage in or possess an interest in other ventures of any nature or description, independently or with others, similar or dissimilar to the activities of the Partnership, and the Partnership and the Partners shall have no rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the activities of the Partnership, shall not be deemed wrongful or improper. No Partner or Affiliate thereof shall be obligated to present any particular investment opportunity to the Partnership even if such opportunity is of a character that, if presented to the Partnership, could be taken by the Partnership, and any Partner or Affiliate thereof shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment opportunity. Section 11.6 LIMITS ON GENERAL PARTNER'S POWERS. Anything in this Agreement to the contrary notwithstanding, the General Partner shall not cause or permit the Partnership to: (i) acquire any assets other than as expressly provided herein; (ii) do any act which would make it impractical or impossible to carry on the ordinary activity of the Partnership as set forth in Section 2.3; (iii) possess Partnership property for other than a Partnership purpose; (iv) admit a Person as a Partner, except as expressly provided in this Agreement; (v) make any advances of funds to the General Partner or its Affiliates, other than such as represented by the Affiliate Investment Instruments; (vi) perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction; 42 (vii) engage in any activity that is not consistent with the purposes of the Partnership, as set forth in Section 2.3; (viii) without the written consent of the Holders of 66-2/3% in Liquidation Preference of the Partnership Preferred Securities, have an order for relief entered with respect to the Partnership or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of the Partnership's property, or make any assignment for the benefit of creditors of the Partnership; or (ix) borrow money or become liable for the borrowings of any third party or to engage in any financial or other trade or business. Section 11.7 EXCULPATION. (a) No Partnership Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Partnership or any Partnership Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Partnership Indemnified Person in good faith on behalf of the Partnership and in a manner such Partnership Indemnified Person reasonably believed to be within the scope of the authority conferred on such Partnership Indemnified Person by this Agreement or by law, except that a Partnership Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Partnership Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) A Partnership Indemnified Person shall be fully protected in relying in good faith upon the records of the Partnership and upon such information, opinions, reports or statements presented to the Partnership by any Person as to matters the Partnership Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Partnership, including information, opinions, reports or statements as 43 to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to Partners might properly be paid. Section 11.8 FIDUCIARY DUTY. (a) To the extent that, at law or in equity, a Partnership Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to any other Partnership Covered Person, a Partnership Indemnified Person acting under this Agreement shall not be liable to the Partnership or to any other Partnership Covered Person for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Partnership Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Partnership Indemnified Person. (b) Unless otherwise expressly provided herein, (i) whenever a conflict of interest exists or arises between Partnership Covered Persons, or (ii) whether this Agreement or any other agreement contemplated herein or therein provides that a Partnership Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Partnership or any Partner, the Partnership Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Partnership Indemnified Person, the resolution, action or term so made, taken or provided by the Partnership Indemnified Person shall not constitute a breach of this Agreement or any other agreement contemplated herein or of any duty or obligation of the Partnership Indemnified Person at law or in equity or otherwise. (c) Whenever in this Agreement a Partnership Indemnified Person is permitted or required to make a decision (i) in its "discretion" or under a grant of similar authority, the Partnership Indemnified Person 44 shall be entitled to consider such interests and factors as it desires, including its own interest, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or any other Person, or (ii) in its "good faith" or under another express standard, the Partnership Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or by applicable law. Section 11.9 INDEMNIFICATION. (a) To the fullest extent permitted by applicable law, the Partnership shall indemnify and hold harmless each Partnership Indemnified Person from and against any loss, damage or claim incurred by such Partnership Indemnified Person by reason of any act or omission performed or omitted by such Partnership Indemnified Person in good faith on behalf of the Partnership and in a manner such Partnership Indemnified Person reasonably believed to be within the scope of authority conferred on such Partnership Indemnified Person by this Agreement, except that no Partnership Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Partnership Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 11.9 shall be provided out of and to the extent of Partnership assets only, and no Partnership Covered Person shall have any personal liability on account thereof. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Partnership Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Partnership of an undertaking by or on behalf of the Partnership Indemnified Person to repay such amount if it shall be determined that the Partnership Indemnified Person is not entitled to be indemnified as authorized in Section 11.9(a). Section 11.10 TAX MATTERS (a) For purposes of section 6231(a)(7) of the Code, the "Tax Matters Partner" shall be the Company as 45 long as it remains the general partner of the Partnership. The Tax Matters Partner shall keep the Limited Partners fully informed of any inquiry, examination or proceeding. (b) Neither the Partnership, nor the Tax Matters Partner on behalf of the Partnership, shall make an election under section 754 of the Code. (c) The General Partner and the Partnership Preferred Security Holders acknowledge that they intend, for United States federal income tax purposes, that the Partnership shall be treated as a "partnership" (other than a publicly traded partnership taxable as a corporation) and that the General Partner and the Partnership Preferred Security Holders shall be treated as "partners" of the Partnership. (d) The General Partner shall retain, at the expense of the Partnership and at its sole discretion, a nationally recognized firm of certified public accountants which shall prepare all United States federal, state, local or other tax and information returns of the Partnership, as required by law, and the Schedule K-1's or any successor or similar forms or schedules. Section 11.11 CONSOLIDATION, MERGER OR SALE OF ASSETS. The Partnership may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any corporation or other body, except as permitted pursuant to this Section 11.11. The Partnership may, without the consent of the Holders of the Partnership Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by a limited partnership, limited liability company or trust organized as such under the laws of any state of the United States of America, provided that (i) such successor entity either (x) expressly assumes all of the obligations of the Partnership under the Partnership Preferred Securities or (y) substitutes for the Partnership Preferred Securities other securities having substantially the same terms as the Partnership Preferred Securities (the "Partnership Successor Securities") so long as the Partnership Successor Securities are not junior to any other equity securities of the successor entity, with respect to participation in the profits and distributions, and in the 46 assets, of the successor entity, (ii) the Investment Affiliates expressly acknowledge such successor entity as the holder of the Affiliate Investment Instruments, (iii) the Partnership Preferred Securities continue to be or any Partnership Successor Securities are or will be listed, upon notification of issuance, on any national securities exchange or other organization on which the Partnership Preferred Securities, if so listed, are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Trust Preferred Securities (or, in the event that the Trust is liquidated in connection with a Trust Special Event, the Partnership Preferred Securities (including any Partnership Successor Securities)) to be downgraded by any nationally recognized statistical securities rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the powers, preferences and other special rights of the holders of the Trust Preferred Securities or the Holders of the Partnership Preferred Securities (including any Partnership Successor Securities)) in any material respect (other than, in the case of the Partnership Preferred Securities, with respect to any dilution of the Holders' interest in the new resulting entity), (vi) such successor entity has a purpose substantially identical to that of the Partnership, (vii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of nationally recognized independent counsel to the Partnership experienced in such matters to the effect that (A) such successor entity will be treated as a "partnership" for United States federal income tax purposes and not as an association or a publicly traded partnership taxable as a corporation, (B) such merger, consolidation, amalgamation or replacement will not cause the Trust to be classified as an association or a publicly traded partnership taxable as a corporation for United States federal income tax purposes, (C) following such merger, consolidation, amalgamation or replacement, the Company and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company, and (D) such merger, consolidation, amalgamation or replacement will not adversely affect the limited liability of the Holders of the Partnership Preferred Securities and (viii) the Company guarantees the obligations of such successor entity under the Partnership Successor Securities at least to the extent provided by the Partnership Guarantee. 47 ARTICLE XII TRANSFERS OF INTERESTS BY PARTNERS Section 12.1 TRANSFER OF INTERESTS. (a) Partnership Preferred Securities shall be freely transferable by a Holder. (b) Except as provided in the next sentence, the General Partner may not assign or transfer its Interest in the Partnership in whole or in part unless, prior to such assignment or transfer, the General Partner has obtained the consent of the Holders of not less than 66-2/3% in Liquidation Preference of the Partnership Preferred Securities. The General Partner may assign or transfer its Interest in the Partnership without such consent only to an entity that is the survivor of a merger or consolidation of the General Partner in a transaction that meets the requirements of Section 11.11 and only if prior to such assignment or transfer the Company has received an opinion of nationally recognized independent tax counsel to the Partnership experienced in such matters to the effect that after such assignment or transfer the Partnership will continue to be treated as a partnership for United States federal income tax purposes and will not be treated as an association or a publicly traded partnership taxable as a corporation. "Permitted Successor" shall mean an entity that is an assignee or transferee of the Interest of the General Partner as permitted by this Section 12.1(b). The admission of a Permitted Successor as a general partner of the Partnership shall be effective upon the filing of an amendment to the Certificate with the Secretary of State of the State of Delaware which indicates that the Permitted Successor has been admitted as a general partner of the Partnership. If the General Partner assigns its entire Interest, the General Partner shall cease to be a general partner of the Partnership simultaneously with the admission of the Permitted Successor as a general partner of the Partnership. Any such Permitted Successor is hereby authorized to and shall continue the business of the Partnership without dissolution. (c) Except as provided above, no Interest shall be transferred, in whole or in part, except in 48 accordance with the terms and conditions set forth in this Agreement. Any transfer or purported transfer of any Interest not made in accordance with this Agreement shall be null and void. Section 12.2 TRANSFER OF L.P. CERTIFICATES. The General Partner shall provide for the registration of L.P. Certificates and of transfers of L.P. Certificates. Upon surrender for registration of transfer of any L.P. Certificate, the General Partner shall cause one or more new L.P. Certificates to be issued in the name of the designated transferee or transferees. Every L.P. Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the General Partner duly executed by the Partnership Preferred Security Holder or his or her attorney duly authorized in writing. Each L.P. Certificate surrendered for registration of transfer shall be cancelled by the General Partner. A transferee of an L.P. Certificate shall be admitted to the Partnership as a Limited Partner, shall become bound by this Agreement and shall be entitled to the rights and subject to the obligations of a Partnership Preferred Security Holder hereunder upon the receipt by the transferee of an L.P. Certificate, which receipt shall be deemed to constitute a request by such transferee that the books and records of the Partnership reflect such transferee's admission as a limited partner. The transferor of an L.P. Certificate, in whole, shall cease to be a Limited Partner at the time that the transferee of such L.P. Certificate is admitted to the Partnership as a Limited Partner in accordance with this Section 12.2. Section 12.3 DEFINITIVE L.P. CERTIFICATES; PERSONS DEEMED PARTNERSHIP PREFERRED SECURITY HOLDERS. (a) DEFINITIVE L.P. CERTIFICATES. Unless and until the Partnership issues a global L.P. Certificate pursuant to Section 12.4(a), the Partnership shall only issue definitive L.P. Certificates to the Partnership Preferred Security Holders. (b) The Partnership may treat the Person in whose name any L.P. Certificate shall be registered on the books and records of the Partnership as the sole holder of such L.P. Certificate and of the Partnership Preferred Securities represented by such L.P. Certificate for purposes of receiving Distributions and for all other purposes whatsoever (including without limitation, tax returns and information reports) and, accord- 49 ingly, shall not be bound to recognize any equitable or other claim to or interest in such L.P. Certificate or in the Partnership Preferred Securities represented by such L.P. Certificate on the part of any other Person, whether or not the Partnership shall have actual or other notice thereof. Section 12.4 BOOK ENTRY PROVISIONS. (a) General. The provisions of this Section 12.4 shall apply only in the event that the Partnership Preferred Securities are distributed to the Holders of Trust Securities in connection with the involuntary or voluntary dissolution, winding up or liquidation of the Trust as a result of the occurrence of a Trust Special Event. Upon the occurrence of such event, a global L.P. Certificate representing the Book-Entry Interests, shall be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Partnership and any previously issued and still outstanding definitive L.P. Certificates shall be of no further force and effect. The global L.P. Certificate shall initially be registered on the books and records of the Partnership in the name of Cede & Co., the nominee of DTC, and no Holder of a Partnership Preferred Security will receive a new definitive L.P. Certificate representing such Holder's interests in such L.P. Certificate, except as provided in Section 12.4(c). In connection with the involuntary or voluntary dissolution, winding up or liquidation of the Trust as a result of the occurrence of a Trust Special Event, Cede & Co., the nominee of DTC, shall automatically be admitted to the Partnership as a Limited Partner. Receipt of the global L.P. Certificate shall be deemed to constitute a request by Cede & Co., the nominee of DTC, that the books and records of the Partnership reflect its admission as a Limited Partner. Unless and until new definitive, fully registered L.P. Certificates (the "Definitive L.P. Certificates") have been issued to the Partnership Preferred Security Owners pursuant to Section 12.4(c): (i) The provisions of this Section shall be in full force and effect; (ii) The Partnership, the General Partner and any Special Representative shall be entitled to deal with the Clearing Agency for all purposes of this Agreement (including the payment of Distributions, 50 Redemption Price and liquidation proceeds on the L.P. Certificates and receiving approvals, votes or consents hereunder) as the Partnership Preferred Security Holder and the sole holder of the L.P. Certificates and shall have no obligation to the Partnership Preferred Security Owners; (iii) None of the Partnership, the Trust, the General Partner, any Special Representative or any agents of any of the foregoing shall have any liability or responsibility for any aspect of the records relating to or payments made on account of beneficial ownership interests in a global L.P. Certificate for such beneficial ownership interests or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests; and (iv) Except as provided in Section 12.4(c) below, the Holders of Partnership Preference Securities will not be entitled to receive physical delivery of the Partnership Preferred Securities in definitive form and will not be considered Holders thereof for any purpose under this Agreement, and no global L.P. Certificate representing Partnership Preferred Securities shall be exchangeable, except for another global L.P. Certificate of like denomination and tenor to be registered in the name of DTC or Cede & Co., or to a successor Depositary or its nominee. Accordingly, each Partnership Preferred Security Owner must rely on the procedures of DTC or if such person is not a Participant, on the procedures of the Participant through which such person owns its interest to exercise any rights of a Holder under the Agreement. (b) NOTICES TO CLEARING AGENCY. Whenever a notice or other communication to the Partnership Preferred Security Holders is required under this Agreement, unless and until Definitive L.P. Certificates shall have been issued to the Partnership Preferred Security Owners pursuant to Section 12.4(c), the General Partner and any Special Representative shall give all such notices and communications specified herein to be given to the Partnership Preferred Security Holders to the Clearing Agency, and shall have no obligations to the Partnership Preferred Security Owners. 51 (c) DEFINITIVE L.P. CERTIFICATES. Definitive L.P. Certificates shall be prepared by the Partnership and exchangeable for the global L.P. Certificate or L.P. Certificates if and only if (i) the Depositary notifies the Company that it is unwilling or unable to continue its services as a securities depositary and no successor depositary shall have been appointed, (ii) the Depositary, at any time, ceases to be a clearing agency registered under the Exchange Act at such time as the Depositary is required to be so registered to act as such depositary and no successor depositary shall have been appointed, or (iii) the Company, in its sole discretion, determines that such global L.P. Certificate shall be so exchangeable. Upon surrender of the global L.P. Certificate or L.P. Certificates representing the Book-Entry Interests by the Clearing Agency, accompanied by registration instructions, the General Partner shall cause Definitive L.P. Certificates to be delivered to Partnership Preferred Security Owners in accordance with the instructions of the Clearing Agency. Neither the General Partner nor the Partnership shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Any Person receiving a Definitive L.P. Certificate in accordance with this Section 12.4 shall be admitted to the Partnership as a Limited Partner upon receipt of such Definitive L.P. Certificate and shall be registered on the books and records of the Partnership as a Partnership Preferred Security Holder. The Clearing Agency or the nominee of the Clearing Agency, as the case may be, shall cease to be a Limited Partner under this Section 12.4(c) at the time that at least one additional Person is admitted to the Partnership as a Limited Partner in accordance herewith. The Definitive L.P. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as may be required by any national securities exchange on which Partnership Preferred Securities may be listed and is reasonably acceptable to the General Partner, as evidenced by its execution thereof. 52 Section 12.5 REGISTRAR, TRANSFER AGENT AND PAYING AGENT. (a) The General Partner will act as Registrar, Transfer Agent and Paying Agent for the Partnership Preferred Securities for so long as the Partnership Preferred Securities are held by the Trust or, if the Trust is liquidated in connection with a Trust Special Event, for so long as the Partnership Preferred Securities remain in book-entry only form. (b) Except in such case where the General Partner shall act as Registrar or Paying Agent pursuant to Section 12.5(a) hereof, the Partnership shall maintain in the Borough of Manhattan, City of New York, State of New York (i) an office or agency where Partnership Preferred Securities may be presented for registration of transfer or for exchange ("Registrar") and (ii) an office or agency where Partnership Preferred Securities may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Partnership Preferred Securities and of their transfer and exchange. The Partnership may appoint the Registrar and the Paying Agent and may appoint one or more co-registrars and one or more additional paying agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent. The Partnership may change any Paying Agent, Registrar or co-registrar without prior notice to any Holder. If the Partnership fails to appoint or maintain another entity as Registrar or Paying Agent, the General Partner shall act as such. (c) Registration of transfers of Partnership Preferred Securities shall be effected without charge by or on behalf of the Partnership, but upon payment (with the giving of such indemnity as the Partnership or the General Partner may require) in respect of any tax or other governmental charges that may be imposed. (d) The Partnership will not be required to register or cause to be registered the transfer of Partnership Preferred Securities after such Partnership Preferred Securities have been called for redemption. 53 ARTICLE XIII WITHDRAWAL, DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS Section 13.1 WITHDRAWAL OF PARTNERS. The General Partner shall not at any time retire or withdraw from the Partnership except as otherwise permitted hereunder. If the General Partner retires or withdraws in contravention of this Section 13.1, it shall indemnify, defend and hold harmless the Partnership and the other Partners from and against any losses, expenses, judgments, fines, settlements or damages suffered or incurred by the Partnership or such other Partners arising out of or resulting from such retirement or withdrawal. Section 13.2 DISSOLUTION OF THE PARTNERSHIP. (a) The Partnership shall not be dissolved by the admission of Partners in accordance with the terms of this Agreement. The death, withdrawal, bankruptcy or dissolution of a Limited Partner, or the occurrence of any other event which terminates the Interest of a Limited Partner in the Partnership, shall not, in and of itself, cause the Partnership to be dissolved and its affairs wound up. To the fullest extent permitted by applicable law, upon the occurrence of any such event, the General Partner may, without any further act, vote on approval of any Partner, admit any Person to the Partnership as an additional or substitute limited partner in the Partnership, which admission shall be effective as of the date of the occurrence of such event, and the business of the Partnership shall be continued without dissolution. (b) The Partnership shall be dissolved and its affairs shall be wound up upon the earliest to occur of any of the following events: (i) upon the bankruptcy or insolvency of the General Partner; (ii) the Partnership has redeemed or otherwise purchased all of the Partnership Preferred Securities; 54 (iii) the entry of a decree of judicial dissolution under Section 17-802 of the Act; or (iv) the written consent of all Partners. (c) Upon dissolution of the Partnership, the Liquidator shall promptly notify the Partners of such dissolution. Section 13.3 LIQUIDATION. (a) In the event of the dissolution of the Partnership for any reason, the General Partner (or, if the Partnership is dissolved pursuant to Section 13.2(b)(i) or (ii), then a liquidating agent appointed by Holders of not less than 66 2/3% in Liquidation Preference of the Partnership Preferred Securities (the General Partner or such Person so appointed is hereinafter referred to as the "Liquidator")) shall commence to wind up the affairs of the Partnership and to liquidate the Partnership's assets; provided, however, that a reasonable time shall be allowed for the orderly liquidation of the assets of the Partnership and the satisfaction of liabilities to creditors so as to enable the Partners to minimize the normal losses attendant upon liquidation. The Partners shall continue to share all income, losses and distributions during the period of liquidation in accordance with Articles IV and V. Subject to the provisions of this Article XIII, the Liquidator shall have full right and unlimited discretion to determine the time, manner and terms of any sale or sales of Partnership property pursuant to such liquidation, giving due regard to the activity and condition of the relevant market and general financial and economic conditions. (b) The Liquidator shall have all of the rights and powers with respect to the assets and liabilities of the Partnership in connection with the liquidation and termination of the Partnership that the General Partner would have with respect to the assets and liabilities of the Partnership during the term of the Partnership, and the Liquidator is hereby expressly authorized and empowered to execute any and all documents necessary or desirable to effectuate the liquidation and termination of the Partnership and the transfer of any assets. 55 (c) Notwithstanding the foregoing, a Liquidator that is not a General Partner shall not, by virtue of acting in such capacity, be deemed a Partner in this Partnership and shall not have any of the economic interests in the Partnership of a Partner; and such Liquidator may be compensated for its services to the Partnership at normal customary and competitive rates for its services to the Partnership as reasonably determined by all the Limited Partners. Section 13.4 DISTRIBUTION IN LIQUIDATION. The proceeds of liquidation shall be applied in the following order of priority (and without regard to the non-mandatory provisions of Section 17-804 of the Act): (i) first, to creditors of the Partnership, including Partners who are creditors, to the extent otherwise permitted by law, in satisfaction of the liabilities of the Partnership (whether by payment or the making of reasonable provisions for payment thereof), other than liabilities for distributions (including Distributions) to Partners; (ii) second, following any allocations required under Section 4.2(e) of the Agreement, to the Limited Partners, an amount equal to the aggregate liquidation preference of their Partnership Preferred Securities, plus the amount of Distributions (including any Compounded Distributions) that are accrued and unpaid as of the date of such liquidating distribution; and (iii) thereafter, to the General Partner. Section 13.5 RIGHTS OF LIMITED PARTNERS. Each Limited Partner shall look solely to the assets of the Partnership for all distributions with respect to the Partnership and such Partner's capital contribution (including returns thereof), and such Partner's share of profits or losses thereof, and shall have no recourse therefor (upon dissolution or otherwise) against the General Partner, except under the Partnership Guarantee. No Partner shall have any right to demand or receive property other than cash upon dissolution and termination of the Partnership. 56 Section 13.6 TERMINATION. The Partnership shall terminate when all of the assets of the Partnership shall have been disposed of and the assets shall have been distributed as provided in Section 13.4 and the Liquidator has executed and caused to be filed a certificate of cancellation of the Partnership. ARTICLE XIV AMENDMENTS AND MEETINGS Section 14.1 AMENDMENTS. Except as provided by Section 3.3(b) and Section 6.2(i), this Agreement may be amended by, and only by, a written instrument executed by the General Partner without the consent of any Limited Partner; provided, however, that no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to (A) cause the Partnership to be treated for United States federal income tax purposes as an association or a publicly traded partnership taxable as a corporation, (B) require the Partnership to register under the 1940 Act or (C) materially adversely affect the rights, privileges or preferences of the Partnership Preferred Securities. Notwithstanding any provision to the contrary, in the event of (i) a liquidation of the Trust for any reason or (ii) any other distribution which effectively causes Partnership Preferred Securities to be distributed to Holders of Trust Preferred Securities, the General Partner may amend this Agreement without the consent of the Limited Partners to provide for (A) orderly dissemination, purchase, sale, exchange and replacement of such Partnership Preferred Securities, (B) all other matters to the extent required by or desirable under then applicable law and (C) such other matters reasonably incidental or related thereto; provided, however, that no such amendment may materially adversely affect the rights, privileges, or preferences of the Partnership Preferred Securities without the consent of a majority in interest of the Partners so effected. Section 14.2 AMENDMENT OF CERTIFICATE. In the event this Agreement shall be amended pursuant to Section 14.1, the General Partner shall amend the Certificate to reflect such change if it deems such amendment of the Certificate to be necessary or appropriate. 57 Section 14.3 MEETINGS OF PARTNERS. (a) Meetings of the Limited Partners who are Holders may be called at any time by the General Partner to consider and act on any matter on which Limited Partners are entitled to act under the terms of this Agreement or the Act. The General Partner shall call a meeting of Holders if directed to do so by Holders of no less than 10% in Liquidation Preference as permitted by this Agreement. Such direction shall be given by delivering to the General Partner a request in writing stating that the signing Limited Partners desire to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Limited Partners calling a meeting shall specify in writing the L.P. Certificates held by the Limited Partners exercising the right to call a meeting and only those specified Interests shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. Except to the extent otherwise provided in this Agreement, the following provisions shall apply to meetings of Partners. (b) Notice of any such meeting shall be given to all Limited Partners having a right to vote thereat not less than seven Business Days nor more than 60 days prior to the date of such meeting. Each such notice shall set forth the date, time and place of the meeting, a description of any matter on which Holders are entitled to vote and instructions for the delivery of proxies or written consents. (c) Any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if a consent in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum Interests that would be necessary to authorize or take such action at a meeting in which all Limited Partners having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Limited Partners entitled to vote who have not consented in writing. The General Partner may provide that any written ballot submitted to the Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within a specified time. 58 (d) Each Partner may authorize any Person to act for it by proxy on all matters as to which a Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Partner or its attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Partner executing it. Except as otherwise provided herein, or pursuant to Section 14.3(f), all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Partnership were a Delaware corporation and the Limited Partners were stockholders of a Delaware corporation. (e) Each meeting of Partners shall be conducted by the General Partner or by such other Person that the General Partner may designate. (f) The General Partner may establish all other reasonable procedures relating to meetings of Limited Partners or the giving of written consents, in addition to those expressly provided, including notice of time, place or purpose of any meeting at which any matter is to be voted on by any Partners, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XV MISCELLANEOUS Section 15.1 NOTICES. All notices provided for in this Agreement shall be in writing, and shall be delivered or mailed by first class or registered or certified mail or, with respect to the Partnership and General Partner, telecopied, as follows: (a) if given to the Partnership, in care of the General Partner at the Partnership's mailing address set forth below: 59 AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Attention: Treasurer (b) if given to the General Partner, at its mailing address set forth below: AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Attention: Treasurer (c) if given to any other Partner at the address set forth on the books and records of the Partnership. Section 15.2 POWER OF ATTORNEY. Each Holder of a Partnership Preferred Security does hereby constitute and appoint the General Partner, and if applicable, any Special Representative appointed pursuant to Section 6.2(h)(i) of this Agreement, as its true and lawful representative and attorney-in-fact, in its name, place and stead to make, execute, sign, deliver and file (a) any amendment of the Certificate required because of an amendment of this Agreement or in order to effect any change in the Partnership, (b) this Agreement, (c) any amendments to this Agreement and (d) all such other instruments, documents and certificates which from time to time may be required by the laws of the United States of America, the State of Delaware or any other jurisdiction, or any political subdivision or agency thereof, to effectuate, implement and continue the valid and subsisting existence of the Partnership or to dissolve the Partnership for any other purpose consistent with this Agreement and the transactions contemplated hereby. The power of attorney granted hereby is coupled with an interest and shall (a) survive and not be affected by the subsequent death, incapacity, disability, dissolution, termination, or bankruptcy of the Holder granting the same or the transfer of all or any portion of such Holder's Interest and (b) extend to such Holder's successors, assigns and legal representatives. Section 15.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties. It 60 supersedes any prior agreement or understandings among them, and it may not be modified or amended in any manner other than as set forth herein. Section 15.4 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Section 15.5 EFFECT. Except as herein otherwise specifically provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, successors and assigns. Section 15.6 PRONOUNS AND NUMBER. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, feminine or neuter shall include the masculine, feminine and neuter. Section 15.7 CAPTIONS. Captions, headings, and subheadings contained in this Agreement are included for convenience and identification purposes only and in no way define, limit or extend the scope or intent of this Agreement or any provision herein. Section 15.8 PARTIAL ENFORCEABILITY. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. Section 15.9 COUNTERPARTS. This Agreement may contain more than one counterpart of the signature page and this Agreement may be executed by the affixing of the signature of each of the Partners to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 61 Section 15.10 WAIVER OF PARTITION. Each Partner hereby irrevocably waives any and all rights (if any) that such Partner may have to maintain any action for partition of any of the Partnership's property. Section 15.11 REMEDIES. The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 62 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above stated. GENERAL PARTNER: AT&T CAPITAL CORPORATION a Delaware corporation By: _____________________________________ Name: Title: INITIAL LIMITED PARTNER: JEFFERY F. NASH, an individual By: _____________________________________ Name: Title: 63 ANNEX A FORM OF PARTNERSHIP PREFERRED SECURITY CERTIFICATE [IF THE PARTNERSHIP PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT: This Partnership Preferred Security is a Global Certificate within the meaning of the Partnership Agreement hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depositary") or a nominee of the Depositary. This Partnership Preferred Security is exchangeable for Partnership Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Partnership Agreement and no transfer of this Partnership Preferred Security (other than a transfer of this Partnership Preferred Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Partnership Preferred Security is presented by an authorized representative of The Depository Partnership Company (55 Water Street, New York, New York) to the Partnership or its agent for registration of transfer, exchange or payment, and any Partnership Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary and any payment hereon is made to Cede & Co. or such other name as requested by or authorized representations of the Depositary, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Partnership Preferred Securities CUSIP NO. [ ] Certificate Evidencing Partnership Preferred Securities of CAPITA PREFERRED FUNDING L.P. ____% Partnership Preferred Securities (liquidation amount $25 per Partnership Preferred Security) CAPITA PREFERRED FUNDING L.P., a limited partnership formed under the laws of the State of Delaware (the "Partnership"), hereby certifies that ______________ (the "Holder") is the registered owner of preferred securities of the Partnership representing limited partnership interests in the assets of the Partnership designated the _____% Partnership Preferred Securities (liquidation amount $25 per Partnership Preferred Security) (the "Partnership Preferred Securities"). The Partnership Preferred Securities are transferable on the books and records of the Partnership, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Partnership Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Agreement of Limited Partnership dated as of October _, 1996, as the same may be amended from time to time (the "Partnership Agreement"). Capitalized terms used herein but not defined shall have the meaning given them in the Partnership Agreement. The Holder is entitled to the benefits of the Partnership Guarantee Agreement, dated October ___, 1996 by the Company (the "Partnership Guarantee Agreement") to the extent provided therein. The Sponsor will provide a copy of the Partnership Agreement, and the Partnership Guarantee Agreement to a Holder without charge upon written request to the Partnership at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Partnership Agreement and is entitled to the benefits thereunder. 2 IN WITNESS WHEREOF, the Partnership has executed this certificate this ___ day of __, 199_. CAPITA PREFERRED FUNDING L.P. By: AT&T CAPITAL CORPORATION as General Partner By:__________________________ Name: 3 [FORM OF REVERSE OF SECURITY] Distributions payable on each Partnership Preferred Security will be fixed at a rate per annum of ______% of the stated liquidation amount of $25 per Partnership Preferred Security. Distributions not paid on the scheduled payment date will accumulate and compound quarterly (to the extent permitted by applicable law) at the rate of ____ % per annum. The term "Distributions" as used herein shall mean ordinary cumulative distributions in respect of each Fiscal Period together with any Compounded Distributions. Distributions on the Partnership Preferred Securities will be made to the extent that the Partnership has funds available for the payment of such distributions. Amounts available to the Partnership for distribution to the holders of the Partnership Preferred Securities will be limited to payments received by the Partnership from the Company and certain wholly owned subsidiaries on the Initial Debentures and Affiliate Investment Instruments or from the Company on the Partnership Guarantee or on the Eligible Debt Securities. Distributions on the Partnership Preferred Securities will be paid only if, as and when declared in the sole discretion of the Company, as the General Partner of the Partnership. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed per 90-day quarter. Except as otherwise described below, distributions on the Partnership Preferred Securities will be cumulative, will accrue from the date of initial issuance and will be payable quarterly in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 1996 if, as and when declared by the General Partner. As long as the Partnership Preferred Securities remain in book-entry-only form, Distributions will be payable to the Holders of record of Partnership Preferred Securities as they appear on the books and records of the Partnership on the relevant record dates, which will be one Business Day prior to the relevant payment dates. If the Trust or the Property Trustee is the Holder of the Partnership Preferred Securities, all distributions of cash shall be made by wire transfer of same day funds to such Holder by 10:00 a.m., New York City time, on the applicable Distribution Payment Date. Distributions payable on any Partnership Preferred Securities that are not punctually paid on any Dis- 4 tribution Payment Date will cease to be payable to the Person in whose name such Partnership Preferred Securities are registered on the relevant record date, and such Distribution will instead be payable to the Person in whose name such Partnership Preferred Securities are registered on the special record date or other specified date for payment of such defaulted or accrued Distribution. In the event that the Partnership Preferred Securities do not remain in book-entry-only form, the relevant record dates shall be the 15th day of the month of the relevant payment dates. In the event that any date on which distributions are payable is not a Business Day, payment of the Distribution shall be made on the next succeeding day which is a Business Day (without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, with the same force and effect as if made on such date. Payments of accrued Distributions will be payable to Holders of record of Partnership Preferred Securities as they appear on the books and records of the Partnership on the record date with respect to the payment date for the Partnership Preferred Securities which corresponds to the payment date with respect to the payment of cumulative distributions on the Initial Debentures, Affiliate Investment Instruments and Eligible Debt Securities. If distributions are not paid on the Initial Debentures, Affiliate Investment Instruments and Eligible Debt Securities on any regularly scheduled payment date, the Partnership will not pay Distributions on the Partnership Preferred Securities until the Partnership has sufficient funds available for such Distributions. If the Distributions are not paid on the Partnership Preferred Securities, such unpaid Distributions will accumulate and will bear interest compounded quarterly at the rate set out above. The Partnership Preferred Securities shall be redeemable as provided in the Partnership Agreement. 5 --------------------- ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Partnership Preferred Security Certificate to: - --------------------------------------------------------------- - --------------------------------------------------------------- - --------------------------------------------------------------- - --------- (Insert assignee's social security or tax identification number) - --------------------------------------------------------------- - --------------------------------------------------------------- - --------------------------------------------------------------- - --------------------------------------------------------------- - -------- (Insert address and zip code of assignee) and irrevocably appoints - --------------------------------------------------------------- - --------------------------------------------------------------- - ---------------------------------------------------- agent to transfer this Partnership Preferred Security Certificate on the books of the Partnership. The agent may substitute another to act for him or her. Date: ----------------------- Signature: -------------------- (Sign exactly as your name appears on the other side of this Partnership Preferred Security Certificate) 1 EX-4 5 EXHIBIT 4.6 ==================================== TRUST PREFERRED SECURITIES GUARANTEE AGREEMENT Capita Preferred Trust Dated as of October __, 1996 ==================================== TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation.......................... 2 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application........................ 6 SECTION 2.2 Lists of Holders of Securities.......................... 6 SECTION 2.3 Reports by the Trust Preferred Guarantee Trustee................................................. 7 SECTION 2.4 Periodic Reports to Trust Preferred Guarantee Trustee................................................. 7 SECTION 2.5 Evidence of Compliance with Conditions Precedent............................................... 7 SECTION 2.6 Events of Default; Waiver............................... 7 SECTION 2.7 Event of Default; Notice................................ 8 SECTION 2.8 Conflicting Interests................................... 8 ARTICLE III POWERS, DUTIES AND RIGHTS OF TRUST PREFERRED GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Trust Preferred Guarantee Trustee....................................... 8 SECTION 3.2 Certain Rights of Trust Preferred Guarantee Trustee..... 10 SECTION 3.3. Not Responsible for Recitals or Issuance of Trust Preferred Securities Guarantee................. 13 ARTICLE IV TRUST PREFERRED GUARANTEE TRUSTEE SECTION 4.1 Trust Preferred Guarantee Trustee; Eligibility.......... 13 SECTION 4.2 Appointment, Removal and Resignation of Trust Preferred Guarantee Trustee....................... 14 ARTICLE V GUARANTEE SECTION 5.1 Guarantee............................................... 15 SECTION 5.2 Waiver of Notice and Demand............................. 15 SECTION 5.3 Obligations Not Affected................................ 15 SECTION 5.4 Rights of Holders....................................... 16 SECTION 5.5 Guarantee of Payment.................................... 17 Page ---- SECTION 5.6 Subrogation............................................. 17 SECTION 5.7 Independent Obligations................................. 17 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions.............................. 17 SECTION 6.2 Ranking................................................. 18 ARTICLE VII TERMINATION SECTION 7.1 Termination............................................. 18 ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation............................................. 19 SECTION 8.2 Indemnification......................................... 19 ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns.................................. 20 SECTION 9.2 Amendments.............................................. 20 SECTION 9.3 Notices................................................. 20 SECTION 9.4 Benefit................................................. 21 SECTION 9.5 Governing Law........................................... 21 ii TRUST PREFERRED SECURITIES GUARANTEE AGREEMENT This TRUST PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Trust Preferred Securities Guarantee"), dated as of October __, 1996, is executed and delivered by AT&T Capital Corporation, a Delaware corporation (the "Guarantor"), and The First National Bank of Chicago, N.A., a national banking association, as trustee (the "Trust Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Trust Preferred Securities (as defined herein) of Capita Preferred Trust, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of October __, 1996, among the trustees of the Issuer named therein, AT&T Capital Corporation, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof [ ] trust originated preferred securities, having an aggregate liquidation amount of $[ ], designated the [ ]% Trust Originated Preferred Securities (the "Trust Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the Trust Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Trust Preferred Securities Guarantee, to pay to the Holders of the Trust Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein and; WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Trust Common Securities Guarantee") in substantially identical terms to this Trust Preferred Securities Guarantee for the benefit of the holders of the Trust Common Securities (as defined herein), except that if a Trust Enforcement Event (as defined in the Declaration), has occurred and is continuing, the rights of holders of the Trust Common Securities to receive Guarantee Payments under the Trust Common Securities Guarantee are subordinated to the rights of Holders of Trust Preferred Securities to receive Guarantee Payments under this Trust Preferred Securities Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Trust Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Trust Preferred Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation In this Trust Preferred Securities Guarantee, unless the context otherwise requires: (a) Capitalized terms used in this Trust Preferred Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) Capitalized terms used in this Trust Preferred Securities Guarantee but not otherwise defined herein shall have the meanings assigned to them in the Declaration or the Partnership Agreement, as the case may be. (c) a term defined anywhere in this Trust Preferred Securities Guarantee has the same meaning throughout; (d) all references to "the Trust Preferred Securities Guarantee" or "this Trust Preferred Securities Guarantee" are to this Trust Preferred Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Trust Preferred Securities Guarantee to Articles and Sections are to Articles and Sections of this Trust Preferred Securities Guarantee, unless otherwise specified; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Trust Preferred Securities Guarantee, unless otherwise defined in this Trust Preferred Securities Guarantee or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" means, with respect to any specified person, any other person that directly or indirectly controls or is controlled by, or is under common control with, such specified person, provided, that, with respect to the Guarantor, "Affiliate" shall be deemed to also include any entity of which at least 20% of the capital stock is owned by a person that directly or indirectly controls the Guarantor. 2 "Affiliated Restricted Payments" means any payment (including, without limitation, payments for the sale, purchase or lease of any assets or properties or the rendering of any services) to any Affiliate of the Guarantor, except for Permissible Affiliated Payments. "Business Day" means any day other than a day on which banking institutions in the City of New York, New York are authorized or required by any applicable law to close. "Corporate Trust Office" means the office of the Trust Preferred Guarantee Trustee at which the corporate trust business of the Trust Preferred Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 153 West 53rd Street, New York, New York 10019. "Covered Person" means any Holder or beneficial owner of Trust Preferred Securities. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Trust Preferred Securities Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Trust Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Trust Preferred Securities to the extent the Issuer shall have funds available therefor, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Issuer has funds available therefor, with respect to any Trust Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Partnership Preferred Securities to the Holders in exchange for Trust Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Trust Preferred Securities to the date of payment and (b) the amount of assets of the Issuer, after satisfaction of all liabilities, remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). "Holder" shall mean any holder, as registered on the books and records of the Issuer of any Trust Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Trust Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" 3 shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Trust Preferred Guarantee Trustee, any Affiliate of the Trust Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Trust Preferred Guarantee Trustee. "Majority in liquidation amount of the Trust Preferred Securities" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of Trust Preferred Securities, voting separately as a class, of more than 50% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Trust Preferred Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Trust Preferred Securities Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Partnership" means Capita Preferred Funding, L.P. "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of October __, 1996, among AT&T Capital Corporation, a Delaware corporation, as general partner, Jeffery F. Nash, an individual, as initial limited partner and such other persons who become limited partners as provided therein. 4 "Partnership Preferred Securities" means those securities representing limited partnership interests in the Partnership. "Permissible Affiliated Payments" means (i) payments by the Company or its subsidiaries (other than the Partnership or the Trust) to Affiliates of the Company for management or other advisory services not to exceed $10 million per annum and (ii) transactions made in good faith the terms of which are fair and reasonable to the Company or such majority owned subsidiary, as the case may be, and are at least as favorable as terms which could be obtained by the Company or such majority-owned subsidiary, as the case may be, in a comparable transaction made on an arm's length basis with persons which are not Affiliates of the Company; provided, that, with respect to a payment or a series of payments not greater than $1 million, such payments shall be conclusively deemed to be on terms which are fair and reasonable to the Company or any of its majority-owned subsidiaries and on terms which are at least as favorable as the terms which could be obtained on an arm's length basis with persons who are not Affiliates if such payments are approved by a majority of the Company's independent directors; and provided, further, that with respect to a payment or a series of related payment or payments in excess of $1 million, the Company or such subsidiary shall either (A) have received a written opinion of a nationally recognized investment bank stating that the terms of such payment are fair to the Company or such subsidiary, as the case may be, from a financial point of view, or (B) have selected the Affiliate or Affiliates which are to receive such payments based upon a competitive bid procedure in which the Company or such subsidiary shall have received at least two independent bids, administered in good faith and on commercially reasonable terms by the Company or such subsidiary. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Trust Preferred Guarantee Trustee, any officer within the Corporate Trust Office of the Trust Preferred Guarantee Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Trust Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. 5 "Successor Trust Preferred Guarantee Trustee" means a successor Trust Preferred Guarantee Trustee possessing the qualifications to act as Trust Preferred Guarantee Trustee under Section 4.1. "Trust Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Trust Preferred Guarantee Trustee" means The First National Bank of Chicago, N.A., a national banking association, until a Successor Trust Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Trust Preferred Securities Guarantee and thereafter means each such Successor Trust Preferred Guarantee Trustee. "Trust Securities" means the Trust Common Securities together with the Trust Preferred Securities. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application (a) This Trust Preferred Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Preferred Securities Guarantee and shall, to the extent applicable, be governed by such provisions; and (b) if and to the extent that any provision of this Trust Preferred Securities Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities (a) The Guarantor shall provide the Trust Preferred Guarantee Trustee with a list, in such form as the Trust Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Trust Preferred Securities ("List of Holders") as of such date, (i) within one (1) Business Day after January 1 and June 30 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Trust Preferred Guarantee Trustee provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of 6 Holders does not differ from the most recent List of Holders given to the Trust Preferred Guarantee Trustee by the Guarantor. The Trust Preferred Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Trust Preferred Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Trust Preferred Guarantee Trustee Within 60 days after May 15 of each year, the Trust Preferred Guarantee Trustee shall provide to the Holders of the Trust Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Trust Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Trust Preferred Guarantee Trustee The Guarantor shall provide to the Trust Preferred Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent The Guarantor shall provide to the Trust Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Trust Preferred Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver The Holders of a Majority in liquidation amount of Trust Preferred Securities may, by vote, on behalf of the Holders of all of the Trust Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Trust Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. 7 SECTION 2.7 Event of Default; Notice (a) The Trust Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Trust Preferred Securities, notices of all Events of Default actually known to a Responsible Officer of the Trust Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, the Trust Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trust Preferred Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Trust Preferred Securities Trust Preferred Securities. (b) The Trust Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Trust Preferred Guarantee Trustee shall have received written notice, or of which a Responsible Officer of the Trust Preferred Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge. SECTION 2.8 Conflicting Interests The Declaration shall be deemed to be specifically described in this Trust Preferred Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF TRUST PREFERRED GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Trust Preferred Guarantee Trustee (a) This Trust Preferred Securities Guarantee shall be held by the Trust Preferred Guarantee Trustee for the benefit of the Holders of the Trust Preferred Securities, and the Trust Preferred Guarantee Trustee shall not transfer this Trust Preferred Securities Guarantee to any Person except a Holder of Trust Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Trust Preferred Guarantee Trustee on acceptance by such Successor Trust Preferred Guarantee Trustee of its appointment to act as Successor Trust Preferred Guarantee Trustee. The right, title and interest of the Trust Preferred Guarantee Trustee shall automatically vest in any Successor Trust Preferred Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Trust Preferred Guarantee Trustee. 8 (b) If an Event of Default actually known to a Responsible Officer of the Trust Preferred Guarantee Trustee has occurred and is continuing, the Trust Preferred Guarantee Trustee shall enforce this Trust Preferred Securities Guarantee for the benefit of the Holders of the Trust Preferred Securities. (c) The Trust Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Trust Preferred Securities Guarantee, and no implied covenants shall be read into this Trust Preferred Securities Guarantee against the Trust Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Trust Preferred Guarantee Trustee, the Trust Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Trust Preferred Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Trust Preferred Securities Guarantee shall be construed to relieve the Trust Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Trust Preferred Guarantee Trustee shall be determined solely by the express provisions of this Trust Preferred Securities Guarantee, and the Trust Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Preferred Securities Guarantee, and no implied covenants or obligations shall be read into this Trust Preferred Securities Guarantee against the Trust Preferred Guarantee Trustee; and (B) in the absence of bad faith on the part of the Trust Preferred Guarantee Trustee, the Trust Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trust Preferred Guarantee Trustee and conforming to the requirements of this Trust Preferred Securities Guarantee; but in the case of any such certificates or opinions that by any pro- 9 vision hereof are specifically required to be furnished to the Trust Preferred Guarantee Trustee, the Trust Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Trust Preferred Securities Guarantee; (ii) the Trust Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trust Preferred Guarantee Trustee, unless it shall be proved that the Trust Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Trust Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of Trust Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trust Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Trust Preferred Guarantee Trustee under this Trust Preferred Securities Guarantee; and (iv) no provision of this Trust Preferred Securities Guarantee shall require the Trust Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Trust Preferred Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Trust Preferred Securities Guarantee or indemnity, reasonably satisfactory to the Trust Preferred Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of Trust Preferred Guarantee Trustee (a) Subject to the provisions of Section 3.1: (i) The Trust Preferred Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. 10 (ii) Any direction or act of the Guarantor contemplated by this Trust Preferred Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Trust Preferred Securities Guarantee, the Trust Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Trust Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Trust Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof). (v) The Trust Preferred Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Trust Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Trust Preferred Securities Guarantee from any court of competent jurisdiction. (vi) The Trust Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Preferred Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Trust Preferred Guarantee Trustee such security and indemnity, reasonably satisfactory to the Trust Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Preferred Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Trust Preferred Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Trust Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Trust Preferred Securities Guarantee. 11 (vii) The Trust Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trust Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Trust Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Trust Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Trust Preferred Guarantee Trustee or its agents hereunder shall bind the Holders of the Trust Preferred Securities, and the signature of the Trust Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Trust Preferred Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Trust Preferred Securities Guarantee, both of which shall be conclusively evidenced by the Trust Preferred Guarantee Trustee or its agent taking such action. (x) Whenever in the administration of this Trust Preferred Securities Guarantee the Trust Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Trust Preferred Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Trust Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Trust Preferred Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Trust Preferred Securities Guarantee. (b) No provision of this Trust Preferred Securities Guarantee shall be deemed to impose any duty or obligation on the Trust Preferred Guarantee Trustee to perform any act or acts or 12 exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Trust Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Trust Preferred Guarantee Trustee shall be construed to be a duty. SECTION 3.3. Not Responsible for Recitals or Issuance of Trust Preferred Securities Guarantee The recitals contained in this Trust Preferred Securities Guarantee shall be taken as the statements of the Guarantor, and the Trust Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Trust Preferred Guarantee Trustee makes no representation as to the validity or sufficiency of this Trust Preferred Securities Guarantee. ARTICLE IV TRUST PREFERRED GUARANTEE TRUSTEE SECTION 4.1 Trust Preferred Guarantee Trustee; Eligibility (a) There shall at all times be a Trust Preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Trust Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Trust Preferred Guarantee Trustee shall immediately 13 resign in the manner and with the effect set out in Section 4.2(c). (c) If the Trust Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Trust Preferred Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Trust Preferred Guarantee Trustee (a) Subject to Section 4.2(b), the Trust Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. (b) The Trust Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Trust Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Trust Preferred Guarantee Trustee and delivered to the Guarantor. (c) The Trust Preferred Guarantee Trustee appointed to office shall hold office until a Successor Trust Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Trust Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Trust Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Trust Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Trust Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Trust Preferred Guarantee Trustee. (d) If no Successor Trust Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of removal or resignation, the Trust Preferred Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Trust Preferred Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Trust Preferred Guarantee Trustee. (e) No Trust Preferred Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Trust Preferred Guarantee Trustee. (f) Upon termination of this Trust Preferred Securities Guarantee or removal or resignation of the Trust Preferred Guarantee Trustee pursuant to this Section 4.2, the Guarantor 14 shall pay to the Trust Preferred Guarantee Trustee all amounts accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE SECTION 5.1 Guarantee The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), if, as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand The Guarantor hereby waives notice of acceptance of this Trust Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected The obligations, covenants, agreements and duties of the Guarantor under this Trust Preferred Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Trust Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Trust Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Trust Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Partnership Preferred Securities or any extension of the 15 maturity date of the Partnership Preferred Securities permitted by the Partnership Agreement); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Trust Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Trust Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders (a) The Holders of a Majority in liquidation amount of the Trust Preferred Securities have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Trust Preferred Guarantee Trustee in respect of this Trust Preferred Securities Guarantee or exercising any trust or power conferred upon the Trust Preferred Guarantee Trustee under this Trust Preferred Securities Guarantee. (b) If the Trust Preferred Guarantee Trustee fails to enforce its rights under the Trust Preferred Securities Guarantee after a Holder of Trust Preferred Securities has made a written request, such Holder of Trust Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce the Trust Preferred Guarantee Trustee's rights under this Trust Preferred Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Trust Preferred Guarantee Trustee or any other person or entity. Notwithstanding the 16 foregoing, if the Guarantor has failed to make a guarantee payment, a Holder of Trust Preferred Securities may directly institute a proceeding in such Holder's own name against the Guarantor for enforcement of the Trust Preferred Securities Guarantee for such payment. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment This Trust Preferred Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation The Guarantor shall be subrogated to all (if any) rights of the Holders of Trust Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Trust Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Trust Preferred Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Trust Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Trust Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Trust Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions So long as any Trust Preferred Securities remain outstanding, if (a) for any distribution period, full distributions on a cumulative basis on any Trust Preferred Securities have not been paid or declared and set apart for payment, (b) an Invest- 17 ment Event of Default by any Investment Affiliate in respect of any Affiliate Investment Instrument has occurred and is continuing, or (c) the Company is in default of its obligations under the Trust Preferred Securities Guarantee, the Trust Common Securities Guarantee, the Partnership Guarantee or any Investment Guarantee, then, during such period the Company shall not, nor permit any majority owned subsidiary to (i) declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its capital stock or comparable equity interest (except for dividends or distributions in shares of its capital stock, conversions or exchanges of common stock of one class into common stock of another class and dividends, distributions with respect to the Partnership or the Trust or dividends and distributions on the common stock of wholly owned subsidiaries of the Company), (ii) make, or permit the making of, any Affiliated Restricted Payments except for Permissible Affiliated Payments, and (iii) make any guarantee payments with respect to the foregoing. SECTION 6.2 Ranking This Trust Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any Preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. Any similar guarantee given hereafter by the Company with respect to Trust Preferred Securities that is silent as to seniority will rank pari passu with this Trust Preferred Securities Agreement. ARTICLE VII TERMINATION SECTION 7.1 Termination This Trust Preferred Securities Guarantee shall terminate upon (i) full payment of the Redemption Price of all Trust Preferred Securities, (ii) upon the distribution of the Partnership Preferred Securities to the Holders of all of the Trust Preferred Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Trust Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Trust Preferred Securities must restore payment of any sums paid under the Trust Preferred Securities or under this Trust Preferred Securities Guarantee. 18 ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Trust Preferred Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Trust Preferred Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Trust Preferred Securities might properly be paid. SECTION 8.2 Indemnification The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Trust Preferred Securities Guarantee. 19 ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns All guarantees and agreements contained in this Trust Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Trust Preferred Securities then outstanding. SECTION 9.2 Amendments Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Trust Preferred Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all the outstanding Trust Preferred Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Securities apply to the giving of such approval. SECTION 9.3 Notices All notices provided for in this Trust Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Trust Preferred Guarantee Trustee, at the Trust Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Trust Preferred Guarantee Trustee may give notice of to the Holders of the Trust Preferred Securities): The First National Bank of Chicago 153 West 53rd Street New York, New York 10019 Attention: Mary R. Fonti Telecopy: (212) 373-1383 (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Trust Preferred Securities): AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07692 20 Attention: General Counsel Telecopy: (201) 397-4356 (c) If given to any Holder of Trust Preferred Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit This Trust Preferred Securities Guarantee is solely for the benefit of the Holders of the Trust Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Trust Preferred Securities. SECTION 9.5 Governing Law THIS TRUST PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. 21 THIS TRUST PREFERRED SECURITIES GUARANTEE is executed as of the day and year first above written. AT&T CAPITAL CORPORATION, as Guarantor By:________________________________ Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, as Trust Preferred Guarantee Trust- ee By:________________________________ Name: Title: 22 EX-4 6 EXHIBIT 4.7 ==================================== PARTNERSHIP GUARANTEE AGREEMENT Capita Preferred Funding, L.P. Dated as of October __, 1996 ==================================== TABLE OF CONTENTS PAGE ---- ARTICLE I.................................................................... 2 SECTION 1.1. Definitions............................................... 2 ARTICLE II................................................................... 4 SECTION 2.1. Guarantee................................................. 4 SECTION 2.2. Waiver of Notice and Demand............................... 4 SECTION 2.3. Obligations Not Affected.................................. 4 SECTION 2.4. Rights of Holders......................................... 5 SECTION 2.5. Guarantee of Payment...................................... 6 SECTION 2.6. Subrogation............................................... 6 SECTION 2.7. Independent Obligations................................... 7 ARTICLE III.................................................................. 7 SECTION 3.1. Limitation of Transactions................................ 7 SECTION 3.2. Ranking................................................... 7 ARTICLE IV................................................................... 8 SECTION 4.1. Termination............................................... 8 ARTICLE V.................................................................... 8 SECTION 5.1. Successors and Assigns.................................... 8 SECTION 5.2. Amendments................................................ 9 SECTION 5.3. Notices................................................... 9 SECTION 5.4. Gender.................................................... 9 SECTION 5.5. Benefit................................................... 9 SECTION 5.6. Governing Law............................................. 9 i PARTNERSHIP GUARANTEE AGREEMENT This PARTNERSHIP GUARANTEE AGREEMENT, dated as of ___________, 1996, is executed and delivered by AT&T Capital Corporation, a Delaware corporation (the "Company" or the "Guarantor"), for the benefit of the holders from time to time of the Partnership Preferred Securities (as defined below). WHEREAS, pursuant to an Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"), dated as of the date hereof, of Capita Preferred Funding, L.P., a Delaware limited partnership (the "Issuer"), the Issuer may issue a single series of limited partner interests in the Issuer (the "Partnership Preferred Securities"); WHEREAS, pursuant to the Partnership Agreement, the proceeds received by the Issuer from the issuance and sale of the Partnership Preferred Securities will be invested by the Issuer in the Affiliate Investment Instruments and Eligible Debt Securities (each as defined in the Partnership Agreement); and WHEREAS, the Guarantor, as incentive for the Holders (as defined herein) to purchase Partnership Preferred Securities, desires hereby irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Partnership Preferred Securities, which purchase the Guarantor hereby agrees shall directly or indirectly provide at least some material benefit to the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. ARTICLE I SECTION 1.1. Definitions As used in this Partnership Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Partnership Agreement. "Affiliate" means, with respect to any specified person, any other person that directly or indirectly controls or is controlled by, or is under common control with, such specified person, provided, that, with respect to the Guarantor, "Affiliate" shall be deemed to also include any entity of which at least 20% of the capital stock is owned by a person that directly or indirectly controls the Guarantor. "Affiliated Restricted Payments" means any payment (including, without limitation, payments for the sale, purchase or lease of any assets or properties or the rendering of any services) to any Affiliate of the Guarantor, except for Permissible Affiliated Payments. "Guarantee Payments" shall mean the following payments or distributions, without duplication, with respect to the Partnership Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid distributions that have theretofore been declared on the Partnership Preferred Securities out of funds legally available therefor, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price"), payable out of funds legally available therefor, with respect to any Partnership Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer, the lesser of (a) the aggregate of the liquidation preference and all accrued and unpaid distributions on the Partnership Preferred Securities to the date of payment and (b) the amount of assets of the Issuer after satisfaction of all liabilities remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). 2 "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Partnership Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Partnership Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Permissible Affiliated Payments" means (i) payments by the Company or its subsidiaries (other than the Partnership or the Trust) to Affiliates of the Company for management or other advisory services not to exceed $10 million per annum and (ii) transactions made in good faith the terms of which are fair and reasonable to the Company or such majority-owned subsidiary, as the case may be, and are at least as favorable as terms which could be obtained by the Company or such majority-owned subsidiary, as the case may be, in a comparable transaction made on an arm's length basis with persons which are not Affiliates of the Company; provided, that with respect to a payment or a series of payments not greater than $1 million, such payments shall be conclusively deemed to be on terms which are fair and reasonable to the Company or any of its majority-owned subsidiaries and on terms which are at least as favorable as the terms which could be obtained on an arm's length basis with persons who are not Affiliates if such payments are approved by a majority of the Company's independent directors; and provided, further, that with respect to a payment or a series of related payment or payments in excess of $1 million, the Company or such subsidiary shall either (A) have received a written opinion of a nationally recognized investment bank stating that the terms of such payment are fair to the Company or such subsidiary, as the case may be, from a financial point of view, or (B) have selected the Affiliate or Affiliates which are to receive such payments based upon a competitive bid procedure in which the Company or such subsidiary shall have received at least two independent bids, administered in good faith and on commercially reasonable terms by the Company or such subsidiary. 3 ARTICLE II SECTION 2.1. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments, as and when due (without duplication of amounts theretofore paid by the Issuer), regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 2.2. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Partnership Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 2.3. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Partnership Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Partnership Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Partnership Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the 4 Partnership Preferred Securities; provided that nothing in this Partnership Guarantee Agreement shall affect or impair any valid extension; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Partnership Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Partnership Preferred Securities; (f) the settlement or compromise of any obli- gation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 2.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 2.4. Rights of Holders The Guarantor expressly acknowledges that (i) this Partnership Guarantee Agreement will be deposited with the General Partner to be held for the benefit of the Holders; (ii) in the event of the appointment of a Special Representative to, among other things, enforce this Partnership Guarantee Agreement, the Special Representative may take possession of this Partnership Guarantee Agreement for such purpose; (iii) if no Special 5 Representative has been appointed, the General Partner has the right to enforce this Partnership Guarantee Agreement on behalf of the Holders; (iv) the Holders of not less than a majority in aggregate liquidation preference of the Partnership Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of this Partnership Guarantee Agreement including the giving of directions to the General Partner or the Special Representative, as the case may be; and (v) if the General Partner or Special Representative fails to enforce this Partnership Guarantee Agreement as above provided, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Partnership Guarantee Agreement, without first instituting a legal proceeding against the Issuer or any other person or entity. Notwithstanding the foregoing, if the Guarantor has failed to make a guarantee payment, a Holder may directly institute a proceeding against Guarantor to enforce such payment under this Partnership Guarantee Agreement. SECTION 2.5. Guarantee of Payment This Partnership Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full to the extent not paid by the Issuer. SECTION 2.6. Subrogation The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Partnership Guarantee Agreement provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Partnership Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Partnership Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. 6 SECTION 2.7. Independent Obligations The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Partnership Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Partnership Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (f), inclusive, of Section 2.3 hereof. ARTICLE III SECTION 3.1. Limitation of Transactions So long as any Partnership Preferred Securities remain outstanding, if (a) for any distribution period, full distributions on a cumulative basis on any Partnership Preferred Securities have not been paid or declared and set apart for payment (b) there shall have occurred an Event of Default under the Partnership Agreement or (c) the Guarantor shall be in default with respect to its payment obligations under this Partnership Guarantee Agreement, the Trust Preferred Securities Guarantee, the Trust Common Securities Guarantee or any [Investment Guarantee] then, during such period the Company shall not, nor permit any majority owned subsidiary to (i) declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to any of its capital stock or comparable equity interest (except for dividends or distributions in shares of its capital stock, conversions or exchanges of common stock of one class into common stock of another class and dividends, distributions with respect to the Partnership or the Trust or dividends and distributions on the common stock of wholly owned subsidiaries of the Company), (ii) make, or permit the making of, any Affiliated Restricted Payments except for Permissible Affiliated Payments, and (iii) make any guarantee payments with respect to the foregoing. SECTION 3.2. Ranking This Partnership Guarantee Agreement will constitute an unsecured obligation of the Guarantor and 7 will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued from time to time by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. Any similar guarantee given hereafter by the Company with respect to Partnership Preferred Securities that is silent as to seniority will rank pari passu with this Partnership Guarantee Agreement. ARTICLE IV SECTION 4.1. Termination This Partnership Guarantee Agreement shall terminate and be of no further force and effect, as to the Partnership Preferred Securities, upon full payment of the Redemption Price of all Partnership Preferred Securities, and will terminate completely upon full payment of the amounts payable in accordance with the Partnership Agreement upon liquidation of the Issuer. This Partnership Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must, in accordance with Delaware Revised Uniform Limited Partnership Act, restore payment of any sums paid under any Partnership Preferred Securities or this Partnership Guarantee Agreement. ARTICLE V SECTION 5.1. Successors and Assigns All guarantees and agreements contained in this Partnership Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Partnership Preferred Securities then outstanding. 8 SECTION 5.2. Amendments Except with respect to any changes which do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Partnership Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a majority in liquidation preference of all the outstanding Partnership Preferred Securities. SECTION 5.3. Notices Any notice, request or other communication required or permitted to be given hereunder to the Guarantor shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), addressed to the Guarantor, as follows (and if so given, shall be deemed given when mailed): AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 Attention: General Counsel Facsimile No: (201) 397-4356 Any notice, request or other communication required or permitted to be given hereunder to the Holders shall be given by the Guarantor in the same manner as notices sent by the Issuer to the Holders. SECTION 5.4. Gender The masculine, feminine and neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 5.5. Benefit This Partnership Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Partnership Preferred Securities. SECTION 5.6. Governing Law THIS PARTNERSHIP GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 9 THIS PARTNERSHIP GUARANTEE AGREEMENT is executed as of the day and year first above written. AT&T CAPITAL CORPORATION By: __________________________ Name: Title: EX-4 7 EXHIBIT 4.8 AT&T CAPITAL CORPORATION, Issuer, AND THE FIRST NATIONAL BANK OF CHICAGO, N.A., Trustee ______________________ INDENTURE DATED AS OF OCTOBER __, 1996 ________________________ __% SUBORDINATED DEBENTURES DUE 2016 Certain Sections of this Indenture relating to Sections 310 through 318 of the Trust Indenture Act of 1939: Trust Indenture Indenture Act Section Section - --------------- ---------- Section 310(a)(1) ................................. 609 (a)(2) ................................. 609 (a)(3) ................................. Not Applicable (a)(4) ................................. Not Applicable (b) ................................. 608, 610 Section 311(a) ................................. 613 (b) ................................. 613 Section 312(a) ................................. 701 ................................. 702(a) (b) ................................. 702(b) (c) ................................. 702(c) Section 313(a) ................................. 703(a) (a)(4) ................................. 101, 1004 (b) ................................. 703(a) (c) ................................. 703(a) (d) ................................. 703(b) Section 314(a) ................................. 704 (b) ................................. Not Applicable (c)(1) ................................. 102 (c)(2) ................................. 102 (c)(3) ................................. Not Applicable (d) ................................. Not Applicable (e) ................................. 102 Section 315(a) ................................. 601 (b) ................................. 602 (c) ................................. 601 (d) ................................. 601 (e) ................................. 514 Section 316(a) ................................. 101 (a)(1)(A) ................................. 502 ................................. 512 (a)(1)(B) ................................. 513 (a)(2) ................................. Not Applicable (b) ................................. 508 (c) ................................. 104(c) Section 317(a)(1) ................................. 503 (a)(2) ................................. 504 (b) ................................. 1003 Section 318(a) ................................. 107 - ---------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. (i) TABLE OF CONTENTS Page ---- ARTICLE ONE Definitions and other Provisions of General Application......................... 1 SECTION 101. Definitions........................................... 1 SECTION 102. Compliance Certificates and Opinions.................. 10 SECTION 103. Form of Documents Delivered to Trustee................ 10 SECTION 104. Acts of Holders; Record Dates......................... 11 SECTION 105. Notices, Etc., to Trustee and the Company.......................................... 12 SECTION 106. Notice to Holders; Waiver............................. 12 SECTION 107. Conflict with Trust Indenture Act..................... 13 SECTION 108. Effect of Headings and Table of Contents......................................... 13 SECTION 109. Successors and Assigns................................ 13 SECTION 110. Separability Clause................................... 13 SECTION 111. Benefits of Indenture................................. 14 SECTION 112. GOVERNING LAW......................................... 14 SECTION 113. Legal Holidays........................................ 14 ARTICLE TWO Security Forms............................. 14 SECTION 201. Forms Generally....................................... 14 SECTION 202. Form of Face of Security.............................. 15 SECTION 203. Form of Reverse of Security........................... 17 SECTION 204. Form of Trustee's Certificate of Authentication................................... 20 ARTICLE THREE The Securities............................. 20 SECTION 301. Title and Terms....................................... 20 SECTION 302. Denominations.................................... 22 SECTION 303. Execution, Authentication, Delivery and Dating........................................... 22 SECTION 304. Temporary Securities.................................. 22 SECTION 305. Registration, Registration of Transfer and Exchange.................................... 23 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities...................................... 24 SECTION 307. Payment of Interest; Interest Rights Preserved....................................... 25 SECTION 308. Persons Deemed Owners................................. 26 SECTION 309. Cancellation.......................................... 26 SECTION 310. Computation of Interest............................... 27 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. (i) Page ---- ARTICLE FOUR Satisfaction and Discharge....................... 27 SECTION 401. Satisfaction and Discharge of Indenture............... 27 SECTION 402. Application of Trust Money............................ 28 ARTICLE FIVE Remedies................................ 28 SECTION 501. Events of Default..................................... 28 SECTION 502. Acceleration of Maturity; Rescission and Annulment................................... 29 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee...................... 30 SECTION 504. Trustee May File Proofs of Claim...................... 31 SECTION 505. Trustee May Enforce Claims Without Possession of Securities........................ 32 SECTION 506. Application of Money Collected........................ 32 SECTION 507. Limitation on Suits................................... 32 SECTION 508. Unconditional Right of Holders to Receive Principal and Interest.................. 33 SECTION 509. Restoration of Rights and Remedies.................... 33 SECTION 510. Rights and Remedies Cumulative........................ 34 SECTION 511. Delay or Omission Not Waiver.......................... 34 SECTION 512. Control by Holders.................................... 34 SECTION 513. Waiver of Past Defaults............................... 34 SECTION 514. Undertaking for Costs................................. 35 ARTICLE SIX The Trustee.............................. 35 SECTION 601. Certain Duties and Responsibilities................... 35 SECTION 602. Notice of Defaults.................................... 35 SECTION 603. Certain Rights of Trustee............................. 36 SECTION 604. Not Responsible for Recitals or Issuance of Securities.......................... 37 SECTION 605. May Hold Securities................................... 37 SECTION 606. Money Held in Trust................................... 37 SECTION 607. Compensation and Reimbursement........................ 38 SECTION 608. Disqualification; Conflicting Interests............... 38 SECTION 609. Corporate Trustee Required; Eligibility............... 38 SECTION 610. Resignation and Removal; Appointment of Successor....................................... 39 SECTION 611. Acceptance of Appointment by Successor................ 40 SECTION 612. Merger, Conversion, Consolidation or Succession to Business.......................... 40 SECTION 613. Preferential Collection of Claims Against Company................................. 41 ARTICLE SEVEN Holders' Lists and Reports by Trustee................. 41 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. (ii) Page ---- SECTION 701. Company to Furnish Trustee Names and Addresses of Holders............................ 41 SECTION 702. Preservation of Information; Communications to Holders....................... 41 SECTION 703. Reports by Trustee.................................... 42 ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease.......... 42 SECTION 801. Company May Consolidate, Etc., Only on Certain Terms..................... 42 SECTION 802. Successor Substituted................................. 43 ARTICLE NINE Supplemental Indentures........................ 44 SECTION 901. Supplemental Indentures Without Consent of Holders...................................... 44 SECTION 902. Supplemental Indentures with Consent of Holders......................................... 44 SECTION 903. Execution of Supplemental Indentures.................. 45 SECTION 904. Effect of Supplemental Indentures..................... 45 SECTION 905. Conformity with Trust Indenture Act................... 46 ARTICLE TEN Covenants; Representations and Warranties............... 46 SECTION 1001. Payment of Principal and Interest.................... 46 SECTION 1002. Maintenance of Office or Agency...................... 46 SECTION 1003. Money for Security Payments to Be Held in Trust........................................ 46 SECTION 1004. Reports by the Company .............................. 47 SECTION 1005. Limitations on Incurrence of Secured Debt............................................ 47 SECTION 1006. Limitations on Incurrence of Senior Indebtedness.]................................... 50 SECTION 1007. Statement as to Compliance; Notice of Certain Events of Default....................... 50 ARTICLE ELEVEN Subordination of Securities.......................... 51 SECTION 1101. Securities Subordinate to Senior Indebtedness.................................... 51 SECTION 1102. Payment Over of Proceeds upon Dissolution, etc................................ 51 SECTION 1103. No Payment When Senior Indebtedness in Default......................................... 53 SECTION 1104. Payment Permitted If No Default...................... 53 SECTION 1105. Subrogation to Rights of Holders of Senior Indebtedness............................. 53 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. (iii) Page ---- SECTION 1106. Provisions Solely to Define Relative Rights........................................... 54 SECTION 1107. Trustee to Effectuate Subordination.................. 54 SECTION 1108. No Waiver of Subordination Provisions................ 55 Section 1109. Notice to Trustee.................................... 55 SECTION 1110. Reliance on Judicial Order or Certificate of Liquidating Agent................. 56 SECTION 1111. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights................................. 56 SECTION 1112. Article Applicable to Paying Agents.................. 57 SECTION 1101. Guarantee; Status of Guarantee....................... 57 SECTION 1102. Execution of Guarantee............................... 58 SECTION 1103. Form of Notation of Guarantee........................ 59 ARTICLE TWELVE Redemption of Securities............................. 61 SECTION 1201. Optional Redemption.................................. 61 SECTION 1202. Applicability of Article............................. 61 SECTION 1203. Authorization for Redemption; Notice to Trustee...................................... 61 SECTION 1204. Selection by Trustee of Securities to Be Redeemed..................................... 62 SECTION 1205. Notice of Redemption................................. 62 SECTION 1206. Deposit of Redemption Price.......................... 63 SECTION 1207. Securities Payable on Redemption Date................ 63 SECTION 1208. Securities Redeemed in Part.......................... 63 - ---------- Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. (iv) INDENTURE, dated as of October __, 1996, from AT&T Capital Corporation, a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company"), to The First National Bank of Chicago, N.A. (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its ___% Subordinated Debentures due 2016 (the "Securities") as herein provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the Holders of the Securities: ARTICLE ONE Definitions and other Provisions of General Application SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Accounts Receivable" 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 2 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. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Additional Interest" means interest that shall accrue on any interest on the Securities that is in arrears for more than one quarter or not paid during an Extension Period, which in either case shall accrue at the rate of __% per annum compounded quarterly. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by certification, and delivered to the Trustee. "Business Day" means a day other than a day on which banking institutions in the City of New York are authorized or required by law to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. 3 "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman, a Vice Chairman, its President or a Vice President and delivered to the Trustee. "Consolidated EBIT" means, for any period, the sum of (i) Consolidated Net Income for such period plus (ii) to the extent deducted in determining such Consolidated Net Income, 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 Company and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Net Income" means, for any period, the net income (loss) (calculated (a) before preferred and common stock dividends and (b) exclusive of the effect of any extraordinary or other materials non-recurring gain or loss outside the ordinary course of business) of the Company 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 Company and any Restricted Subsidiaries as at the end of the most recent fiscal quarter of the Company for which such balance sheet is available, prepared in accordance with generally accepted accounting principles, less (a) all current liabilities (obligations whose liquidity is reasonably expected to occur within twelve months), (b) investments in and advances to Subsidiaries other than Restricted Subsidiaries or other entities accounted for on the equity method of accounting, and (c) Intangible Assets. "Intangible Assets" means the value (net of any applicable reserves), as shown on or reflected in the Company'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. "Corporate Trust Office" means the principal office of the Trustee in New York, New York, at which at any particular time its corporate trust business shall be administered and which at the date of this Indenture is 153 West 53rd Street, New York, New York 10019. "Defaulted Interest" has the meaning specified in Section 307. "Event of Default" has the meaning specified in Section 501. 4 "Extension Period" has the meaning specified in Section 301. "Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United States Code, as amended from time to time. "General Partner" means the Company, in its capacity as general partner of the Partnership. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Interest Payment Date", when used with respect to any installment of interest on a Security, means the date specified in such Security as the fixed date on which an installment of interest with respect to the Securities is due and payable. "Limited Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership, dated as of October __, 1996, of the Partnership, as amended, modified or otherwise supplemented from time to time. "Maturity", when used with respect to any Security, means the date on which the original of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Non-Recourse Debt" of the Company or any Restricted Subsidiary means any indebtedness for borrowed money of the Company or such Restricted Subsidiary, as the case may be, which is secured by any lien (as such term is used in Section 1006) 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 Company or such Restricted Subsidiary, as the case may be, and which is not a general obligation of the Company or such Restricted Subsidiary, as the case may be. "Officers' Certificate" means a certificate signed by (i) the Chairman, a Vice Chairman, the President, a Vice President, or the Treasurer of the Company and (ii) the Secretary or an Assistant Secretary of the Company and delivered to the Trustee; provided, however, that such certificate may be signed by two of the officers or directors listed in clause (i) above in 5 lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. One of the officers signing an Officer's Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 401, or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company. "Partnership" means Capita Preferred Funding, L.P., a Delaware limited partnership, and any successor thereto. 6 "Partnership Investment Company Event" means that the General Partner shall have requested and received an opinion of nationally recognized independent legal counsel experienced in such matters to the effect that as a result of the occurrence on or after the date hereof of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, the Partnership is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940. "Partnership Preferred Securities" means the __% limited partnership interests, liquidation amount $25 per Partnership Preferred Security, issued pursuant to the Limited Partnership Agreement. "Partnership Special Event" means either a Partnership Investment Company Event or a Partnership Tax Event. "Partnership Tax Event" means that the Company, as the general partner of the Partnership, shall have requested and received an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that there has been a Tax Action which affects any of the events described in (i) through (iii) below and that there is more than an insubstantial risk that (i) the Partnership is, or will be subject to United States federal income tax with respect to income accrued or received on the Affiliate Investment Instruments or the Eligible Debt Securities (each as defined in the Limited Partnership Agreement), (ii) the Partnership is, or will be subject to more than a de minimis amount of other taxes, duties or other governmental charges or (iii) interest payable by one or more of the obligors with respect to the Affiliate Investment Instruments to the Partnership is not, or will not be, deductible by the Company for United States federal income tax purposes. "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company which shall initially be The First National Bank of Chicago, N.A. "Person" means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to 7 evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the Business Day next preceding such Interest Payment Date. "Representative" means an indenture trustee or other trustee, agent or representative for an issue of Senior Indebtedness. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means each Subsidiary of the Company 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 1005) shall be a Restricted Subsidiary. "Securities" has the meaning specified in the Recitals to this instrument. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means the principal of, premium, if any, interest on and any other payment due pursuant to any of the following, whether outstanding at the date hereof or hereafter incurred, created or assumed: (i) all indebtedness of the Company (other than any obligations to trade creditors) evidenced by notes, debentures, bonds or other securities sold by the Company for money borrowed and capitalized lease obligations; 8 (ii) all indebtedness of others of the kinds described in the preceding clause (i) assumed or guaranteed in any manner by the Company or in effect guaranteed by the Company; and (iii) all renewals, extensions or refundings of indebtedness of the kinds described in either of the preceding clauses (i) or (ii), unless, in the case of any particular indebtedness, capitalized lease obligation, guarantee, renewal, extension or refunding, the instrument creating or evidencing the same or the assumption or guarantee of the same expressly provides that such indebtedness, renewal, extension or refunding is subordinated to or is pari passu with the Securities. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal, together with any accrued and unpaid interest (including Additional Interest), of such Security or such installment of interest is due and payable. "Subsidiary" means any Person a majority of the equity ownership or the Voting Stock of which is at the time owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Tax Action" means that there has been (a) an amendment to, change in or announced proposed change in the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) a judicial decision interpreting, applying, or clarifying such laws or regulations, (c) an administrative pronouncement or action that represents an official position (including a clarification of an official position) of the governmental authority or regulatory body making such administrative pronouncement or taking such action, or (d) a threatened challenge asserted in connection with an audit of the Company or any of its Subsidiaries, the Partnership, or the Trust, or a threatened challenge asserted in writing in connection with any other taxpayer that has raised capital through the issuance of securities that are substantially similar to the Securities, the Partnership Preferred Securities, or the Trust Preferred Securities, which amendment or change is adopted or which decision or pronouncement is announced or which action, clarification or challenge occurs on or after the date of this Indenture. 9 "Trust" means Capita Preferred Trust, a Delaware business trust, and any successor thereto. "Trust Agreement" has the meaning specified in the first paragraph of this instrument. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Preferred Securities" means the __% Trust Originated Preferred Securities, liquidation amount $25 per Trust Preferred Security, issued pursuant to the Trust Agreement. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirement set forth in this Indenture. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a 10 certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form any instrument. SECTION 104. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, 11 waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 105. Notices, Etc., to Trustee and the Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Trustee Administration, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified below or at any other address previously furnished in writing to the Trustee by the Company. If to the Company to: AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962-1963 Attention: Treasurer 12 SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in a notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly-owned Subsidiary, provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto. 13 SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the holders of Preferred Securities (to the extent provided herein) and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal of the Securities shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment of interest or principal of the Securities, as the case may be, shall be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity. ARTICLE TWO Security Forms SECTION 201. Forms Generally. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. 14 The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these or other methods, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 202. Form of Face of Security. AT&T CAPITAL CORPORATION __% Subordinated Debenture, Due 2016 No. _____________ $________ AT&T CAPITAL CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ________________, or registered assigns, the principal sum of ________ DOLLARS ($________) on ____________ __, 2016 and to pay interest on said principal sum from ___________ __, 1996 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1996, at the rate of __% per annum plus Additional Interest, if any, until the principal hereof shall have become due and payable, and on any overdue principal. The amount of interest payable for any period will be computed on the basis of twelve 30-day months and a 360-day year. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. A "Business Day" shall mean any day other than a day on which banking institutions in the City of New York are authorized or required by law to remain closed. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day next preceding such Interest Payment Date. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this security (or one or more Predecessor 15 Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. The Company shall have the right at any time during the term of this Security, from time to time, to extend the interest payment period of such Security for up to six consecutive quarters (an "Extension Period"), during which periods interest will compound quarterly and the Company shall have the right to make partial payments of interest on any Interest Payment Date, and at the end of which Extension Period the Company shall pay all interest then accrued and unpaid (together with Additional Interest thereon to the extent that payment of such interest is permitted by applicable law). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof shall not exceed six consecutive quarters or extend beyond the Maturity of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may select a new Extension Period, subject to the foregoing requirements. No interest shall be due and payable during an Extension Period except at the end thereof. The Company shall give the Holder of this Security and the Trustee notice of its selection of an Extension Period at least one Business Day prior to the earlier of (i) the Interest Payment Date or (ii) the date Capita Preferred Trust is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Trust Preferred Securities of the record date or the date such distributions are payable, but in any event not less than one Business Day prior to such record date. Payment of the principal of and interest on this Security will be made at the office or agency of the Company maintained for that purpose in New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in 16 right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture of each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of the Indenture summarized on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, AT&T Capital Corporation has caused this instrument to be duly executed under its corporate seal. Dated: ________, 1996 AT&T CAPITAL CORPORATION By:_________________________________________ Name: Title: Attest: ______________________ SECTION 203. Form of Reverse of Security. This Security is one of a duly authorized issue of Securities of the Company, designated as its __% Subordinated Debentures Due 2016 (herein called the "Securities"), limited in aggregate principal amount to $_____________ issued under an Indenture, dated as of __________ __, 1996 (herein called the "Indenture"), between the Company and The First National Bank of Chicago, N.A., as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference 17 is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. At any time on or after September 30, 2006, the Company shall have the right, subject to the terms and conditions of Article Twelve of the Indenture, to redeem this Security at the option of the Company, without premium or penalty, in whole or in part, at a Redemption Price equal to 100% of the principal amount to be redeemed plus accrued but unpaid interest, including any Additional Interest, if any, to the Redemption Date. If a Partnership Special Event shall occur and be continuing, the Company shall have the right, subject to the terms and conditions of Article Twelve of the Indenture, to redeem this Security, without premium or penalty, in whole but not in part, at a Redemption Price equal to 100% of the principal amount thereof plus accrued but unpaid interest, including any Additional Interest, if any, to the Redemption Date. Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Redemption Price. If the Securities are only partially redeemed by the Company, the Securities will be redeemed pro rata, by lot or in such other manner as the Trustee shall deem appropriate and fair in its discretion and that may provide for the selection of a portion or portions (equal to twenty-five U.S. dollars ($25) or any integral multiple thereof) of the principal amount of any Security. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default with respect to the Securities shall occur and be continuing, the principal of the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction and discharge at any time of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of Holders of not less than a majority in principal amount of the Outstanding Securities, to modify the Indenture in a manner affecting the rights of the Holders of the Securities; provided that no such modification may, without the consent of the Holder of each 18 Outstanding Security, (i) extend the fixed maturity of the Securities, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or (ii) reduce the percentage of principal amount of the Securities, the Holders of which are required to consent to any such modification of the Indenture. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in New York, New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this security for registration of transfer, the Company, the Trustee and any of their respective agents may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security shall be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different 19 authorized denomination, as requested by the Holder surrendering the same. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. SECTION 204. Form of Trustee's Certificate of Authentication. This is one of the Securities referred to in the within-mentioned Indenture. THE FIRST NATIONAL BANK OF CHICAGO, N.A., as Trustee By:______________________________________ Authorized Signatory ARTICLE THREE The Securities SECTION 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $___________, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other securities pursuant to Section 303, 304, 305, 306, 906 or 1208. The Securities shall be known and designated as the "___% Subordinated Debentures Due 2016" of the Company. Their Stated Maturity shall be _________ __, 2016, and they shall bear interest at the rate of ___% per annum, from _________ __, 1996 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable quarterly (subject to deferral as set forth herein), in arrears, on March 31, June 30, September 30 and December 31 of each year, commencing December 31, 1996 until the principal thereof is paid or made available for payment. Interest will compound quarterly and will accrue at the rate of ___% per annum on any interest installment in arrears for more than one quarter or during an extension of an interest payment period as set forth below in this Section 301. In the event that any date on which interest is payable on the Securities is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date shall be the immediately preceding Business Day) (and without any interest or other payment in respect of any such delay). 20 The Company shall have the right, at any time during the term of the Securities, from time to time to extend the interest payment period for up to six consecutive quarters (the "Extension Period") during which period interest will compound quarterly and the Company shall have the right to make partial payments of interest on any Interest Payment Date, and at the end of which Extension Period the Company shall pay all interest then accrued and unpaid thereon (together with Additional Interest at the rate specified for the Securities to the extent permitted by applicable law). Prior to the termination of any such Extension Period, the Company may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof shall not exceed six consecutive quarters or extend beyond the Maturity of the Securities. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and any Additional Interest then due, the Company may select a new Extension Period, subject to the foregoing requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give Capita Preferred Trust, Capita Preferred Funding, L.P. and the Trustee notice of its selection of such Extension Period subject to the above requirements at least one Business Day prior to the earlier of (i) the Interest Payment Date or (ii) the date Capita Preferred Trust is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Trust Preferred Securities of the record date or the date such distributions are payable, but in any event not less than one Business Day prior to such record date. The principal of and interest on the Securities shall be payable at the office or agency of the Company in the United States maintained for such purpose and at any other office or agency maintained by the Company for such purpose in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Eleven. The Securities shall be redeemable as provided in Article Twelve. 21 SECTION 302. Denominations. The Securities shall be issuable only in registered form, without coupons, and only in denominations of $25 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman, one of its Vice Chairman, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. SECTION 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. 22 If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or excess of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied 23 by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1208 not involving any transfer. If the Securities are to be redeemed in part, the Company will not be required to issue, register the transfer of or exchange any Securities during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of any such Securities that may be selected for redemption and ending at the close of business on the day of such mailing, except the unredeemed portion of any such Securities being redeemed in part. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute 24 an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) the Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less 25 than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue (including in each such case Additional Interest), which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of any of them shall treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 307) interest (including Additional Interest) on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of them shall be affected by notice to the contrary. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. 26 SECTION 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE FOUR Satisfaction and Discharge SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose and amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest (including Additional Interest) to the date of such deposit (in the case of Securities 27 which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money has been deposited with the Trustee. The Trustee shall not invest money deposited with it pending distribution of such amounts. ARTICLE FIVE Remedies SECTION 501. Events of Default. "Event of Default", wherever used herein, means any one of the following events that has occurred and is continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) failure for 90 days to pay any interest on the Securities, including any Additional Interest in respect thereof, when due (subject to the deferral of any due date in the case of an Extension Period); or 28 (2) failure to pay any principal on the Securities when due whether at Stated Maturity, upon redemption by declaration or otherwise; or (3) failure to observe or perform in any material respect any other covenant herein for 90 days after written notice of such failure (specified as a "Notice of Default"), requiring the Company to remedy the same shall have been given to the Company by the Trustee or the holders of at least 25% in principal amount of the Outstanding Securities; or (4) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for all or substantially all of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (5) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for all or substantially all of its property or make any general assignment for the benefit of creditors; or the Company shall admit in writing its inability to pay its debts generally as they become due. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have the right to declare the principal of and the interest on all the Securities (including any Additional Interest) and any other amounts payable hereunder to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders) and to enforce any and all other rights of Holders of Securities as creditors with respect to the Securities. Upon any such declaration such principal and all accrued interest shall become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal 29 amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Company has paid or deposited with the Trustee a sum sufficient to pay, (A) all overdue interest (including any Additional Interest) on all Securities, (B) the principal of any Securities which have became due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (C) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of 90 days (subject to the deferral of any due and payable interest in the case of an Extension Period), or (2) default is made in the payment of the principal of any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest (including any Additional Interest), at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. 30 If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company, its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. 31 SECTION 506. Application of Money Collected. Subject to Article Eleven, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; SECOND: To the payment of the amounts then due and unpaid for principal of and interest (including any Additional Interest) on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest (including any Additional Interest), respectively; and THIRD: The balance, if any, to the Company. SECTION 507. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; 32 it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. Unconditional Right of Holders to Receive Principal and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and (subject to Section 307) interest (including any Additional Interest) on such Security on the respective Stated Maturities (subject to the deferral of any due date in the case of an Extension Period) expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 33 SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture; and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. Subject to Section 902, the Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of or interest (including any Additional Interest) on any Security (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration have been deposited with the Trustee); or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any 34 action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such court to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee or in any suit for the enforcement of the right to receive the principal of and interest (including any Additional Interest) on any Security. ARTICLE SIX The Trustee SECTION 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(3), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; 35 (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its choice and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. 36 SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. May Hold Securities. The Trustee, any Paying Agent, any Security Registrar, or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, or such other agent. Money held by the Trustee in trust hereunder shall not be invested by the Trustee pending distribution thereof to the holders of the Securities. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any and all loss, damage, claim, liability 37 or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The provisions of this Section shall survive the termination of this Indenture. SECTION 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and has its Corporate Trust Office in New York, New York, if such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. 38 (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the 39 retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided that, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). 40 ARTICLE SEVEN Holders' Lists and Reports by Trustee SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) semiannually, not later than the last day of June and December in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of all Holders as of a date not more than 15 days prior to the delivery thereof who were not Holders at the date of the Company had previously provided such list (or, in the case of the initial provision of such list, at the date of issuance of the Securities), and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of any of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. 41 SECTION 703. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company 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 Company shall be the continuing corporation or the successor corporation or the person which acquires by sale or conveyance substantially all the assets of the Company (if other than the Company 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, premium, if any, and interest, if any, on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, by supplemental indenture in form satisfactory to the Trustee, executed and delivered to the Trustee by such corporation, and (ii) the Company 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 Indenture, 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 Company for purposes of this Section 801. SECTION 802. Successor Substituted. In case of any such consolidation, merger, sale or conveyance, and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had 42 been named herein. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, lease or conveyance such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. In the event of any such sale or conveyance (other than a conveyance by way of lease) the Company or any successor corporation which shall theretofore have become such in the manner described in this Article shall be released and discharged from all obligations and covenants under this Indenture. ARTICLE NINE Supplemental Indentures SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein or in the Securities conferred upon the Company; (3) to cure any ambiguity or to correct any provision herein which may be defective or inconsistent with any other provision herein; 43 (4) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by Section 905 or otherwise; (5) to evidence and provide the acceptance of the appointment of a successor Trustee hereunder; or (6) to make any other change that does not adversely affect the rights of any Holder. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of interest (including any Additional Interest) on, any Security, or reduce the principal amount thereof or the rate of interest thereon, or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders in required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section or Section 513, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed 44 supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. ARTICLE TEN Covenants; Representations and Warranties SECTION 1001. Payment of Principal and Interest. The Company will duly and punctually pay the principal of and interest on the Securities in accordance with the terms of the Securities and this Indenture. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in the United States an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any 45 such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in the United States) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the United States for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or at the option of the Company before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, on or prior to each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or interest on any Security and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. SECTION 1004. Reports by the Company. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents 46 and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 1005. Limitations on Incurrence of Secured Debt. The Company will not, nor will it permit any Restricted Subsidiary to, incur, issue, assume or guarantee any indebtedness for money borrowed ("debt") secured by any pledge, mortgage, security interest or lien ("lien") on any property or assets of the Company 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 Securities (together with, if the Company so determines, any other debt of the Company or such Restricted Subsidiary, which is not subordinated to the Securities) 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 Company and its Restricted Subsidiaries would not exceed 10% of Consolidated Net Tangible Assets of the Company and its Restricted Subsidiaries; provided, however, that (i) any recourse provided by the Company or any Restricted Subsidiary in connection with any sale, transfer or other disposition by the Company or any Restricted Subsidiary of Accounts Receivable or of any Restricted Subsidiary 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 and (ii) no Asset Drop Down shall, in any event, constitute a lien; and provided, further, that the satisfaction and discharge of any debt pursuant to Section 401 or pursuant to any similar provision in any other indenture or instrument governing any debt shall be deemed the incurrence, issue, assumption or guarantee of debt secured by a lien for purposes of this Section 1005. Notwithstanding the foregoing, this Section shall neither limit nor be deemed or construed as limiting the right of the Company 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; (2) liens on property, shares of stock, other equity interests, or debt 47 existing at the time of acquisition or repossession thereof by the Company 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 of this Indenture by the Company 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 Company or any Restricted Subsidiary arising from or in connection with transactions entered into by the Company or such Restricted Subsidiary after the date of this Indenture or on Accounts Receivable acquired by the Company 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 (x) as a result of any guarantee, repurchase or other contingent (direct or indirect) or recourse obligation of the Company or such Restricted Subsidiary in connection with the discounting, sale, assignment, transfer or other disposition of such Accounts Receivable or any interest therein, or (y) to secure or provide for the payment of all or any part of the investment of the Company 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 Company 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 Company 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 48 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 tho leases comprising such group and/or on the rental or other payments or rights under such leases, or on any direct or indirect interest therein, and whether (in any case) (x) such liens be created prior to, at the time of, or at any time after the entering into of such lease transactions and/or (y) such leases be in existence prior to, or be entered into by the Company or such Restricted Subsidiary at the time of or at any time after, the purchase or other acquisition by the Company 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 improvements on such property). SECTION 1006. Limitations on Incurrence of Senior Indebtedness. The Company shall not incur any additional Senior Indebtedness unless at the date of incurrence the ratio of Consolidated EBIT to Consolidated Interest Expense for the four immediately preceding consecutive fiscal quarters, shall be at least 1.25 to 1; provided, that if, at any date of determination, the Company's long-term unsecured senior indebtedness is rated by at least one nationally recognized statistical rating organization in one of its generic rating categories which signifies investment grade, then the foregoing limitation shall not be applicable at such date; provided, further, that the Company and its Subsidiaries shall in any event be entitled to incur each and all of the following: (i) existing indebtedness outstanding under, or available to be borrowed by the Company under, one or more commercial bank credit facilities (including the Company's Credit Agreements, each dated as of September 16, 1996, among the Company, the banks listed therein and Morgan Guaranty Trust Company of New York, as agent) not in excess of $1,800,000,000; (ii) additional indebtedness in an aggregate principal amount not to exceed $100 million at any one time outstanding; and (iii) any indebtedness of the Company or any Subsidiary issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding indebtedness permitted hereunder in an amount not to exceed the amount so refinanced or refunded. SECTION 1007. Statement as to Compliance; Notice of Certain Events of Default. The Company will, within 120 days after the close of each fiscal year, commencing with the first fiscal year following the issuance of Securities under this Indenture, file with the Trustee a certificate of the principal executive officer, the principal financial officer or the principal accounting officer 49 of the Company covering the period from the date of issuance of such Securities to the end of the fiscal year in which such Securities were issued, in the case of the first such certificate, and covering the preceding fiscal year in the case of each subsequent certificate, and stating whether or not, to the knowledge of the signer, the Company has complied with all conditions and covenants on its part contained in this Indenture, and, if the signer has obtained knowledge of any default by the Company in the performance, observance or fulfillment of any such condition or covenant, specifying each such default and the nature thereof. For the purpose of this Section 1007, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. ARTICLE ELEVEN Subordination of Securities SECTION 1101. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, notwithstanding anything to the contrary contained herein, to the extent and in the manner hereinafter set forth in this Article, the indebtedness represented by the Securities and the payment of the principal of and premium, if any, and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash or cash equivalents of all Senior Indebtedness (including any interest accruing after the occurrence of an Event of Default under Section 501(4) or (5)). SECTION 1102. Payment Over of Proceeds upon Dissolution, etc. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in any such event: (1) the holders of Senior Indebtedness shall be entitled to receive payment in full in cash or cash equivalents of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents, before the Holders of the Securities are entitled to receive any payment on account of principal of (or premium, if any) or interest on the Securities; and 50 (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article Eleven, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities (except for any such payment or distribution of securities which (i) are unsecured, (ii) have an average life and final maturity no shorter than the average life and final maturity of the Securities and (iii) are subordinated, to at least the same extent as the Securities, to the payment of all Senior Indebtedness then outstanding), shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their Representative or Representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, and premium, if any, and interest on, and other amounts due on or in connection with, the Senior Indebtedness to the extent necessary to make payment in full in cash or cash equivalents of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness; and (3) in the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any such payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities, before all Senior Indebtedness is paid in full or payment thereof provided for, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in cash or cash equivalents, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance, transfer or lease of its properties and assets substantially as an entirety 51 to another corporation upon the terms and conditions set forth in Article Eight shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the corporation formed by such consolidation or into which the Company is merged or the corporation which acquires by conveyance, transfer or lease such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance, transfer or lease, comply with the conditions set forth in Article Eight. SECTION 1103. No Payment When Senior Indebtedness in Default. No payment of principal (including redemption payments), premium, if any, or interest on the Securities may be made (i) if any Senior Indebtedness is not paid when due, (ii) if any applicable grace period with respect to such payment default on Senior Indebtedness has ended and such default has not been cured or waived or ceased to exist, or (iii) if the maturity of any Senior Indebtedness of the Company has been accelerated because of a default. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, then and in such event such payment shall be received and held in trust for the holders of Senior Indebtedness and shall be paid over or delivered to the Representative of Senior Indebtedness then outstanding to the extent necessary to pay in full in cash or cash equivalents all Senior Indebtedness. The provisions of this Section shall not apply to any payment with respect to which Section 1102 would be applicable. SECTION 1104. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1102 or under the conditions described in Section 1103, from making payments at any time of principal of (and premium, if any) or interest on the Securities. SECTION 1105. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior 52 Indebtedness of the Company to the same extent as the Securities are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. SECTION 1106. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the express limitations set forth in Article Five and to the rights, if any, under this Article of the holders of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1102, to receive, pursuant to and in accordance with such Section, cash, property and securities otherwise payable or deliverable to the Trustee or such Holder, or (2) under the conditions specified in Section 1103, to prevent any payment prohibited by such Section. SECTION 1107. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the 53 subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 1108. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 1109. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payments to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or a holder of Senior Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 602, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 1109 at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to 54 the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within three Business Days prior to such date. Nothing in this Section 1109 shall limit the right of the holders of Senior Indebtedness to recover payments as contemplated by Section 1102 and 1103. Subject to the provisions of Section 602, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 1110. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 602, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. 55 SECTION 1111. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607. SECTION 1112. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that (i) Section 1111 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent and (ii) any notice required by this Article Eleven to be given by the holders of, or a Representative for, Senior Indebtedness need only be given to the Trustee and not to any Paying Agent.] ARTICLE TWELVE Redemption of Securities SECTION 1201. Optional Redemption. (a) At any time on or after September 30, 2006, the Company shall have the right to redeem the Securities, in whole or in part, from time to time, at a Redemption Price equal to 100% of the principal amount of Securities to be redeemed plus accrued but unpaid interest, including any Additional Interest, if any, to the Redemption Date. (b) If, at any time, a Partnership Tax Event or a Partnership Investment Company Event (each a "Partnership Special Event") shall occur and be continuing, the Company may, within 90 days following the occurrence of such Partnership Special Event, elect to redeem the Securities in whole (but not in part), upon not less than 30 or more than 60 days' notice at the Redemption Price, provided that, if at the time there is available to the Company or the Partnership the opportunity to eliminate, within such 90-day period, the Partnership Special Event by taking some ministerial action, such as filing a form or making an election, 56 or pursuing some other similar reasonable such measure that in the sole judgment of the Company has or will cause no adverse effect on the Partnership, the Trust or the Company, the Company will pursue such measure in lieu of redemption. SECTION 1202. Applicability of Article. Redemption of Securities, at the election of the Company as permitted by Section 1201, shall be made in accordance with such provision and this Article. SECTION 1203. Authorization for Redemption; Notice to Trustee. The election of the Company to redeem Securities pursuant to Section 1201 shall be evidenced by a Board Resolution. In case of any redemption, the Company shall, at least 30 days and no more than 60 days prior to the Redemption Date fixed by the Company, notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and provide a copy of the notice of redemption given to Holders of Securities to be redeemed pursuant to Section 1204. SECTION 1204. Selection by Trustee of Securities to Be Redeemed. If less then all the Securities are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method (including pro rata or by lot) as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $25 or any integral multiple thereof) of the principal amount of the Securities. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. 57 SECTION 1205. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall identify the Securities to be redeemed and shall state: (1) the Redemption Date, (2) the Redemption Price, (3) that on the Redemption Date the Redemption Price will become due and payable upon each such security to be redeemed and that interest thereon will cease to accrue on and after said date, and (4) the place or places where such securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1206. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1207. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the 58 relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1209. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a place of payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. The Company may not redeem fewer than all the Outstanding Securities unless all accrued and unpaid interest (including Additional Interest) has been paid on such Securities. 59 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. AT&T CAPITAL CORPORATION, as Issuer By:____________________________ Name: Title: Attest: ___________________________ THE FIRST NATIONAL BANK OF CHICAGO, N.A., as Trustee By:____________________________ Name: Title: Attest: ____________________________ STATE OF NEW YORK ) ss.: COUNTY OF ________ ) On the ____ day of ________, 1996, before me personally came ________, to me known, who, being by me duly sworn, did depose and say that he/she is the ________ of [Name of Issuer] [the Guarantor], one of the corporations described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of such corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. ------------------------------ [SEAL] EX-4 8 EXHIBIT 4.9 ================================================================================ AFFILIATE DEBENTURE GUARANTEE AGREEMENT AT&T Capital Corporation Dated as of October __, 1996 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION.................................. 1 SECTION 1.1 Definitions and Interpretation......................... 1 ARTICLE II TRUST INDENTURE ACT............................................. 4 SECTION 2.1 Trust Indenture Act; Application....................... 4 SECTION 2.2 Lists of Holders of Securities......................... 4 SECTION 2.3 Reports by the Trust Preferred Guarantee Trustee......................................... 5 SECTION 2.4 Periodic Reverts to Trust Preferred Guarantee Trustee............................... 5 SECTION 2.5 Evidence of Compliance with Conditions Precedent....................................... 5 SECTION 2.6 Events of Default; Waiver.............................. 5 SECTION 2.7 Event of Default; Notice............................... 6 SECTION 2.8 Conflicting Interests.................................. 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF INVESTMENT GUARANTEE TRUSTEE.................................... 6 SECTION 3.1 Powers and Duties of the Investment Guarantee Trustee............................... 6 SECTION 3.2 Certain Rights of Trust Preferred Guarantee Trustee............................... 8 SECTION 3.3 Not Responsible for Recitals or Issuance of Investment Guarantee......................... 10 ARTICLE IV INVESTMENT GUARANTEE TRUSTEE.................................... 11 SECTION 4.1 Investment Guarantee Trustee; Eligibility..................................... 11 SECTION 4.2 Appointment, Removal and Resignation of Investment Guarantee Trustee.................... 11 ARTICLE V GUARANTEE....................................................... 12 SECTION 5.1 Guarantee.............................................. 12 SECTION 5.2 Waiver of Notice and Demand............................ 13 SECTION 5.3 Obligations Not Affected............................... 13 SECTION 5.4 Rights of Holders...................................... 14 SECTION 5.5 Guarantee of Payment................................... 14 SECTION 5.6 Subrogation............................................ 14 SECTION 5.7 Independent Obligations................................ 15 ARTICLE VI SUBORDINATION................................................... 15 SECTION 6.1 Ranking................................................ 15 ARTICLE VII TERMINATION..................................................... 15 Page ---- SECTION 7.1 Termination............................................ 15 ARTICLE VIII INDEMNIFICATION................................................. 15 SECTION 8.1 Exculpation............................................ 15 SECTION 8.2 Indemnification........................................ 16 ARTICLE IX MISCELLANEOUS................................................... 16 SECTION 9.1 Successors and Assigns................................. 16 SECTION 9.2 Amendments............................................. 16 SECTION 9.3 Notices................................................ 17 SECTION 9.4 Benefit................................................ 17 SECTION 9.5 Governing Law.......................................... 17 AFFILIATE DEBENTURE GUARANTEE AGREEMENT (this "Investment Guarantee"), dated as of October __, 1996, is executed and delivered by AT&T Capital Corporation, a Delaware corporation (the "Guarantor"), and The First National Bank of Chicago, N.A., a national banking association, as trustee (the "Investment Guarantee Trustee"), for the benefit of the Holder (as defined herein) of the Affiliate Debenture (as defined herein) of [Name of Issuer], a [_________] corporation (the "Issuer"). WHEREAS, pursuant to an Indenture (the "Affiliate Indenture"), dated as of October __, 1996, between the Issuer and The First National Bank of Chicago, N.A., as indenture trustee (in such capacity, the "Indenture Trustee"), the Issuer is issuing to the Holder on the date hereof its __% Debenture Due 2016 (the "Affiliate Debenture"); WHEREAS, as incentive for the Holder to purchase the Affiliate Debenture, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Investment Guarantee, to make Guarantee Payments (as defined herein) to the Holder of the Affiliate Debenture on the terms and conditions set forth herein and; NOW, THEREFORE, in consideration of the purchase by the Holder of the Affiliate Debenture, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Investment Guarantee for the benefit of the Holder. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation In this Investment Guarantee, unless the context otherwise requires: (a) Capitalized terms used in this Investment Guarantee but not defined in the Preamble above have the respective meanings assigned to them in this Section 1.1; (b) Capitalized terms used in this Investment Guarantee but not otherwise defined herein shall have the meanings assigned to them in the Affiliate Indenture. (c) a term defined anywhere in this Investment Guarantee has the same meaning throughout; (d) all references to "the Investment Guarantee" or "this Investment Guarantee" are to this Investment 2 Guarantee as modified, supplemented or amended from time to time; (e) all references in this Investment Guarantee to Articles and Sections are to Articles and Sections of this Investment Guarantee, unless otherwise specified; (f) a term defined in the Trust Indenture Act has the same meaning when used in this Investment Guarantee, unless otherwise defined in this Investment Guarantee or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means a day other than a day on which banking institutions in the City of New York are authorized or required by law to close. "Corporate Trust Office" means the office of the Investment Guarantee Trustee at which the corporate trust business of the Investment Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 153 West 53rd Street. Mew York, New York 10019. "Covered Person" means the Holder or any beneficial owner of the Affiliate Debenture. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Investment Guarantee. "Guarantee Payments" means, with respect to the Affiliate Debenture, to the extent not paid or made by the Issuer, the due and punctual payment of the principal of, premium, if any, and interest on the Affiliate Debenture, when and as the same shall become due and payable, whether at maturity or upon declaration of acceleration or otherwise, according to the terms of the Affiliate Debenture and of the Affiliate Indenture. 3 "Holder" shall mean any holder, as registered on the books and records of the Issuer of the Affiliate Debenture. The initial Holder of the Affiliate Debenture is the Partnership. "Indemnified Person" means the Investment Guarantee Trustee, any Affiliate of the Investment Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Investment Guarantee Trustee. "Majority in liquidation amount of the Affiliate Debenture" means, except as provided by the Trust Indenture Act, a vote by Holder(s) of the Affiliate Debenture, voting separately as a class, of more than 50% of the outstanding principal amount of the Affiliate Debenture plus accrued and unpaid interest to the date upon which the voting percentages are determined. "Officers, Certificate" means, with respect to any Person, a certificate signed by two authorized officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Investment Guarantee shall include: (a) a statement that each officer signing the Officers, Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition of covenant has been complied with. "Partnership" means Capita Preferred Funding, L.P. "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of October __, 1996, among AT&T Capital Corporation, a Delaware corporation, as general partner, Jeffery F. Nash, an individual, as initial limited partner and such other persons who become limited partners as provided therein. "Partnership Preferred Securities" means those securities representing limited partnership interests in the Partnership. 4 "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Investment Guarantee Trustee, any officer within the Corporate Trust Office of the Investment Guarantee Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Investment Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Investment Guarantee Trustee" means a successor Investment Guarantee Trustee possessing the qualifications to act as Investment Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Investment Guarantee Trustee" means The First National Bank of Chicago, N.A., a national banking association, until a Successor Investment Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Investment Guarantee and thereafter means each such Successor Investment Guarantee Trustee. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application (a) This Investment Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Investment Guarantee and shall, to the extent applicable, be governed by such provisions; and (b) if and to the extent that any provision of this Investment Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities (a) The Guarantor shall provide the Investment Guarantee Trustee with a list, in such form as the Investment 5 Guarantee Trustee may reasonably require, of the names and addresses of the Holder(s) of the Affiliate Debenture ("List of Holders") as of such date, (i) within one (1) Business Day after January 1 and June 30 of each year, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Investment Guarantee Trustee provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Investment Guarantee Trustee by the Guarantor. The Investment Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Investment Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Trust Preferred Guarantee Trustee Within 60 days after May 15 of each year, the Investment Guarantee Trustee shall provide to the Holders of the Affiliate Debenture such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Investment Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reverts to Trust Preferred Guarantee Trustee The Guarantor shall provide to the Investment Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent The Guarantor shall provide to the Investment Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Investment Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers, Certificate. SECTION 2.6 Events of Default; Waiver The Holders of a Majority in liquidation amount of the Affiliate Debenture may, by vote, on behalf of the Holders of the 6 Affiliate Debenture, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Investment Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 Event of Default; Notice (a) The Investment Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Affiliate Debenture, notices of all Events of Default actually known to a Responsible Officer of the Investment Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, the Investment Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Investment Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Affiliate Debenture. (b) The Investment Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Investment Guarantee Trustee shall have received written notice, or of which a Responsible Officer of the Investment Guarantee Trustee charged with the administration of the Affiliate Debenture shall have obtained actual knowledge. SECTION 2.8 Conflicting Interests The Affiliate Debenture shall be deemed to be specifically described in this Investment Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF INVESTMENT GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Investment Guarantee Trustee (a) This Investment Guarantee shall be held by the Investment Guarantee Trustee for the benefit of the Holders of the Affiliate Debenture, and the Investment Guarantee Trustee shall not transfer this Investment Guarantee to any Person except a Holder of the Affiliate Debenture exercising his or her rights pursuant to Section 5.4(b) or to a Successor Investment Guarantee Trustee on acceptance by such Successor Investment Guarantee Trustee of its appointment to act as Successor Investment Guarantee Trustee. The right, title and interest of the Investment Guarantee Trustee shall automatically vest in any 7 Successor Investment Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Investment Guarantee Trustee. (b) If an Event of Default actually known to a Responsible officer of the Investment Guarantee Trustee has occurred and is continuing, the Investment Guarantee Trustee shall enforce this Investment Guarantee for the benefit of the Holders of the Affiliate Debenture. (c) The Investment Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Investment Guarantee, and no implied covenants shall be read into this Investment Guarantee against the Investment Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Investment Guarantee Trustee, the Investment Guarantee Trustee shall exercise such of the rights and powers vested in it by this Investment Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Investment Guarantee shall be construed to relieve the Investment Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Investment Guarantee Trustee shall be determined solely by the express provisions of this Investment Guarantee, and the Investment Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Investment Guarantee, and no implied covenants or obligations shall be read into this Investment Guarantee against the Investment Guarantee Trustee; and (B) in the absence of bad faith on the part of the Investment Guarantee Trustee, the Investment Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Investment Guarantee Trustee and conforming to the requirements of this Investment Guarantee; but in the case of any such,certificates or opinions that by any provision hereof are specifically 8 required to be furnished to the Investment Guarantee Trustee, the Investment Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Investment Guarantee; (ii) the Investment Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible officer of the Investment Guarantee Trustee, unless it shall be proved that the Investment Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Investment Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of Affiliate Debenture relating to the time, method and place of conducting any proceeding for any remedy available to the Investment Guarantee Trustee, or exercising any trust or power conferred upon the Investment Guarantee Trustee under this Investment Guarantee; and (iv) no provision of this Investment Guarantee shall require the Investment Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Investment Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Investment Guarantee or indemnity, reasonably satisfactory to the Investment Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of Trust Preferred Guarantee Trustee (a) Subject to the provisions of Section 3.1: (i) The Investment Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Investment Guarantee shall be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Investment Guarantee, the Investment Guarantee Trustee shall 9 deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Investment Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Investment Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof). (v) The Investment Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Investment Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Investment Guarantee from any court of competent jurisdiction. (vi) The Investment Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Investment Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Investment Guarantee Trustee such security and indemnity, reasonably satisfactory to the Investment Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Preferred Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Investment Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Investment Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Investment Guarantee. (vii) The Investment Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Investment Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. 10 (viii) The Investment Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Investment Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Investment Guarantee Trustee or its agents hereunder shall bind the Holders of the Affiliate Debenture, and the signature of the Investment Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Investment Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Investment Guarantee, both of which shall be conclusively evidenced by the Investment Guarantee Trustee or its agent taking such action. (x) whenever in the administration of this Investment Guarantee the Investment Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Investment Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Affiliate Debenture, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Investment Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Investment Guarantee. (b) No provision of this Investment Guarantee shall be deemed to impose any duty or obligation on the Investment Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Investment Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Investment Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Investment Guarantee The recitals contained in this Investment Guarantee shall be taken as the statements of the Guarantor, and the 11 Investment Guarantee Trustee does not assume any responsibility for their correctness. The Investment Guarantee Trustee makes no representation as to the validity or sufficiency of this Investment Guarantee. ARTICLE IV INVESTMENT GUARANTEE TRUSTEE SECTION 4.1 Investment Guarantee Trustee; Eligibility (a) There shall at all times be a Investment Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Investment Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Investment Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Investment Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Investment Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Investment Guarantee Trustee (a) Subject to Section 4.2(b), the Investment Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. 12 (b) The Investment Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Investment Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Investment Guarantee Trustee and delivered to the Guarantor. (c) The Investment Guarantee Trustee appointed to office shall hold office until a Successor Investment Guarantee Trustee shall have been appointed or until its removal or resignation. The Investment Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Investment Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Investment Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Investment Guarantee Trustee and delivered to the Guarantor and the resigning Investment Guarantee Trustee. (d) If no Successor Investment Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of removal or resignation, the Investment Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Investment Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Investment Guarantee Trustee. (e) No Investment Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Investment Guarantee Trustee. (f) Upon termination of this Investment Guarantee or removal or resignation of the Investment Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Investment Guarantee Trustee all amounts accrued to the date of such termination, removal or resignation. ARTICLE V GUARANTEE SECTION 5.1 Guarantee The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), if, as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. 13 SECTION 5.2 Waiver of Notice and Demand The Guarantor hereby waives notice of acceptance of this Investment Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected The obligations, covenants, agreements and duties of the Guarantor under this Investment Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Affiliate Debenture to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the interest, principal or premiums, if any, or any other sums payable under the terms of the Affiliate Debenture or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Affiliate Debenture (other than an extension of time for payment of interest during an Extension Period (as defined in the Affiliate Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Affiliate Debenture, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Affiliate Debenture; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of 14 a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders (a) The Holders of a Majority in liquidation amount of the Affiliate Debenture have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Investment Guarantee Trustee in respect of this Investment Guarantee or exercising any trust or power conferred upon the Investment Guarantee Trustee under this Investment Guarantee. (b) If the Investment Guarantee Trustee fails to enforce its rights under the Investment Guarantee after a Holder of the Affiliate Debenture has made a written request, such Holder of the Affiliate Debenture may institute a legal proceeding directly against the Guarantor to enforce the Investment Guarantee Trustee's rights under this Investment Guarantee, without first instituting a legal proceeding against the Issuer, the Investment Guarantee Trustee or any other Person. Notwithstanding the foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder of the Affiliate Debenture may directly institute a proceeding in such Holder's own name against the Guarantor for enforcement of the Investment Guarantee for such payment. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment This Investment Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation The Guarantor shall be subrogated to all (if any) rights of the Holders of Affiliate Debenture against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Investment Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Investment Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Investment Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor 15 agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Affiliate Debenture, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Investment Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI SUBORDINATION SECTION 6.1 Ranking This Investment Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any Preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. ARTICLE VII TERMINATION SECTION 7.1 Termination This Investment Guarantee shall terminate upon the repayment in full (whether at maturity, upon redemption or otherwise) of all of the principal of, interest on (including all accrued and unpaid interest thereon) and any other amounts payable in respect of the Affiliate Debenture. Notwithstanding the foregoing, this Investment Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of the Affiliate Debenture must restore payment of any sums paid under the Affiliate Debenture or under this Investment Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any 16 Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Investment Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Investment Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which principal, interest or other payments to Holders of the Affiliate Debenture might properly be paid. SECTION 8.2 Indemnification The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Investment Guarantee. ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns All guarantees and agreements contained in this Investment Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Affiliate Debenture then outstanding. SECTION 9.2 Amendments Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent 17 of Holders will be required), this Investment Guarantee may only be amended with the prior approval of the Holders of at least a Majority in liquidation amount of the Affiliate Debenture. SECTION 9.3 Notices All notices provided for in this Investment Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) If given to the Investment Guarantee Trustee, at the Investment Guarantee Trustee's mailing address set forth below (or such other address as the Investment Guarantee Trustee may give notice of to the Holders of the Affiliate Debenture): The First National Bank of Chicago 153 West 53rd Street New York, New York 10019 Attention: Mary R. Fonti Telecopy: (212) 373-1383 (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Affiliate Debenture): AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07692 Attention: Robert J. Ingato Telecopy: (201) 397-4356 (c) If given to any Holder of Affiliate Debenture, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit This Investment Guarantee is solely for the benefit of the Holders of the Affiliate Debenture and, subject to Section 3.1(a), is not separately transferable from the Affiliate Debenture. SECTION 9.5 Governing Law 18 THIS INVESTMENT GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. 19 This Investment Guarantee is executed as of the day and year first above written. AT&T CAPITAL CORPORATION, as Guarantor By:________________________________ Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, N.A., as Investment Guarantee Trustee By:________________________________ Name: Title: EX-5.1 9 EXHIBIT 5.1 EXHIBIT 5.1 [LETTERHEAD OF SIMPSON THACHER & BARTLETT] October 18, 1996 AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Capita Preferred Funding L.P. c/o AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Capita Preferred Trust c/o AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Ladies and Gentlemen: We have acted as counsel to AT&T Capital Corporation, a Delaware corporation (the "Company"), Capita Preferred Funding L.P., a Delaware limited partnership (the "Partnership") and Capita Preferred Trust, a Delaware business trust (the "Trust") in connection with the preparation and filing by the Company, the Partnership and the Trust with the Securities and Exchange Commission (the "Commission") of a Registration Statement on Form S-3 (Registration No. 333-11243) (the "Registration Statement") under the Securities Act of 1933, as amended, with respect to (i) the Trust Preferred Securities Guarantee (the "Trust Guarantee") to be issued by the Company to AT&T Capital Corporation -2- October 18, 1996 Capita Preferred Funding L.P. Capita Preferred Trust The First National Bank of Chicago, N.A. (the "Bank"), as trustee for the benefit of the holders of the Trust's Trust Originated Preferred Securities (the "Trust Preferred Securities"), (ii) the Partnership Guarantee (the "Partnership Guarantee") to be issued by the Company for the benefit of the holders of the Partnership's Partnership Preferred Securities (the "Partnership Preferred Securities"), (iii) the guarantees (the "Investment Guarantees") to be issued by the Company for the benefit of the holders of debentures (the "Subsidiary Debentures") of two of the Company's wholly owned domestic subsidiaries and (iv) a debenture (the "Company Debenture") of the Company to be issued to the Partnership under an indenture (the "Company Indenture") between the Company and the Bank, as trustee (in such capacity, the "Company Debenture Trustee"), each in the form filed as exhibits to the Registration Statement. The Trust Guarantee, the Partnership Guarantee and the Investment Guarantees are referred to herein collectively as the "Guarantees." We have reviewed the corporate action of the Company in connection with the giving of the Guarantees and the issuance and sale of the Company Debenture by the Company and have examined, and have relied as to matters of fact upon, originals or copies certified or otherwise identified to our satisfaction, of such corporate records, agreements, documents and other instruments and such certificates or comparable documents of public officials and of officers and representatives of the Company, and have made such other and further investigations as we have deemed relevant and necessary as a basis for the opinions hereinafter set forth. AT&T Capital Corporation -3- October 18, 1996 Capita Preferred Funding L.P. Capita Preferred Trust In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such latter documents. Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that: 1. The Trust Guarantee has been duly authorized by the Company and when executed and delivered by the Company, and upon the issuance and sale of the Trust Preferred Securities to the holders of the Trust Preferred Securities in accordance with the Registration Statement, will constitute a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. 2. The Partnership Guarantee has been duly authorized by the Company and when executed and delivered by the Company, and upon the issuance and sale of the Partnership Preferred Securities to the holders of the Partnership Preferred Securities in accordance with the Registration Statement, will constitute a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. 3. The Investment Guarantees have been duly authorized by the Company and when executed and delivered by the Company, and upon the issuance and sale of the Subsidiary Debentures to the Partnership in accordance with the Registration Statement, will constitute a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. 4. The Company Debenture has been duly authorized by the Company and when executed and issued by the Company and upon due execution and delivery of the Indenture by the Company and the issuance and sale of the Company Debenture to the Partnership in accordance with the Registration Statement, assuming due authorization, execution and delivery of the Indenture by the Company Debenture Trustee and due authentication of the Company Debenture by the Company Debenture Trustee, will constitute a valid and legally binding AT&T Capital Corporation -4- October 18, 1996 Capita Preferred Funding L.P. Capita Preferred Trust obligation of the Company enforceable against the Company in accordance with its terms. Our opinions set forth in paragraphs 1, 2, 3 and 4 above are subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. We are members of the bar of the State of New York and do not express any opinion herein as to matters governed by any law other than the laws of the State of New York and the Delaware General Corporation Law. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and as an exhibit to the Rule 462(b) Registration Statement and to the reference to this firm under the caption "Legal Matters" in the Registration Statement. This opinion is rendered to you in connection with the above-described transactions. This opinion may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent. Very truly yours, SIMPSON THACHER & BARTLETT EX-5.2 10 EXHIBIT 5.2 [LETTERHEAD OF RICHARDS, LAYTON & FINGER] October 18, 1996 Capita Preferred Funding L.P. Capita Preferred Trust c/o AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 Re: Capita Preferred Funding L.P. and Capita Preferred Trust _____________________________ Ladies and Gentlemen: We have acted as special Delaware counsel for AT&T Capital Corporation, a Delaware corporation (the "Company"), Capita Preferred Funding L.P., a Delaware limited partnership (the "Partnership"), and Capita Preferred Trust, a Delaware business trust (the "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Limited Partnership of the Partnership, dated as of August 29, 1996, as filed in the office of the Secretary of State of the State of Delaware (the "Secretary of State") on August 29, 1996; (b) The Amended and Restated Certificate of Limited Partnership of the Partnership, dated as of October 2, 1996, as filed in the office of the Secretary of State on October 3, 1996 (the "Partnership Certificate"); (c) The Agreement of Limited Partnership of the Partnership, dated as of August 29, 1996, as amended as of October 2, 1996; Capita Preferred Funding L.P. Capita Preferred Trust October 18, 1996 Page 2 (d) A form of Amended and Restated Agreement of Limited Partnership of the Partnership (including Annex A thereto) (the "Partnership Agreement"), to be entered into among the Company, as general partner, Jeffery F. Nash, as initial limited partner, and such other Persons who become limited partners of the Partnership, attached as an exhibit to the Registration Statement (as defined below); (e) The Certificate of Trust of the Trust, dated August 28, 1996 (the "Trust Certificate"), as filed in the office of the Secretary of State on August 29, 1996; (f) The Declaration of Trust of the Trust, dated as of August 28, 1996, among Antigua Acquisition Corporation ("Antigua"), as sponsor, and the trustees of the Trust named therein; (g) A form of Amended and Restated Declaration of Trust of the Trust (including Annex I and Exhibits A-1 and A-2 thereto) (the "Declaration of Trust"), to be entered into among the Company, the successor by merger to Antigua, as sponsor, the trustees of the Trust named therein, and the holders, from time to time, of undivided beneficial interests in the assets of the Trust, attached as an exhibit to the Registration Statement; (h) Amendment No. 3 to the Registration Statement (the "Registration Statement") on Form S-3, including a related preliminary prospectus (the "Prospectus"), relating to the ___% Trust Originated Preferred Securities of the Trust representing preferred undivided beneficial interests in the assets of the Trust (each, a "Trust Preferred Security" and collectively, the "Trust Preferred Securities"), and the Partnership Preferred Securities of the Partnership representing limited partner interests in the Partnership (each, a "Partnership Preferred Security" and collectively, the "Partnership Preferred Securities"), as proposed to be filed by the Company, the Partnership and the Trust with the Securities and Exchange Commission on or about October 18, 1996; (i) A Certificate of Good Standing for the Partnership, dated October 18, 1996, obtained from the Secretary of State; and (j) A Certificate of Good Standing for the Trust, dated October 18, 1996, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Partnership Agreement. Capita Preferred Funding L.P. Capita Preferred Trust October 18, 1996 Page 3 For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (j) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (j) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own, but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that the Partnership Agreement constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the admission of partners to, and the creation, operation and termination of, the Partnership, and that the Partnership Agreement and the Partnership Certificate are in full force and effect and have not been amended, (ii) that the Declaration of Trust constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the Trust, and that the Declaration of Trust and the Trust Certificate are in full force and effect and have not been amended, (iii) except to the extent provided in paragraphs 1 and 5 below, the due creation or the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its creation or organization or formation, (iv) the legal capacity of natural persons who are signatories to the documents examined by us, (v) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (vi) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vii) the receipt by each Person to whom a Partnership Preferred Security is to be issued by the Partnership (collectively, the "Partnership Preferred Security Holders") of an L.P. Certificate and the payment for the Partnership Preferred Security acquired by it, in accordance with the Partnership Agreement and the Registration Statement, (viii) the receipt by each Person to whom a Trust Preferred Security is to be issued by the Trust (collectively, the "Trust Preferred Security Holders") of a Trust Preferred Security Certificate (as defined in the Trust Agreement) and the payment for the Trust Preferred Security acquired by it, in accordance Capita Preferred Funding L.P. Capita Preferred Trust October 18, 1996 Page 4 with the Declaration of Trust and the Registration Statement, (ix) that the books and records of the Partnership set forth all information required by the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act (6 Del. C. 'ss' 17-101, et seq.) (the "Partnership Act"), including all information with respect to all Persons to be admitted as Partners and their contributions to the Partnership, (x) that the Partnership Preferred Securities are issued and sold to the Partnership Preferred Security Holders in accordance with the Registration Statement and the Partnership Agreement, and (xi) that the Trust Preferred Securities are issued and sold to the Trust Preferred Security Holders in accordance with the Registration Statement and the Declaration of Trust. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. The Partnership has been duly formed and is validly existing in good standing as a limited partnership under the Partnership Act. 2. The Partnership Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable limited partner interests in the Partnership. 3. Assuming that the Partnership Preferred Security Holders, as limited partners of the Partnership, do not participate in the control of the business of the Partnership, the Partnership Preferred Security Holders, as limited partners of the Partnership, will have no liability in excess of their obligations to make payments provided for in the Partnership Agreement and their share of the Partnership's assets and undistributed profits (subject to the obligation of a Partnership Preferred Security Holder to repay any funds wrongfully distributed to it). 4. There are no provisions in the Partnership Agreement the inclusion of which, subject to the terms and conditions therein, or, assuming that the Partnership Preferred Capita Preferred Funding L.P. Capita Preferred Trust October 18, 1996 Page 5 Security Holders, as limited partners of the Partnership, take no action other than actions permitted by the Partnership Agreement, the exercise of which, in accordance with the terms and conditions therein, would cause the Partnership Preferred Security Holders, as limited partners of the Partnership, to be deemed to be participating in the control of the business of the Partnership. 5. The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act (12 Del. C. 'ss' 3801, et seq.). 6. The Trust Preferred Securities will represent valid and, subject to the qualifications set forth in paragraph 7 below, fully paid and nonassessable undivided beneficial interests in the assets of the Trust. 7. The Trust Preferred Security Holders, as beneficial owners of the Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Trust Preferred Security Holders may be obligated to make payments as set forth in the Declaration of Trust. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We also consent to Simpson Thacher & Bartlett's relying as to matters of Delaware law upon this opinion in connection with an opinion to be rendered by it in connection with the Registration Statement. In addition, we hereby consent to the use of our name under the heading "Legal Matters" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of Persons whose consent is required under Section 7 of the Securities Capita Preferred Funding L.P. Capita Preferred Trust October 18, 1996 Page 6 Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other Person for any purpose. Very truly yours, EX-8.1 11 EXHIBIT 8.1 EXHIBIT 8.1 [LETTERHEAD OF SIMPSON THACHER & BARTLETT] October 18, 1996 AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Capita Preferred Trust c/o AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Capita Preferred Funding L.P. c/o AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Re: Capita Preferred Trust's issuance and sale of Trust Originated Preferred Securities Ladies and Gentlemen: We have acted as special tax counsel ("Tax Counsel") to AT&T Capital Corporation, a Delaware corporation (the "Company"), the Capita Preferred Trust, a statutory business trust organized under the Business Trust Act of the State of Delaware (the "Trust") and Capita Preferred Funding L.P., a limited partnership formed under the Delaware Revised Uniform Limited Partnership Act (the "Partnership"), in connection with the preparation and filing by the Company, the Partnership and the Trust with the Securities and Exchange Commission (the "Commission") of a Registration Statement on Form S-3 (Registration No. 333-11243) (as amended, the "Registration Statement") under -2- October 18, 1996 the Securities Act of 1933, as amended, and with respect to: (i) the issuance and sale of a subordinated debenture due 2016 (the "Company Subordinated Debenture") by the Company pursuant to a form of Indenture (the "Company Indenture"), between the Company and The First National Bank of Chicago, N.A., a national banking association organized under the laws of the United States, as trustee (the "Indenture Trustee") in the form filed as an exhibit to the Registration Statement; (ii) the issuance and sale of two debentures each due 2016 (each a "Guaranteed Investment Affiliate Debenture", collectively the "Investment Affiliate Debentures") by each of two wholly-owned United States subsidiaries of the Company (each an "Investment Affiliate"), pursuant to forms of Indenture (each an "Investment Affiliate Indenture"), from each such Investment Affiliate and the Company to the Indenture Trustee (the Company Subordinated Debenture and the Guaranteed Investment Affiliate Debentures are collectively referred to hereinafter as the "Debentures" and the forms of the Company Indenture and the Investment Affiliate Indentures are collectively referred to hereinafter as the "Indentures"), each of which are guaranteed by the Company pursuant to a form of Affiliate Debenture Guarantee Agreement in the form filed as an exhibit to the Registration Statement; (iii) the issuance and sale of the Partnership Preferred Securities by the Partnership to the Trust pursuant to the Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") in the form filed as an exhibit to the Registration Statement; (iv) the issuance and sale of Trust Preferred Securities and Trust Common Securities (collectively, the "Trust Securities") pursuant to the Trust's Amended and Restated -3- October 18, 1996 Declaration of Trust, to be dated as of October 22, 1996 (the "Declaration") in the form filed as an exhibit to the Registration Statement. The Trust Preferred Securities will be offered for sale to investors pursuant to the Registration Statement. All capitalized terms used in this opinion letter and not otherwise defined herein shall have the meaning ascribed to such terms in the Registration Statement. In delivering this opinion letter, we have reviewed and relied upon: (i) the Registration Statement, (ii) forms of the Indentures; (iii) forms of the Debentures; (iv) the form of the Partnership Agreement; (v) the form of the Declaration; (vi) the forms of (A) the Partnership Guarantee Agreement, (B) the Trust Preferred Securities Guarantee Agreement, (C) the Trust Common Securities Guarantee Agreement and (D) the Affiliate Debenture Guarantee Agreement, each filed as exhibits to the Registration Statement; and (vii) the forms of (A) the Partnership Preferred Securities and (B) the Trust Securities, each filed as exhibits to the Registration Statement. In addition, we have examined, and relied as to matters of fact upon, certain certificates and comparable documents of the Company and certain wholly owned United States subsidiaries of the Company, from which the Company will select the Investment Affiliates. Further, we have relied upon certain other statements and representations made by officers of the Company. We also have examined and relied upon original or copies, certified or otherwise identified to our satisfaction, of such records of the Company, the Partnership and the Trust and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. -4- October 18, 1996 In our examination of such material, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all copies of documents submitted to us. In addition, we also have assumed that (i) the transactions related to the issuance of the Debentures, the Partnership Preferred Securities and Trust Securities will be consummated in accordance with the terms of the documents and forms of documents described herein and (ii) on the closing date, an Independent Financial Advisor will deliver the opinion required under Section 7.1(b) of the Partnership Agreement. On the basis of the foregoing and assuming that the Partnership and the Trust were formed and will be maintained in compliance with the terms of the Partnership Agreement and the Declaration, respectively, we hereby confirm (i) our opinions set forth in the Registration Statement under the caption "Certain Federal Income Tax Considerations" and (ii) that, subject to the qualifications set forth therein, the discussion set forth in the Registration Statement under such caption is an accurate summary of the United States federal income tax matters described therein. We express no opinion with respect to the transactions referred to herein or in the Registration Statement other than as expressly set forth herein. Moreover, we note that there is no authority directly on point dealing with securities such as the Trust Preferred Securities or transactions of the type described herein and that our opinions are not binding on the Internal Revenue Service ("IRS") or the courts, either of which could take a contrary position. Nevertheless, we believe that if challenged, the opinions we -5- October 18, 1996 express herein would be sustained by a court with jurisdiction in a properly presented case. Our opinions are based upon the Code, the Treasury regulations promulgated thereunder and other relevant authorities and law, all as in effect on the date hereof. Consequently, future changes in the law may cause the tax treatment of the transactions referred to herein to be materially different from that described above. We are admitted to practice law only in the State of New York and the opinions we express herein are limited solely to matters governed by the federal law of the United States. We hereby consent to the use of this opinion for filing as Exhibit 8.1 to the Registration Statement and the use of our name in the Registration Statement under the captions "Certain Federal Income Tax Considerations" and "Legal Matters". Very truly yours, Simpson Thacher & Bartlett EX-12 12 EXHIBIT 12.1 EXHIBIT 12.1 AT&T Capital Corporation September 30, 1996 Conslidated EBIT to interest expense for any four consecutive fiscal quarters will not be less than 1.25 to 1. Consolidated earnings before interest and taxes 9 months ended 9/30/96 Earnings before taxes 182,496 Interest Expense 350,359 ------- Earnings as adjusted 532,855 less: YTD YTD 12/31/95 9/30/95 -------- ------- 3 months ended 12/31/95 Earnings before taxes 64,963 208,239 143,276 Interest Expense 110,149 411,040 300,891 ------- ------- ------- Earnings as adjusted 175,112 619,279 444,167 Consolidated Earnings: 12 months ended 9/30/96 707,967 Consolidated Interest Expense: 9 months ended 9/30/96 305,359 3 months ended 12/31/95 110,149 ------- 12 months ended 9/30/96 460,508 EBIT ratio 1.54 EX-25 13 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 ______________ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)___ ______________ THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) ______________ Capital Preferred Trust (Exact name of obligor as specified in its charter) Delaware 22-3467159 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 44 Whippany Road Morristown, New Jersey 07962 (Address of principal executive offices) (Zip Code) Trust Originated Preferred Securities (Title of Indenture Securities) Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations With the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. No such affiliation exists with the trustee. Item 16. List of exhibits. List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 2 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and State of Illinois, on the 16th day of October, 1996. The First National Bank of Chicago, Trustee By /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President * Exhibit 1, 2, 3 and 4 are herein incorporated by reference to Exhibits bearing identical numbers in Item 12 of the Form T-1 of The First National Bank of Chicago, filed as Exhibit 26 to the Registration Statement on Form S-3 of ITT Corporation, filed with the Securities and Exchange Commission on October 15, 1996 (Registration No. 333-07221). 3 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT October 16, 1996 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of a Declaration of Trust, as amended and restated, of Capital Preferred Trust, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, The First National Bank of Chicago By: /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President 4 EXHIBIT 7 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-1 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for June 30, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter.
Schedule RC--Balance Sheet C400 <- Dollar Amounts in ---- ---- Thousands RCFD BIL MIL THOU ----------------- ---- ------------- ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1). 0081 3,572,641 1.a. b. Interest-bearing balances(2).......................... 0071 6,958,367 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) 1773 1,448,974 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold.................................... 0276 5,020,878 3.a. b. Securities purchased under agreements to resell....... 0277 918,688 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C).................................................... RCFD 2122 19,125,160 4.a. b. LESS: Allowance for loan and lease losses............. RCFD 3123 379,232 4.b. c. LESS: Allocated transfer risk reserve........... RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c).................. 2125 18,745,928 4.d. 5. Assets held in trading accounts.......................... 3545 9,599,172 5. 6. Premises and fixed assets (including capitalized leases). 2145 623,289 6. 7. Other real estate owned (from Schedule RC-M)... 2150 8,927 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)........................... 2130 57,280 8. 9. Customers' liability to this bank on acceptances outstanding 2155 632,259 9. 10. Intangible assets (from Schedule RC-M)................... 2143 156,715 10. 11. Other assets (from Schedule RC-F)........................ 2160 1,592,088 11. 12. Total assets (sum of items 1 through 11)................. 2170 49,335,206 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 5 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-2
Schedule RC-Continued Dollar Amounts in Thousands Bil Mil Thou --------- ------------ 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1)................................ RCON 2200 16,878,870 13.a. (1) Noninterest-bearing(1)................................. RCON 6631 7,855,880 13.a.(1) (2) Interest-bearing....................................... RCON 6636 9,022,990 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II).......... RCFN 2200 12,677,057 13.b. (1) Noninterest bearing.................................... RCFN 6631 766,936 13.b.(1) (2) Interest-bearing........................ RCFN 6636 11,910,121 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased.................................... RCFD 0278 1,318,968 14.a. b. Securities sold under agreements to repurchase RCFD 0279 1,197,589 14.b. 15. a. Demand notes issued to the U.S. Treasury RCON 2840 104,546 15.a. b. Trading Liabilities........................................ RCFD 3548 6,431,784 15.b. 16. Other borrowed money: a. With original maturity of one year or less.. RCFD 2332 4,437,636 16.a. b. With original maturity of more than one year.............. RCFD 2333 75,308 16.b. 17. Mortgage indebtedness and obligations under capitalized leases........................................................ RCFD 2910 283,041 17. 18. Bank's liability on acceptance executed and outstanding RCFD 2920 632,259 18. 19. Subordinated notes and debentures............................. RCFD 3200 1,275,000 19. 20. Other liabilities (from Schedule RC-G)........................ RCFD 2930 892,947 20. 21. Total liabilities (sum of items 13 through 20). RCFD 2948 46,205,005 21. 22. Limited-Life preferred stock and related surplus.............. RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus.. RCFD 3838 0 23. 24. Common stock.................................................. RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,349,164 25. 26. a. Undivided profits and capital reserves...................... RCFD 3632 584,878 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities.......................... RCFD 8434 (3,951) 26.b. 27. Cumulative foreign currency translation adjustments RCFD 3284 (748) 27. 28. Total equity capital (sum of items 23 through 27) RCFD 3210 3,130,201 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).................... RCFD 3300 49,335,206 29.
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external
Number comprehensive level ---------- ------------------- auditors as of any date during 1995 .........RCFD 6724 ...... N/A M.I. ---------- ___________________
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. 6 EX-25 14 EXHIBIT 25.2 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 ______________ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)___ ______________ THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) ______________ AT&T Capital Corporation (Exact name of obligor as specified in its charter) Delaware 22-3211453 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 44 Whippany Road Morristown, New Jersey 07962 (Address of principal executive offices) (Zip Code) Guarantee of Trust Originated Preferred Securities of Capita Preferred Trust (Title of Indenture Securities) Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations With the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. No such affiliation exists with the trustee. Item 16. List of exhibits. List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 2 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and State of Illinois, on the 16th day of October, 1996. The First National Bank of Chicago, Trustee By /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President * Exhibit 1, 2, 3 and 4 are herein incorporated by reference to Exhibits bearing identical numbers in Item 12 of the Form T-1 of The First National Bank of Chicago, filed as Exhibit 26 to the Registration Statement on Form S-3 of ITT Corporation, filed with the Securities and Exchange Commission on October 15, 1996 (Registration No. 333-07221). 3 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT October 16, 1996 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of the guarantee of the Trust Originated Preferred Securities of Capita Preferred Trust by AT&T Capital Corporation, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, The First National Bank of Chicago By: /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President 4 EXHIBIT 7 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-1 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for June 30, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter. Schedule RC--Balance Sheet
C400 <- Dollar Amounts in ---- ------ Thousands RCFD BIL MIL THOU ----------------- ---- ------------ ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1)........... 0081 3,572,641 1.a. b. Interest-bearing balances(2).................................... 0071 6,958,367 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A)....... 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D)... 1773 1,448,974 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold.............................................. 0276 5,020,878 3.a. b. Securities purchased under agreements to resell................. 0277 918,688 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C).............................................................. RCFD 2122 19,125,160 4.a. b. LESS: Allowance for loan and lease losses....................... RCFD 3123 379,232 4.b. c. LESS: Allocated transfer risk reserve..................... RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c)............................ 2125 18,745,928 4.d. 5. Assets held in trading accounts.................................... 3545 9,599,172 5. 6. Premises and fixed assets (including capitalized leases)........... 2145 623,289 6. 7. Other real estate owned (from Schedule RC-M)............. 2150 8,927 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)..................................... 2130 57,280 8. 9. Customers' liability to this bank on acceptances outstanding....... 2155 632,259 9. 10. Intangible assets (from Schedule RC-M)............................. 2143 156,715 10. 11. Other assets (from Schedule RC-F).................................. 2160 1,592,088 11. 12. Total assets (sum of items 1 through 11)........................... 2170 49,335,206 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 5 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-2
Schedule RC-Continued Dollar Amounts in Thousands Bil Mil Thou --------- ------------ LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1)........................... RCON 2200 16,878,870 13.a. (1) Noninterest-bearing(1)............................ RCON 6631 7,855,880 13.a.(1) (2) Interest-bearing.................................. RCON 6636 9,022,990 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II).......... RCFN 2200 12,677,057 13.b. (1) Noninterest bearing............................... RCFN 6631 766,936 13.b.(1) (2) Interest-bearing.................................. RCFN 6636 11,910,121 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased............................... RCFD 0278 1,318,968 14.a. b. Securities sold under agreements to repurchase........ RCFD 0279 1,197,589 14.b. 15. a. Demand notes issued to the U.S. Treasury.... RCON 2840 104,546 15.a. b. Trading Liabilities.................................. . RCFD 3548 6,431,784 15.b. 16. Other borrowed money: a. With original maturity of one year or less............ RCFD 2332 4,437,636 16.a. b. With original maturity of more than one year......... RCFD 2333 75,308 16.b. 17. Mortgage indebtedness and obligations under capitalized leases................................................... RCFD 2910 283,041 17. 18. Bank's liability on acceptance executed and outstanding.. RCFD 2920 632,259 18. 19. Subordinated notes and debentures........................ RCFD 3200 1,275,000 19. 20. Other liabilities (from Schedule RC-G)................... RCFD 2930 892,947 20. 21. Total liabilities (sum of items 13 through 20)........... RCFD 2948 46,205,005 21. 22. Limited-Life preferred stock and related surplus......... RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus............ RCFD 3838 0 23. 24. Common stock............................................. RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock). RCFD 3839 2,349,164 25. 26. a. Undivided profits and capital reserves................. RCFD 3632 584,878 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities......................... RCFD 8434 (3,951) 26.b. 27. Cumulative foreign currency translation adjustments...... RCFD 3284 (748) 27. 28. Total equity capital (sum of items 23 through 27)........ RCFD 3210 3,130,201 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).................... RCFD 3300 49,335,206 29.
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external
Number comprehensive level -------------- --------------------- auditors as of any date during 1995 ...RCFD 6724 .... N/A M.1. -------------- --------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4. = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. 6 EX-25 15 EXHIBIT 25.3 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 ______________ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)___ ______________ THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) ______________ AT&T Capital Corporation (Exact name of obligor as specified in its charter) Delaware 22-3211453 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 44 Whippany Road Morristown, New Jersey 07962 (Address of principal executive offices) (Zip Code) Subordinated Debentures Due 2016 (Title of Indenture Securities) Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations With the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. No such affiliation exists with the trustee. Item 16. List of exhibits. List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 2 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and State of Illinois, on the 16th day of October, 1996. The First National Bank of Chicago, Trustee By /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President * Exhibit 1, 2, 3 and 4 are herein incorporated by reference to Exhibits bearing identical numbers in Item 12 of the Form T-1 of The First National Bank of Chicago, filed as Exhibit 26 to the Registration Statement on Form S-3 of ITT Corporation, filed with the Securities and Exchange Commission on October 15, 1996 (Registration No. 333-07221). 3 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT October 16, 1996 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of the Subordinated Debentures due 2016 of AT&T Capital Corporation, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, The First National Bank of Chicago By: /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President 4 EXHIBIT 7 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-1 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for June 30, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter.
Schedule RC--Balance Sheet C400 <- Dollar Amounts in ---- ---- Thousands RCFD BIL MIL THOU ----------------- ---- ------------- ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1). 0081 3,572,641 1.a. b. Interest-bearing balances(2).......................... 0071 6,958,367 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) 1773 1,448,974 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold.................................... 0276 5,020,878 3.a. b. Securities purchased under agreements to resell....... 0277 918,688 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C).................................................... RCFD 2122 19,125,160 4.a. b. LESS: Allowance for loan and lease losses............. RCFD 3123 379,232 4.b. c. LESS: Allocated transfer risk reserve........... RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c).................. 2125 18,745,928 4.d. 5. Assets held in trading accounts.......................... 3545 9,599,172 5. 6. Premises and fixed assets (including capitalized leases). 2145 623,289 6. 7. Other real estate owned (from Schedule RC-M)... 2150 8,927 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)........................... 2130 57,280 8. 9. Customers' liability to this bank on acceptances outstanding 2155 632,259 9. 10. Intangible assets (from Schedule RC-M)................... 2143 156,715 10. 11. Other assets (from Schedule RC-F)........................ 2160 1,592,088 11. 12. Total assets (sum of items 1 through 11)................. 2170 49,335,206 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 5 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-2
Schedule RC-Continued Dollar Amounts in Thousands Bil Mil Thou --------- ------------ 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1)................................ RCON 2200 16,878,870 13.a. (1) Noninterest-bearing(1)................................. RCON 6631 7,855,880 13.a.(1) (2) Interest-bearing....................................... RCON 6636 9,022,990 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II).......... RCFN 2200 12,677,057 13.b. (1) Noninterest bearing.................................... RCFN 6631 766,936 13.b.(1) (2) Interest-bearing........................ RCFN 6636 11,910,121 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased.................................... RCFD 0278 1,318,968 14.a. b. Securities sold under agreements to repurchase RCFD 0279 1,197,589 14.b. 15. a. Demand notes issued to the U.S. Treasury RCON 2840 104,546 15.a. b. Trading Liabilities........................................ RCFD 3548 6,431,784 15.b. 16. Other borrowed money: a. With original maturity of one year or less.. RCFD 2332 4,437,636 16.a. b. With original maturity of more than one year.............. RCFD 2333 75,308 16.b. 17. Mortgage indebtedness and obligations under capitalized leases........................................................ RCFD 2910 283,041 17. 18. Bank's liability on acceptance executed and outstanding RCFD 2920 632,259 18. 19. Subordinated notes and debentures............................. RCFD 3200 1,275,000 19. 20. Other liabilities (from Schedule RC-G)........................ RCFD 2930 892,947 20. 21. Total liabilities (sum of items 13 through 20). RCFD 2948 46,205,005 21. 22. Limited-Life preferred stock and related surplus.............. RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus.. RCFD 3838 0 23. 24. Common stock.................................................. RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,349,164 25. 26. a. Undivided profits and capital reserves...................... RCFD 3632 584,878 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities.......................... RCFD 8434 (3,951) 26.b. 27. Cumulative foreign currency translation adjustments RCFD 3284 (748) 27. 28. Total equity capital (sum of items 23 through 27) RCFD 3210 3,130,201 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).................... RCFD 3300 49,335,206 29.
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external
Number comprehensive level ---------- ------------------- auditors as of any date during 1995 .........RCFD 6724 ...... N/A M.I. ---------- -------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. 6 EX-25 16 EXHIBIT 25.4 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 ______________ STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)___ ______________ THE FIRST NATIONAL BANK OF CHICAGO (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) One First National Plaza, Chicago, Illinois 60670-0126 (Address of principal executive offices) (Zip Code) The First National Bank of Chicago One First National Plaza, Suite 0286 Chicago, Illinois 60670-0286 Attn: Lynn A. Goldstein, Law Department (312) 732-6919 (Name, address and telephone number of agent for service) ______________ AT&T Capital Corporation (Exact name of obligor as specified in its charter) Delaware 22-3211453 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 44 Whippany Road Morristown, New Jersey 07962 (Address of principal executive offices) (Zip Code) Guarantee of Debentures Due 2016 of Wholly Owned Subsidiaries of AT&T Capital Corporation (Title of Indenture Securities) Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations With the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. No such affiliation exists with the trustee. Item 16. List of exhibits. List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 2 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, The First National Bank of Chicago, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and State of Illinois, on the 16th day of October, 1996. The First National Bank of Chicago, Trustee By /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President * Exhibit 1, 2, 3 and 4 are herein incorporated by reference to Exhibits bearing identical numbers in Item 12 of the Form T-1 of The First National Bank of Chicago, filed as Exhibit 26 to the Registration Statement on Form S-3 of ITT Corporation, filed with the Securities and Exchange Commission on October 15, 1996 (Registration No. 333-07221). 3 EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT October 16, 1996 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In connection with the qualification of the guarantees of AT&T Capital Corporation of two Debentures due 2016 issued by certain wholly owned subsidiaries of AT&T Capital Corporation to be designated, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, The First National Bank of Chicago By: /s/ Steven M. Wagner -------------------- Steven M. Wagner Vice President 4 EXHIBIT 7 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-1 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for June 30, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding of the last business day of the quarter.
Schedule RC--Balance Sheet C400 <- Dollar Amounts in ---- ---- Thousands RCFD BIL MIL THOU ----------------- ---- ------------- ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin(1). 0081 3,572,641 1.a. b. Interest-bearing balances(2).......................... 0071 6,958,367 1.b. 2. Securities a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) 1773 1,448,974 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge and Agreement subsidiaries, and in IBFs: a. Federal Funds sold.................................... 0276 5,020,878 3.a. b. Securities purchased under agreements to resell....... 0277 918,688 3.b. 4. Loans and lease financing receivables: a. Loans and leases, net of unearned income (from Schedule RC-C).................................................... RCFD 2122 19,125,160 4.a. b. LESS: Allowance for loan and lease losses............. RCFD 3123 379,232 4.b. c. LESS: Allocated transfer risk reserve........... RCFD 3128 0 4.c. d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b and 4.c).................. 2125 18,745,928 4.d. 5. Assets held in trading accounts.......................... 3545 9,599,172 5. 6. Premises and fixed assets (including capitalized leases). 2145 623,289 6. 7. Other real estate owned (from Schedule RC-M)... 2150 8,927 7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)........................... 2130 57,280 8. 9. Customers' liability to this bank on acceptances outstanding 2155 632,259 9. 10. Intangible assets (from Schedule RC-M)................... 2143 156,715 10. 11. Other assets (from Schedule RC-F)........................ 2160 1,592,088 11. 12. Total assets (sum of items 1 through 11)................. 2170 49,335,206 12.
- ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 5 Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 Address: One First National Plaza, Ste 0460 ST-BK: 17-1630 City, State Zip: Chicago, IL 60670 FFIEC 031 FDIC Certificate No.: 0/3/6/1/8 Page RC-2
Schedule RC-Continued Dollar Amounts in Thousands Bil Mil Thou --------- ------------ 13. Deposits: a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part 1)................................ RCON 2200 16,878,870 13.a. (1) Noninterest-bearing(1)................................. RCON 6631 7,855,880 13.a.(1) (2) Interest-bearing....................................... RCON 6636 9,022,990 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part II).......... RCFN 2200 12,677,057 13.b. (1) Noninterest bearing.................................... RCFN 6631 766,936 13.b.(1) (2) Interest-bearing........................ RCFN 6636 11,910,121 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: a. Federal funds purchased.................................... RCFD 0278 1,318,968 14.a. b. Securities sold under agreements to repurchase RCFD 0279 1,197,589 14.b. 15. a. Demand notes issued to the U.S. Treasury RCON 2840 104,546 15.a. b. Trading Liabilities........................................ RCFD 3548 6,431,784 15.b. 16. Other borrowed money: a. With original maturity of one year or less.. RCFD 2332 4,437,636 16.a. b. With original maturity of more than one year.............. RCFD 2333 75,308 16.b. 17. Mortgage indebtedness and obligations under capitalized leases........................................................ RCFD 2910 283,041 17. 18. Bank's liability on acceptance executed and outstanding RCFD 2920 632,259 18. 19. Subordinated notes and debentures............................. RCFD 3200 1,275,000 19. 20. Other liabilities (from Schedule RC-G)........................ RCFD 2930 892,947 20. 21. Total liabilities (sum of items 13 through 20). RCFD 2948 46,205,005 21. 22. Limited-Life preferred stock and related surplus.............. RCFD 3282 0 22. EQUITY CAPITAL 23. Perpetual preferred stock and related surplus.. RCFD 3838 0 23. 24. Common stock.................................................. RCFD 3230 200,858 24. 25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,349,164 25. 26. a. Undivided profits and capital reserves...................... RCFD 3632 584,878 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities.......................... RCFD 8434 (3,951) 26.b. 27. Cumulative foreign currency translation adjustments RCFD 3284 (748) 27. 28. Total equity capital (sum of items 23 through 27) RCFD 3210 3,130,201 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28).................... RCFD 3300 49,335,206 29.
Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external
Number comprehensive level ---------- ------------------- auditors as of any date during 1995 .........RCFD 6724 ...... N/A M.I. ---------- ------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ---------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. 6 -----END PRIVACY-ENHANCED MESSAGE-----