<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1996
REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C> <C>
ANTIGUA ACQUISITION CAPITA PREFERRED FUNDING L.P. CAPITA PREFERRED TRUST
CORPORATION* (EXACT NAME OF REGISTRANT AS SPECIFIED IN (EXACT NAME OF REGISTRANT AS
(EXACT NAME OF REGISTRANT AS CERTIFICATE OF LIMITED PARTNERSHIP) SPECIFIED IN CERTIFICATE OF TRUST)
SPECIFIED IN CHARTER)
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)
[TO BE APPLIED FOR] [TO BE APPLIED FOR] [TO BE APPLIED FOR]
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
* This registrant will be merged into
AT&T Capital Corporation upon consummation
of the Merger referred to herein.
44 WHIPPANY ROAD
MORRISTOWN, NEW JERSEY 07962
(201) 397-3000
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
G. DANIEL MCCARTHY
SENIOR VICE PRESIDENT, GENERAL COUNSEL, SECRETARY AND CHIEF RISK MANAGEMENT
OFFICER
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:
<TABLE>
<S> <C>
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
</TABLE>
------------------------
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
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
MAXIMUM 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
<S> <C> <C> <C> <C>
Capita Preferred Trust
Originated
Preferred Securities........ 40,000 $ 25 $ 1,000,000 $345
Capita Preferred Funding L.P.
Partnership
Preferred Securities(2)..... 40,000 $ 25 $ 1,000,000
Guarantee of AT&T Capital
Corporation with respect to
Trust Preferred
Securities(3)............... -- -- -- --
Guarantee of AT&T Capital
Corporation with respect to
Partnership Preferred
Securities (3).............. -- -- -- --
Totals................... -- $345
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457.
(2) 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.
(3) No separate consideration will be received for guarantees of AT&T Capital
Corporation with respect to the Trust Preferred Securities or the
Partnership Preferred Securities.
------------------------
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.
________________________________________________________________________________
<PAGE>
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 30, 1996
PROSPECTUS
TRUST PREFERRED SECURITIES
CAPITA PREFERRED TRUST
% TRUST ORIGINATED PREFERRED SECURITIESSM ('TOPRS'SM')
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
AT&T CAPITAL CORPORATION
------------------------
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'). All of the
partnership interests in the Partnership other than the limited partnership
interests represented by the Partnership Preferred Securities are 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 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 as more fully described below. See
'Description of the Partnership Preferred Securities -- Partnership
Investments.'
(continued on next page)
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 16 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.
Application will be made to list the Trust Preferred Securities on the New
York Stock Exchange, Inc. (the 'New York Stock Exchange'). If approved for
listing, 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.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
<S> <C> <C> <C>
Per Trust Preferred Security............ $ (3) $
Total................................... $ (3) $
</TABLE>
(1) Plus accrued distributions, if any, from , 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 $ of which $ will be reimbursed 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.
------------------------
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.
<PAGE>
<PAGE>
(continued from cover page)
Upon a Trust Enforcement Event (as defined herein), the holders of the
Trust Preferred Securities will have a preference over the holders of the Trust
Common Securities with respect to payments in respect of distributions and
payments upon redemption, liquidation and otherwise.
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) when, as, and if 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 will
bear interest compounded quarterly at a rate per annum equal to %. 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 Company's
obligations under the Trust Guarantee are subordinate and junior in right of
payment 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. See
'Description of the Trust Guarantee'.
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.
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). 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 the Trust
Guarantee, the Partnership Guarantee or any Investment Guarantee (each as
defined herein), 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. Distributions on the
Partnership Preferred Securities are guaranteed by the Company (the 'Partnership
Guarantee'), if, as and when such distributions have been declared out of funds
legally available therefor. The assets of the Partnership will initially
consist only of the Debentures, which consist of debt instruments of the Company
and certain of its domestic eligible controlled affiliates, and, to a limited
extent, certain U.S. government obligations and commercial paper of entities not
affiliated with the Company (the 'Eligible Debt Securities'). Payments in
respect of Affiliate Investment Instruments (other than those issued by the
Company) held by the Partnership will be guaranteed, on a subordinated basis, by
the Company pursuant to the Investment Guarantees for the benefit of the
Partnership. At June 30, 1996, the Company had outstanding consolidated senior
indebtedness aggregating approximately $7.5 billion, which would have ranked
senior to the Company's obligations under the Investment Guarantees. 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 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 'Risk Factors -- Risk Factors Related to TOPrS
- -- Distributions Payable Only if
2
<PAGE>
<PAGE>
Declared by General Partner; Tax Consequences', 'Description of the
Trust -- Preferred Securities -- Distributions' and 'Description of the
Partnership Preferred Securities-Distributions'.
The Partnership Preferred Securities are redeemable by the Partnership, in
whole or in part, from time to time, on or after October , 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 plus 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 Preferred 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 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
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'.
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. 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.
3
<PAGE>
<PAGE>
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, proxy statements and other
information with the Commission. The Registration Statement, as well as such
reports, proxy statements 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, proxy
statements 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.
No separate financial statements of either the Partnership or the Trust
have been included herein. The Company, the Trust and the Partnership do not
consider that such financial statements would be material to holders of the
Trust Preferred Securities because the Trust and the Partnership are newly
organized special purpose entities, have no operating history and no independent
operations and are not engaged in, and do not propose to engage in, any activity
other than as described under 'Capita Preferred Trust' and 'Capita Preferred
Funding L.P.' Further, the Company believes that financial statements of the
Trust and the Partnership are not material to the holders of the Trust Preferred
Securities since the Company will guarantee the Trust Preferred Securities, the
Partnership Preferred Securities and the Affiliate Investment Instruments issued
by Investment Affiliates (other than the Company). 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 Preferred Securities, that the sole assets of the
Partnership are the Affiliate Investment Instruments and the Eligible Debt
Securities, and, considered together with the Company's Trust Guarantee,
Partnership Guarantee and Investment Guarantees (collectively, the
'Guarantees'), constitute a full and unconditional guarantee by the Company of
the Trust's obligations under the Trust Preferred Securities and the
Partnership's obligations under the Partnership Preferred Securities.
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.
4
<PAGE>
<PAGE>
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 and August 20, 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
<PAGE>
<PAGE>
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.
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 second quarter of 1996 were
$10.1 billion, representing a 15.5% increase over total assets at the end of the
second quarter of 1995, and net income of $74.8 million for the first six months
of 1996 represented an increase of 41.2% 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
<PAGE>
<PAGE>
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 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 $1.5 billion to $2.5 billion of its lease and loan
receivables will be securitized annually pursuant to off-balance sheet
securitization transactions. See 'Business of the Company -- Business Strategy.'
The Company has an experienced management team; its six executive officers
have been in management positions with the Company for an average of ten years
and, on a combined basis have more than 100 years experience in the equipment
leasing and finance industry. At June 30, 1996, the Company and its subsidiaries
had approximately 2,850 employees. The principal executive offices of the
Company are located at 44 Whippany Road, Morristown, New Jersey 07962.
THE MERGER
On , 1996, the Company consummated a merger (the 'Merger')
with Antigua Acquisition Corporation, a newly 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 newly formed Cayman
Islands corporation ('Holdings'), and Merger Sub, a wholly-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 other members of
the Company's Corporate Leadership Team, (ii) GRS Holding Company Limited, a
private United Kingdom holding corporation engaged in the U.K. rail leasing
business ('GRSH'), which on a fully diluted basis is 85% beneficially owned by
Nomura International plc ('Nomura'), a wholly owned subsidiary of The Nomura
Securities Co., Ltd., and (iii) Babcock & Brown Holdings Inc., a San Francisco
based leasing, asset and project financing advisory company ('Babcock & Brown').
Following the consummation of the Merger and the related transactions, the
Management Investors own % of the Common Stock (or % on a fully diluted
basis), GRSH indirectly owns % of the Common Stock (or % on a fully
diluted basis) and Babcock & Brown indirectly owns % of the Common Stock (or
% on a fully diluted basis).
Concurrently with the Merger, on , 1996, affiliates of the
Company issued and sold equipment receivable-backed securities in an off-balance
sheet securitization which generated aggregate
7
<PAGE>
<PAGE>
proceeds to the Company of approximately $ billion (representing
approximately $ billion of the Company's portfolio assets less residuals not
securitized), which proceeds, together with the equity contributions relating to
the Merger (approximately $.8 billion), were used to purchase the Company's then
outstanding common stock and to repay short-term notes. 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 , 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 and the License Agreement 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 and the License Agreement, 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 -- 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
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
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 consist of the Debentures and, to
a limited extent, certain Eligible Debt Securities.
Securities Offered........................... 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, December 31, commencing December 31, 1996.
Distributions not made on the scheduled payment date will
accumulate and will bear interest compounded 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
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 -- Risks Related to TOPrS -- Distributions Payable Only
if Declared by General Partner; 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 sole
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
</TABLE>
9
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Affiliate Investment Instruments and the Investment Guarantee
and (2) the rights of the holders of the Partnership Preferred
Securities to receive distributions (only when, as and if
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
'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, unless Partnership Preferred Securities are
distributed to such holders in connection with a Trust Special
Event. See 'Description
</TABLE>
10
<PAGE>
<PAGE>
<TABLE>
<S> <C>
of the 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 October , 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.
Trust Guarantee.............................. 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. The Trust Guarantee will
be unsecured and will be 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.
Partnership Guarantee........................ The Company will 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 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. The Partnership Guarantee will be unsecured and will
be 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.
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
</TABLE>
11
<PAGE>
<PAGE>
<TABLE>
<S> <C>
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'.
Special Event Redemptions or Distributions...
Upon the occurrence of a Trust Tax Event or a Trust Investment
Company Event (each as defined herein), 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 or a Partnership Company Event (each as
defined herein), 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'. Payments in respect of
Debentures which are not issued directly by the Company will be
guaranteed, to the extent described herein, by the Company
pursuant to the Investment Guarantees for the benefit of the
Partnership. See 'Description of the Partnership Preferred
Securities -- Investment Guarantees'.
</TABLE>
12
<PAGE>
<PAGE>
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 six months ended June 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 six months ended June 30, 1996 and 1995 include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation.
The results of operations for the six months ended June 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. 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.'
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
---------- ---------
<S> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
RESULTS OF OPERATIONS DATA:
Total revenues................ $899,884 $ 744,770
Interest expense.............. 230,072 194,804
Operating and administrative
expenses.................... 248,409 234,987
Provision for credit losses... 48,536 39,678
Income before income taxes and
cumulative effect on prior
years of accounting
change...................... 120,267 88,842
Income before cumulative
effect on prior years of
accounting change and impact
of tax rate change.......... 74,823 52,994
Cumulative effect on prior
years of accounting
change(1)................... -- --
Impact of 1993 tax rate
change(1)................... -- --
Net income(1)................. 74,823 52,994
Earnings per share(1)......... 1.58 1.13
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
RESULTS OF OPERATIONS DATA:
Total revenues................$1,577,035 $1,384,079 $1,359,589
Interest expense.............. 411,040 271,812 236,335
Operating and administrative
expenses.................... 473,663 427,187 381,515
Provision for credit losses... 86,214 80,888 123,678
Income before income taxes and
cumulative effect on prior
years of accounting
change...................... 208,239 173,614 138,040
Income before cumulative
effect on prior years of
accounting change and impact
of tax rate change.......... 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)................. 127,555 100,336 68,596
Earnings per share(1)......... 2.70 2.14 1.60
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
------------------------
1996 1995
----------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Total assets.................. $10,097,187 $8,741,899
Total debt(2)................. 7,491,185 6,226,242
Total liabilities(2).......... 8,916,912 7,691,106
Total shareowners' equity..... 1,180,275 1,050,793
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Total assets..................$9,541,259 $8,021,923 $6,409,726
Total debt(2)................. 6,928,409 5,556,458 4,262,405
Total liabilities(2).......... 8,425,134 7,013,705 5,485,283
Total shareowners' equity..... 1,116,125 1,008,218 924,443
</TABLE>
(table continued on next page)
13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS ENDED JUNE 30,
----------------------------
1996 1995
------------ -------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
OTHER DATA:
Ratio of earnings to fixed
charges(3).................. 1.51x 1.45x
Ratio of total debt to
shareowners' equity(4)...... 6.35x 5.95x
Return on average
equity(5)(7)................ 13.0% 10.3%
Return on average
assets(6)(7)................ 1.5% 1.3%
Portfolio Assets of the
Company..................... $9,777,855 $ 8,515,795
Allowance for credit losses... 238,553 202,661
Net Portfolio Assets of the
Company..................... 9,539,302 8,313,134
Assets of others managed by
the Company................. 2,159,923 2,566,180
Volume of equipment
financed(8)................. 2,503,135 1,979,706
Ratio of allowance for credit
losses to net
charge-offs(9).............. 4.46x 3.94x
Ratio of net charge-offs to
Portfolio Assets(9)......... 0.55% 0.60%
Ratio of allowance for credit
losses to Portfolio
Assets...................... 2.44% 2.38%
Ratio of operating and
administrative expenses to
period-end total
assets(10).................. 4.92% 5.38%
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER
31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
OTHER DATA:
Ratio of earnings to fixed
charges(3).................. 1.50x 1.62x 1.57x
Ratio of total debt to
shareowners' equity(4)...... 6.22x 5.51x 4.61x
Return on average
equity(5)(7)................ 12.1% 10.5% 8.5%
Return on average
assets(6)(7)................ 1.5% 1.4% 1.1%
Portfolio Assets of the
Company.....................$9,328,623 $7,661,226 $6,236,624
Allowance for credit losses... 223,220 176,428 159,819
Net Portfolio Assets of the
Company..................... 9,105,403 7,484,798 6,076,805
Assets of others managed by
the Company................. 2,214,502 2,659,526 2,795,663
Volume of equipment
financed(8)................. 4,567,000 4,251,000 3,467,000
Ratio of allowance for credit
losses to net
charge-offs(9).............. 4.77x 3.18x 2.71x
Ratio of net charge-offs to
Portfolio Assets(9)......... 0.50% 0.73% 0.95%
Ratio of allowance for credit
losses to Portfolio
Assets...................... 2.39% 2.30% 2.56%
Ratio of operating and
administrative expenses to
period-end total
assets(10).................. 4.96% 5.33% 5.95%
</TABLE>
- ------------
(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 $248.9 million, $248.9
million, $248.9 million, $214.1 million and $188.6 million at June 30,
1996, June 30, 1995, December 31, 1995, 1994 and 1993, respectively. The
Company no longer receives such interest-free loans and repaid such loans
immediately prior to the Merger. 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 six
months ended June 30, 1996 and the year ended December 31, 1995 would have
been x and x, 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
six months ended June 30, 1996 would have been x, and for the year ended
December 31, 1995, there would have been an earnings deficiency of $
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. If such loans were
so included, the ratio of total debt to shareowners' equity would have been
6.56x, 6.16x, 6.45x, 5.72x and 4.81x at June 30, 1996, June 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 six months ended June 30, 1996
and 1995) divided by average total shareowners' equity.
(6) Net income (annualized in the case of the six months ended June 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 June 30, 1996 and 1995 are calculated based on the
twelve months then ended.
(10) Operating and administrative expenses (annualized for the six months ended
June 30, 1996 and June 30, 1995) divided by period-end total assets.
14
<PAGE>
<PAGE>
RATINGS OF SECURITIES
Standard & Poor's Ratings Group, a division of McGraw-Hill ('S&P'), has
rated the Trust Preferred Securities '[ ]', Moody's Investors Service, Inc.
('Moody's') has rated the Trust Preferred Securities '[ ]' and Duff & Phelps
Credit Rating Co. ('Duff & Phelps') has rated the Trust Preferred Securities
'[ ]'.
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.
15
<PAGE>
<PAGE>
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.
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 governed by certain important agreements described below and in
'Relationship with AT&T Entities.'
For the six months ended June 30, 1996, 30.9% and 64.3% (or $278.1 million
and $48.1 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.
Additionally, 7.3% and 7.3% (or $65.9 million and $5.4 million) of total
revenues and net income, respectively, for the six months ended June 30, 1996
were attributable to transactions with the AT&T Entities as End-Users. The
Company's non-AT&T Entities related business generated 61.8% and 28.4% (or
$555.9 million and $21.3 million) of total revenues and net income,
respectively, for the six months ended June 30, 1996 (25.0% 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, 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. Additionally, 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.'
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. 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
16
<PAGE>
<PAGE>
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 the Operating Agreements, especially Lucent's
Operating Agreement, on terms not adverse to the Company could have a material
adverse effect on the Company's results of operations. 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 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.
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.
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 alternative providers of financing that offer 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 (and, in the case of the AT&T Operating Agreement
only, the Company ceases to be a subsidiary of Holdings). 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 Agreements, for a term equal to any renewal
term of
17
<PAGE>
<PAGE>
the Operating Agreements. 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.'
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
approximately an 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 ' -- 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 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
Lucent or NCR in the Company. To the extent that this change causes the
relations of Lucent and NCR with the Company to be less favorable than in the
past, there will be an adverse effect on the Company's results of operations.
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 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
in 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 with reasonable accuracy, the Company has estimated an increase in
borrowing costs of 30 basis points. 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 $10.0 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 incremental
borrowing costs. To illustrate the Company's sensitivity to interest rates, had
the increase in borrowing costs been 20 or 40 basis points the Company's
interest expense increase would have been $6.7 million or $13.4 million,
respectively.
Additionally, the increased borrowings required to fund the higher costs
associated with Tax Deconsolidation, increased operating and administrative
expenses, compensation and benefit plans and transaction costs (all as described
below) are expected to increase interest expense by approximately $22.3 million.
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
18
<PAGE>
<PAGE>
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. While the
Company was a part of the AT&T consolidated federal income tax group, 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 $248.9 million. Additionally, as a result
of Tax Deconsolidation, 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 and $.3 million will be paid to Nomura and Babcock &
Brown, respectively. The Company estimates the total increase in operating and
administrative expenses to be $7.4 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 after-tax charge of $22.3 million. In
addition, $ million was paid to certain officers of the Company upon closing
of the Merger resulting in an after-tax charge of $ million.
Transaction Costs. The Company will incur a $22.0 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. 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. There can be no assurance that such allowance will prove
19
<PAGE>
<PAGE>
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. See 'Business of the Company -- Certain Business
Skills.'
RISK FACTORS RELATED TO TOPRS
DISTRIBUTIONS PAYABLE ONLY IF DECLARED BY GENERAL PARTNER; 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. Payments
in respect of Affiliate Investment Instruments, including the Debentures, held
by the Partnership will be guaranteed by the Company pursuant to the Investment
Guarantees. 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, in which event the Trust will not have
funds to pay distributions on the Trust 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.
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. Should the General
Partner elect not to declare distributions on the Partnership Preferred
Securities in the future, the market price of the Trust Preferred Securities is
likely to be affected. In addition, as a result of the existence of the General
Partner's right not to declare distributions on the Partnership Preferred
Securities, the market price of the Trust Preferred Securities (which represent
an undivided beneficial interest in the Partnership Preferred Securities) may be
more volatile than other similar securities where there is no such right to
defer current distributions. See 'Certain Federal Income Tax
Considerations -- Timing of Income.'
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
20
<PAGE>
<PAGE>
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.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Trust Special Event or a Partnership Special Event
(each as defined herein, and 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. Upon the occurrence of a Partnership Special Event,
however, a dissolution of the Trust in which holders of Trust Preferred
Securities receive cash would be a taxable event to such holders. 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 Trust Preferred
Securities or 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
Partnership Preferred Securities -- Partnership Special Event Redemption' and
'Description of Partnership Preferred Securities -- General'.
21
<PAGE>
<PAGE>
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND DEBENTURES
The Company's obligations under the Trust Guarantee, the Partnership
Guarantee and the Investment Guarantees (collectively, the '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. No payment may be made on the Guarantees if (i) any
senior indebtedness of the Company is not paid when due and any applicable grace
period with respect to such default has ended with such default not having been
cured or waived or ceasing to exist, or (ii) the maturity of any senior
indebtedness has been accelerated because of a default. As of June 30, 1996,
consolidated senior indebtedness of AT&T Capital aggregated approximately $7.5
billion. There are no terms in the Trust Preferred Securities, the Partnership
Preferred Securities or the Guarantees 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 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 Partnership Preferred Securities under the Partnership Guarantee,
and (iii) the rights of the holders of the Partnership Preferred Securities to
receive distributions (when, as and if declared) 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. In addition, the holders of a majority in liquidation
amount of the Trust Preferred Securities will have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred upon
the Property Trustee under the Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of the
Partnership Preferred Securities. If the Property Trustee fails to enforce its
rights under the Partnership Preferred Securities, a holder of Trust Preferred
Securities may institute a legal proceeding directly against the Company 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 Preferred
Securities may directly institute a proceeding against such Investment Affiliate
for enforcement of payment with respect to such Affiliate Investment Instrument.
The holders of Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Partnership Preferred Securities.
See 'Description of the Trust Preferred Securities -- Enforcement Events.'
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 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 United States 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. Application will be made to list the Trust Preferred
Securities 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.
22
<PAGE>
<PAGE>
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 net proceeds from the sale of such Debentures to the Partnership of
approximately $ to repay certain outstanding indebtedness incurred in
connection with the transactions contemplated by the Merger.
CAPITALIZATION
The following table sets forth the short-term notes and capitalization of
the Company as of June 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 net 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.
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED FOR
ACTUAL FOR MERGER(1) THE OFFERING
---------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term notes, less unamortized discounts....................... $2,233,152 $ 1,052,052 $ --
Medium and long-term debt(2)....................................... 5,258,033 5,258,033
Company-obligated preferred securities of subsidiary(3)............ -- -- --
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 46,968,810 shares ( shares
authorized and shares issued and outstanding on
a pro forma basis).......................................... 470 190 --
Additional paid-in capital......................................... 783,908 593,140 --
Foreign currency translation adjustment............................ (2,908) (2,908) --
Retained earnings.................................................. 419,595 91,500 --
Recourse loans to senior executives(4)............................. (20,790) (20,790) --
---------- ------------- ---------------
Total shareowners' equity..................................... 1,180,275 661,132 --
---------- ------------- ---------------
Total capitalization.......................................... $8,671,460 $ 6,971,217 --
---------- ------------- ---------------
---------- ------------- ---------------
</TABLE>
- ------------
(1) Gives effect to the Merger and related transactions, (excluding the effects
of this offering) which are described below under 'The Merger.'
(2) Does not include $248.9 million aggregate principal amount of interest-free
loans outstanding at June 30, 1996, from AT&T to the Company under certain
tax agreements. Since the consummation of the Merger, the Company no longer
receives such loans and repaid such loans immediately prior to the Merger.
See 'Risk Factors -- Risks Related to the Termination of AT&T's Ownership
Interest in the Company -- Tax Deconsolidation.'
(3) 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 be comprised of the Debentures and the Eligible Debt
Securities. Pursuant to the Trust Guarantee, Partnership Guarantee and
Investment Guarantee, the Company will guarantee, to the extent described
herein, the Trust Preferred Securities, the Partnership Preferred Securities
and the Debentures, respectively.
(4) 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. Some or all of these loans are expected to remain
outstanding in accordance with the terms of the Merger.
23
<PAGE>
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES OF THE COMPANY
<TABLE>
<CAPTION>
PRO FORMA FOR OFFERING(1)
--------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
JUNE 30, DECEMBER 31, JUNE 30, -----------------------------------------
1996 1995 1996 1995 1994 1993 1992 1991
---------- ------------ ----------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges.................... x x 1.51x 1.50x 1.62x 1.57x 1.44x 1.29x
</TABLE>
- ------------
(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 six months ended June 30, 1996 would
have been x, and for the year ended December 31, 1995 there would have been
an earnings deficiency of $ 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.
24
<PAGE>
<PAGE>
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 six months ended June
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 six months ended June 30, 1996 and 1995 include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation. The results of operations for the six months ended June 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. 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.'
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1996 1995
----------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
RESULTS OF OPERATIONS DATA:
Total revenues..................... $ 899,884 $ 744,770
Interest expense................... 230,072 194,804
Operating and administrative
expenses......................... 248,409 234,987
Provision for credit losses........ 48,536 39,678
Income before income taxes and
cumulative effect on prior years
of accounting change............. 120,267 88,842
Income before cumulative effect on
prior years of accounting change
and impact of tax rate change.... 74,823 52,994
Cumulative effect on prior years of
accounting change(1)............. -- --
Impact of 1993 tax rate
change(1)........................ -- --
Net income(1)...................... 74,823 52,994
Earnings per share(1).............. 1.58 1.13
<CAPTION>
AT JUNE 30,
-------------------------
1996 1995
----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets....................... $10,097,187 $8,741,899
Total debt(2)...................... 7,491,185 6,226,242
Total liabilities(2)............... 8,916,912 7,691,106
Total shareowners' equity.......... 1,180,275 1,050,793
(table continued on next page)
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
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)...................... 127,55 100,336 68,596 73,572 54,199
Earnings per share(1).............. 2.70 2.14 1.60 1.83 1.35
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................... $9,541,259 $8,021,923 $6,409,726 $5,895,429 $5,197,245
Total debt(2)...................... 6,928,409 5,556,458 4,262,405 4,089,483 3,594,247
Total liabilities(2)............... 8,425,134 7,013,705 5,485,283 5,158,808 4,647,979
Total shareowners' equity.......... 1,116,125 1,008,218 924,443 736,621 549,266
</TABLE>
25
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------------
1996 1995
----------- ----------
(DOLLARS IN THOUSANDS)
OTHER DATA:
<S> <C> <C>
Ratio of earnings to fixed
charges(3)....................... 1.51x 1.45x
Ratio of total debt to shareowners'
equity(4)........................ 6.35x 5.95x
Return on average equity(5)(7)..... 13.0% 10.3%
Return on average assets(6)(7)..... 1.5% 1.3%
Portfolio Assets of the Company.... $ 9,777,855 $8,515,795
Allowance for credit losses........ 238,553 202,661
Net Portfolio Assets of the
Company.......................... 9,539,302 8,313,134
Assets of others managed by the
Company.......................... 2,159,923 2,566,180
Volume of equipment financed(8).... 2,503,135 1,979,706
Ratio of allowance for credit
losses to net charge-offs(9)..... 4.46x 3.94x
Ratio of net charge-offs to
Portfolio Assets(9).............. 0.55% 0.60%
Ratio of allowance for credit
losses to Portfolio Assets....... 2.44% 2.38%
Ratio of operating and
administrative expenses to
period-end total assets(10)...... 4.92% 5.38%
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
OTHER DATA:
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(3)....................... 1.50x 1.62x 1.57x 1.44x 1.29x
Ratio of total debt to shareowners'
equity(4)........................ 6.22x 5.51x 4.61x 5.55x 6.54x
Return on average equity(5)(7)..... 12.1% 10.5% 8.5% 11.4% 10.7%
Return on average assets(6)(7)..... 1.5% 1.4% 1.1% 1.3% 1.1%
Portfolio Assets of the Company.... $9,328,623 $7,661,226 $6,236,624 $5,724,702 $5,050,797
Allowance for credit losses........ 223,220 176,428 159,819 123,961 93,967
Net Portfolio Assets of the
Company.......................... 9,105,403 7,484,798 6,076,805 5,600,741 4,956,830
Assets of others managed by the
Company.......................... 2,214,502 2,659,526 2,795,663 1,374,354 649,014
Volume of equipment financed(8).... 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)..... 4.77x 3.18x 2.71x 1.58x 1.15x
Ratio of net charge-offs to
Portfolio Assets(9).............. 0.50% 0.73% 0.95% 1.37% 1.62%
Ratio of allowance for credit
losses to Portfolio Assets....... 2.39% 2.30% 2.56% 2.17% 1.86%
Ratio of operating and
administrative expenses to
period-end total assets(10)...... 4.96% 5.33% 5.95% 6.10% 5.75%
</TABLE>
- ------------
(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 $248.9 million, $248.9
million, $248.9 million, $214.1 million, $188.6 million, $193.1 million and
$206.6 million at June 30, 1996, June 30, 1995, December 31, 1995, 1994,
1993, 1992 and 1991, respectively. The Company no longer receives such
interest-free loans and repaid such loans immediately prior to the Merger.
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 six
months ended June 30, 1996 and the year ended December 31, 1995 would have
been x and x, 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 six months ended June 30, 1996 would have been x,
and for the year ended December 31, 1995, there would have been an
earnings deficiency of $ 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. If such loans were so
included, the ratio of total debt to shareowners' equity would have been
6.56x, 6.16x, 6.45x, 5.72x, 4.81x, 5.81x and 6.92x at June 30, 1996, June
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 six months ended June 30, 1996
and 1995) divided by average total shareowners' equity.
(6) Net income (annualized in the case of the six months ended June 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 June 30, 1996 and 1995 are calculated based on the
twelve months then ended.
(10) Operating and administrative expenses (annualized for the six months ended
June 30, 1996 and June 30, 1995) divided by period-end total assets.
26
<PAGE>
<PAGE>
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 six months ended June 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.
<TABLE>
<CAPTION>
AT OR FOR THE SIX MONTHS ENDED JUNE 30, 1996
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 27.8 0.3 28.1 30.4 0.5 30.9
AT&T Entities as End-User..... 4.7 -- 4.7 7.3 -- 7.3
Non-AT&T Entities Related
Business.................... 49.0 18.2 67.2 49.1 12.7 61.8
---- ------- ----- ---- ------- -----
Total............... 81.5 18.5 100.0 86.8 13.2 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
AT OR FOR THE SIX MONTHS
ENDED JUNE 30, 1996
--------------------------
% OF NET INCOME (LOSS)
--------------------------
U.S. FOREIGN TOTAL
------ ------- ------
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 63.8 0.5 64.3
AT&T Entities as End-User..... 7.3 -- 7.3
Non-AT&T Entities Related
Business.................... 33.3 (4.9) 28.4
------ ------- ------
Total............... 104.4 (4.4) 100.0
------ ------- ------
------ ------- ------
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 29.4 0.1 29.5 32.3 0.4 32.7
AT&T Entities as End-User..... 5.3 -- 5.3 8.3 -- 8.3
Non-AT&T Entities Related
Business.................... 47.8 17.4 65.2 46.3 12.7 59.0
---- ------- ----- ---- ------- -----
Total............... 82.5 17.5 100.0 86.9 13.1 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 1995
-------------------------
% OF NET INCOME (LOSS)
-------------------------
U.S. FOREIGN TOTAL
------ ------- -----
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 67.2 0.7 67.9
AT&T Entities as End-User..... 8.2 -- 8.2
Non-AT&T Entities Related
Business.................... 27.0 (3.1) 23.9
------ ------- -----
Total............... 102.4 (2.4) 100.0
------ ------- -----
------ ------- -----
</TABLE>
27
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 34.3 0.3 34.6 33.1 0.3 33.4
AT&T Entities as End-User..... 6.8 -- 6.8 9.5 -- 9.5
Non-AT&T Entities Related
Business.................... 48.0 10.6 58.6 47.8 9.3 57.1
---- ------- ----- ---- ------- -----
Total............... 89.1 10.9 100.0 90.4 9.6 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 1994
-------------------------
% OF NET INCOME (LOSS)
-------------------------
U.S. FOREIGN TOTAL
------ ------- -----
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 83.9 (1.4) 82.5
AT&T Entities as End-User..... 8.5 -- 8.5
Non-AT&T Entities Related
Business.................... 11.8 (2.8) 9.0
------ ------- -----
Total............... 104.2 (4.2) 100.0
------ ------- -----
------ ------- -----
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1993
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 38.1 0.3 38.4 31.1 0.2 31.3
AT&T Entities as End-User..... 9.5 -- 9.5 14.9 -- 14.9
Non-AT&T Entities Related
Business.................... 46.1 6.0 52.1 47.8 6.0 53.8
---- ------- ----- ---- ------- -----
Total............... 93.7 6.3 100.0 93.8 6.2 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
AT OR FOR THE YEAR ENDED
DECEMBER 31, 1993
-------------------------
% OF NET INCOME (LOSS)
-------------------------
U.S. FOREIGN TOTAL
------ ------- -----
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 99.8 (1.7) 98.1(1)
AT&T Entities as End-User..... 20.8 -- 20.8(1)
Non-AT&T Entities Related
Business.................... (6.9) (12.0) (18.9)(1)
------ ------- -----
Total............... 113.7 (13.7) 100.0
------ ------- -----
------ ------- -----
</TABLE>
- ------------
(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 six months ended June 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 25.0% of the Company's net income for the six months ended
June 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 six months ended June 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
28
<PAGE>
<PAGE>
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).
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 $1.5 billion to $2.5 billion of its lease and loan receivables
will be securitized annually pursuant to off-balance sheet securitization
transactions. 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. 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 and maturity. Small transactions are generally credit
scored by operating personnel who apply credit
29
<PAGE>
<PAGE>
criteria previously approved by the Company's Risk Management Department. Such
criteria take into account numerous factors, including customer credit history,
type of business, operating history and geographic location. 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 , 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 other
members of the Company's Corporate Leadership Forum, (ii) GRSH and (iii) Babcock
& Brown. Following the consummation of the Merger and the related transactions,
the Management Investors own % of the Common Stock (or % on a fully
diluted basis), GRSH indirectly owns % of the Common Stock (or % on a
fully diluted basis) and Babcock & Brown indirectly owns % of the Common
Stock (or % on a fully diluted basis).
The Merger and transactions related to the Merger had a significant impact
on the Company's financial position and results of operations. Had the Merger
and related transactions occurred on June 30, 1996, on a pro forma basis, the
Company's total assets, debt, total liabilities and equity would have been $7.6
billion, $6.1 billion, $6.7 billion and $661.1 million, respectively. Had the
Merger and related transactions occurred on January 1, 1995, the Company's
revenues for the six months ended June 30, 1996 and the year ended December 31,
1995 would have been $788.5 million and $1,269.6 million, respectively, and the
Company's net income (loss) for the six months ended June 30, 1996 and the year
ended December 31, 1995 would have been $17.9 million and $(29.1) million,
respectively. The transactions related to the Merger include: (i) the $2.75
billion securitization of lease and loan receivables (portfolio assets of $3.01
billion, less residuals not securitized) which occurred on , 1996, and the
application of the net proceeds therefrom; (ii) the purchase of the Company's
then outstanding common
30
<PAGE>
<PAGE>
stock 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 $248.9 million of non-interest
bearing notes held by AT&T and the payment by the Company to AT&T of $35 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; (v) 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; (vi) the
expected increase in the Company's borrowing cost resulting from the Merger;
(vii) 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; (viii) the payment of certain annual management and advisory fees; and
(ix) 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 recently completed initial
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 $1,418.3 million,
and the Company's net income for the year ended December 31, 1995 would have
been $62.4 million which excludes other non-recurring expenses of $49.3 million.
The Company's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 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 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) 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
31
<PAGE>
<PAGE>
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 -- 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 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 and the License Agreement 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 assumed or 'doing business' name.
See 'Risk Factors -- 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.
32
<PAGE>
<PAGE>
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 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
limited partnership agreement dated August 29, 1996, between 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 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 (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)
related to the organization and operations of the Trust and the offering of the
Trust Preferred 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 use its reasonable efforts to cause the Trust to
remain a statutory business trust, except as permitted by the Declaration of the
Trust in connection with the Trust's liquidation, merger, or consolidation, and
(iii) to take no action which would be reasonably likely to cause the Trust to
be classified as an association 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
33
<PAGE>
<PAGE>
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 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 income allocated
to distributions 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 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 use its
reasonable efforts to cause the Partnership to remain a limited partnership and
not to voluntarily dissolve, wind-up or be terminated, except as permitted by
the Limited Partnership Agreement and (iii) to take no action which would be
reasonably likely to cause the Partnership to be classified as an association
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.'
The Limited Partnership Agreement provides that the General Partner will
have liability for the debts and obligations 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), but excluding obligations to holders of
Partnership Preferred Securities in their capacities as holders). 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.,
34
<PAGE>
<PAGE>
will act as indenture 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. All of the Trust Common Securities will be owned by the
Company. The Trust Common Securities rank pari passu, and payments will be made
thereon on a pro rata basis, with the Trust Preferred Securities, except that
upon the occurrence of a Trust Enforcement Event (as defined herein), the rights
of the holders of the Trust Common Securities to receive payment of periodic
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of Trust Preferred Securities. See
-- 'Subordination of Trust Common Securities'. 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 certain
temporary investments 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
[name of commercial bank], 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 when, as, and if the Trust has funds available for payment.
Distributions not paid on the scheduled payment date will accumulate and will
bear interest compounded quarterly at a rate per annum equal to %. The term
'distribution'as used herein includes any such interest payable unless otherwise
stated. The amount of distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months.
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, 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 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 (as defined herein).
Distributions on the Partnership Preferred
35
<PAGE>
<PAGE>
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.
The assets of the Partnership consist only of Affiliate Investment
Instruments (which will initially consist solely of 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,
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'.
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 Regular Trustees shall have the right to select the relevant record dates,
which shall be at least 15 days prior to 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' 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.
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
October , 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 per Trust Security equal to $25 plus accrued and unpaid distributions
through the date of redemption ('Redemption Price'); 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, 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
36
<PAGE>
<PAGE>
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 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 any Investment
Affiliate would be precluded from deducting any interest payable with respect to
an Affiliate Investment Instrument 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 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 Debentures, 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
Prospectus (collectively a 'Tax Action'), which Tax Action affects any of the
events 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
Affiliate Investment Instruments to the Partnership is not, or will not be,
deductible by the Company 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.
37
<PAGE>
<PAGE>
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. 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 distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made pro rata based on the liquidation
amount of the Trust Securities; provided, however, that, if on any distribution
date or redemption date a Trust Enforcement Event shall have occurred and be
continuing, no payment of any distribution on, or amount payable upon redemption
of, any Trust Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Trust Common Securities, shall
be made by the Trust unless payment in full in cash of all accumulated and
unpaid distributions on all outstanding Trust Preferred Securities for all
distribution periods terminating on or prior thereto, or in the case of payment
of the amount payable upon
38
<PAGE>
<PAGE>
redemption of the Trust Preferred Securities, the full amount of such payment in
respect of all outstanding Trust Preferred Securities shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all distributions on, or the amount
payable upon redemption of, Trust Preferred Securities then due and payable.
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 dissolution pro rata with the holders of the
Trust Preferred Securities, except that if a Trust Enforcement Event has
occurred and is continuing, the Trust Preferred Securities shall have a
preference over the Trust Common Securities with regard to such distributions.
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.
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 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
39
<PAGE>
<PAGE>
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 taxable as a corporation nor an entity taxable as a
publicly traded partnership for United States federal income tax purposes and
(D) following such merger, consolidation, amalgamation or replacement, the
Partnership will continue to be treated as a partnership for United States
federal income tax purposes. Notwithstanding the foregoing, 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 the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
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 sole 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
40
<PAGE>
<PAGE>
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.
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 Company 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 Preferred Securities may directly
institute a proceeding against such Investment Affiliate for enforcement of
payment with respect to such Affiliate Investment Instrument.
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.
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 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. 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 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
41
<PAGE>
<PAGE>
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. 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 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.
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.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by 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.
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 for purposes of United States federal income tax as a
grantor trust (ii) cause the Partnership to fail to be classified for purposes
of United States federal income tax purposes as a partnership, (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
42
<PAGE>
<PAGE>
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 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 and which will be legended as set forth under the
heading 'Notices to Investors'.
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.
43
<PAGE>
<PAGE>
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 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.
44
<PAGE>
<PAGE>
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, 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 and so that the Affiliate Investment Instruments issued by the Company
or its affiliates will be treated as indebtedness of the Company 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.
45
<PAGE>
<PAGE>
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 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.
GENERAL
Pursuant to the Trust Guarantee, the Company will irrevocably and
unconditionally agree, on a subordinated basis and to the extent set forth
therein, to pay in full to the holders of the 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 Trust Guarantee, when taken together with the Investment Affiliates'
and the Company's obligations under the Affiliate Investment Instruments and the
Investment Guarantee, the provisions set forth in the Limited Partnership
Agreement and the Declaration, including the Company's obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Trust Preferred
Securities issued by the Trust.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Trust Common
Securities (the 'Common Securities Trust Guarantee') to the same extent as the
Trust Guarantee, except that upon the occurrence and during the continuation of
a Trust Enforcement Event, holders of Trust Preferred Securities shall have
priority over holders of Trust Common Securities with respect to distributions
and payments on liquidation, redemption or otherwise.
46
<PAGE>
<PAGE>
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 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 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 (as defined below) 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 Babcock & Brown and its Affiliates. 'Permissible Affiliated
Payments' means (i) the payment to such 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;
any such transaction 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 transaction is
approved by a majority of the Company's independent directors.
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.
Notwithstanding the foregoing, if the Company has failed to make a guarantee
payment, a holder of Preferred Securities may directly institute a proceeding in
such holder's own name against the Company for enforcement of the Preferred
Securities 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. 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.
47
<PAGE>
<PAGE>
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.
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 or
indirectly 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
48
<PAGE>
<PAGE>
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 will bear interest compounded 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 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,
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.
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
General Partner shall have the right to select relevant record dates, which
shall be at least 15 days prior to 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.
49
<PAGE>
<PAGE>
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 'Initial Company Debenture'), and approximately 14% of the
Initial Partnership Proceeds will be used to purchase Debentures of two domestic
subsidiaries of the Company (the 'Initial Affiliate Debentures'). Each Debenture
will have a term of 20 years and will provide for interest payable quarterly in
arrears at an annual rate of % on the Initial Company Debenture, % on
the Initial Affiliate Debenture issued by and % on the
Initial Affiliate Debenture issued by ; which rates represent
market rates of interest for the investments. The Debentures will be general
unsecured debt obligations of the relevant issuers. 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 their character, including a
limitation on consolidation, merger, sale or conveyance of assets of the
relevant issuer and a limitation on incurrence of secured debt. The Debentures
will also contain customary events of default (the 'Investment Events of
Default'), including defaults in payments on the Debentures 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 and certain bankruptcy, insolvency or reorganization events
(subject to certain exceptions and grace periods).
The payment of interest, principal and other payment terms of the
Debentures and any other Affiliate Investment Instruments that are debt
securities of an Investment Affiliate and the payment of dividends,
distributions, and other payment terms of Affiliate Investment Instruments that
are preferred or preference stock of an Investment Affiliate, in each case, when
as and if declared by the applicable Investment Affiliate, will be guaranteed to
the extent described herein (each, an 'Investment Guarantee') by the Company for
the benefit of the Partnership. 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 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 Standard & Poor's Rating Group ('S&P'), and
Moody's Investor Service, Inc. ('Moody's'), and having a maturity not in excess;
(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
50
<PAGE>
<PAGE>
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 Eligible Debt Securities and additional Affiliate
Investment Instruments. Reinvestment of proceeds in Eligible Debt Securities
will generally not be subject to any limitations except that at the time of such
reinvestment the securities purchased by the Partnership must constitute
Eligible Debt Securities (as defined above). 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 the Debentures have been, and the specific terms of
all Affiliate Investment Instruments other than 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 and preferred
securities in the United States or 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 Investment 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 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 comparable investment made on an arm's length basis with
persons which are not affiliated with the Partnership. The term 'Investment
Affiliates' 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.
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
Partnership with respect to each Affiliate Investment Instrument issued by an
Investment Affiliate (other than the Company) to the extent set forth below.
With respect to Affiliate Investment Instruments that are debt securities, the
Company will fully and unconditionally guarantee the due and punctual payment
(without duplication of amounts theretofore paid by the Investment Affiliates),
of principal, premium, if any, and interest on such Affiliate Investment
Instruments when and as the same shall become due and payable, whether at
maturity, upon redemption or otherwise. With respect to Affiliate Investment
Instruments that are preferred or preference securities, the Company will fully
and unconditionally guarantee, to the extent set forth therein, to the
Partnership as and when due, any accrued and unpaid dividends or distributions
if, as and when declared and payments upon redemption and maturity or otherwise,
including all accrued and unpaid dividends or distributions. Investment
Guarantees of preferred or preference stock will not apply to any payment of
dividends or distributions unless and until such dividends or distributions are
declared by the relevant Investment Affiliate.
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
51
<PAGE>
<PAGE>
unconditional guarantees with respect to the applicable Affiliate Investment
Instruments from the time of issuance.
The Investment Guarantees will constitute guarantees of collection, not of
payment (that is, the guaranteed party may not institute a legal proceeding
directly against the Company to enforce its rights under the guarantee without
first receiving a judgment against the Investment Affiliate that issued the
applicable Affiliate Investment Instrument). 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
Partnership.
Status of the Investment Guarantee
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.
Governing Law
The Investment Guarantees will be governed by and construed in accordance
with the laws of the State of New York.
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 October ,
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 having an
aggregate liquidation amount equal to the liquidation amount of the Partnership
Preferred Securities so redeemed will be mandatorily redeemed at a price equal
to the stated liquidation amount of the Trust Preferred Securities so redeemed,
together with any accrued and unpaid distributions on such Trust Preferred
Securities. 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.
52
<PAGE>
<PAGE>
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 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
one or more of the Investment Affiliates 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.
'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 (a 'Partnership Dissolution Investment
Company Opinion') to the effect that as a result of the occurrence on or after
the date hereof 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.
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 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
53
<PAGE>
<PAGE>
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) in
accordance with the provisions of 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.
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
54
<PAGE>
<PAGE>
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.
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 (iii) an Investment Event of Default occurs
and is continuing on any Affiliate Investment Instrument, then the Property
Trustee, as the sole 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. Under no circumstances, however, shall the Special Representative
have authority to cause the General Partner to declare distributions on the
Partnership Preferred Securities. In addition, 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.
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 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 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
55
<PAGE>
<PAGE>
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
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
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.
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
56
<PAGE>
<PAGE>
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 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.
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
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 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
will be treated as indebtedness of the issuer of such instruments for United
States 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 determined 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.
Holders of Partnership Preferred Securities have no preemptive rights.
57
<PAGE>
<PAGE>
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 Partnership Guarantee incorporates by reference the
terms of the Trust Indenture Act. The General Partner will hold the Partnership
Guarantee for the benefit of the holders of the Partnership Preferred
Securities.
GENERAL
Pursuant to the Partnership Guarantee, the Company will irrevocably and
unconditionally 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 Partnership Guarantee, when taken together with the Investment
Affiliates' and the Company's obligations under the Affiliate Investment
Instruments and the Investment Guarantees, the provisions set forth in the
Limited Partnership Agreement, including the Company's obligations to pay costs,
expenses, debts and liabilities of the Partnership, will provide a full and
unconditional guarantee on a subordinated basis by the Company of payments due
on the Partnership Preferred Securities issued by the 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
58
<PAGE>
<PAGE>
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.
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. 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
59
<PAGE>
<PAGE>
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.
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.
60
<PAGE>
<PAGE>
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 are the
material United States federal income tax consequences of the issuance,
ownership and disposition of the 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 advisers 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. Tax Counsel has further advised that it is of the view that, if challenged,
the opinions described 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.
CLASSIFICATION OF THE TRUST
Tax Counsel has rendered its opinion generally to the effect that, under
current law and assuming full compliance with the terms of the Declaration and
the Indentures (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for
61
<PAGE>
<PAGE>
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 has rendered its opinion generally to the effect that, under
current law and assuming full compliance with the terms of the Limited
Partnership Agreement (and certain other documents), and based on certain facts
and assumptions contained 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 (a 'Taxable Publicly Traded
Partnership'). Accordingly, it is expected that the Partnership will continue to
qualify as a partnership, and therefore will not constitute a Taxable Publicly
Traded Partnership, for all taxable years in which the Partnership Preferred
Securities remain outstanding. If, however, the Partnership were to constitute a
Taxable Publicly Traded Partnership with respect to a future taxable year, the
partnership would be treated as an association taxable as a corporation and its
income would be subject to United States federal income tax.
CLASSIFICATION OF THE DEBENTURES
In connection with the issuance of the Debentures, Tax Counsel has rendered
its opinion generally to the effect that, under current law and assuming full
compliance with the terms of the underlying Indentures (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the Debentures will be classified for United States federal income tax
purposes as indebtedness.
INCOME AND DEDUCTIONS
A holder's distributive share of income attributable to the Partnership
will generally 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 will generally 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 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 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.
62
<PAGE>
<PAGE>
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 distributions on the Trust
Preferred Securities are deferred, 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 distribution deferral period will equal
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 tax basis in
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 Trust Preferred Securities, (ii)
increased by the amount of Partnership income includible 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.
63
<PAGE>
<PAGE>
OTHER PARTNERSHIP PROVISIONS
Section 708. Under Section 708 of the Code, the Partnership will be deemed
to terminate for U.S. 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. Were such a deemed termination 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 IRS regulations, should they
become effective, will mitigate some of the effects of a constructive
termination.
Section 701. The IRS 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
Form 1099, 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 will generally be allowed as a credit against the holder's
United States federal income tax, provided the required information is timely
filed with the 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.
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 and 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
64
<PAGE>
<PAGE>
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.
<TABLE>
<CAPTION>
NUMBER OF TRUST
UNDERWRITERS PREFERRED SECURITIES
--------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
--------------------
Total.......................................................
--------------------
--------------------
</TABLE>
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
Representative.
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 Underwriting 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.
Application will be made to list the Trust Preferred Securities 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.
65
<PAGE>
<PAGE>
The Underwriters have agreed to reimburse the Company for $ in expenses
incurred in connection with the issuance and sale of the Trust Preferred
Security 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 G. Daniel McCarthy, Senior Vice President, General Counsel,
Secretary and Chief Risk Management Officer of the Company. Certain matters of
Delaware law relating to the legality of the Trust Preferred Securities, the
validity of the Trust Agreement and the formation of the Trust and the
Partnership 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 Preferred Securities, the Partnership Preferred Securities and
the Trust Guarantee, the Partnership Guarantee and the Investment Guarantees
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 and the Investment Guarantees 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.
66
<PAGE>
<PAGE>
_____________________________________ _____________________________________
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................................................................................................... 4
Incorporation of Certain Documents By Reference............................................................................. 5
Prospectus Summary.......................................................................................................... 6
Ratings of Securities....................................................................................................... 15
Risk Factors................................................................................................................ 16
Use of Proceeds............................................................................................................. 23
Capitalization.............................................................................................................. 23
Ratio of Earnings to Fixed Charges of the Company........................................................................... 24
Selected Financial Data..................................................................................................... 25
Business of the Company..................................................................................................... 27
The Merger.................................................................................................................. 30
Relationship With AT&T Entities............................................................................................. 31
Capita Preferred Trust...................................................................................................... 33
Capita Preferred Funding L.P................................................................................................ 34
Description of the Trust Preferred Securities............................................................................... 34
Description of the Trust Guarantee.......................................................................................... 46
Description of the Partnership Preferred Securities......................................................................... 48
Description of the Partnership Guarantee.................................................................................... 58
Certain Federal Income Tax Considerations................................................................................... 61
Underwriting................................................................................................................ 64
Legal Matters............................................................................................................... 66
Experts..................................................................................................................... 66
</TABLE>
TRUST PREFERRED SECURITIES
CAPITA PREFERRED TRUST
% TRUST ORIGINATED
PREFERRED SECURITIESSM ('TOPRSSM')
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
AT&T CAPITAL CORPORATION
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
, 1996
_____________________________________ _____________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are other expenses of issuance and distribution, all of
which will be paid by AT&T Capital:
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee..................................... $ 345
Printing and Distributing Registration Statement, Prospectus, and Miscellaneous
Material*.......................................................................
Accountants' Fee*.................................................................
Legal Fees and Expenses*..........................................................
Blue Sky Fees and Expenses*.......................................................
New York Stock Exchange Listing Fee*..............................................
Rating Agency Fee*................................................................
Miscellaneous Expenses*...........................................................
--------
Total................................................................... $
--------
--------
</TABLE>
- ------------
* To be filed by amendment.
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 Declaration of Trust of Capita Preferred Trust (the 'Trust') provides
that to the fullest extent permitted by applicable law, the Trust shall
indemnify and hold harmless each of the Trustees, any Affiliate of the Trustees,
any officer, director, shareholder, member, partner, employee, representative or
agent of the Trustees, or any employee or agent of the Trust or its Affiliates
(each a 'Trust Indemnified Person'), from and against any loss, damage or claim
incurred by such Trust Indemnified Person by reason of any act or omission
performed or omitted by such Trust Indemnified Person in good faith on behalf of
the Trust and in a manner such Trust Indemnified Person reasonably believed to
be within the scope of authority conferred on such Trust Indemnified Person by
the Declaration of Trust, except that no Trust Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Trust Indemnified Person by reason of gross negligence (or, in the case of
the Property Trustee, negligence) or willful misconduct with respect to such
acts or omissions. The Declaration of Trust also provides that, to the fullest
extent permitted by applicable law, expenses (including legal fees) incurred by
a Trust Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Trust prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Trust of an undertaking by or on behalf of the Trust Indemnified Person to
repay such amount if it shall be determined that the Trust Indemnified Person is
not entitled to be indemnified as authorized in the Declaration of Trust. The
Declaration of Trust further provides that no Trust Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Trust or any
Covered Person (as defined therein) or for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Trust Indemnified
Person in good faith on behalf of the Trust and in a manner such Trust
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Trust Indemnified Person by the Declaration of Trust or by
law, except that a Trust Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Trust Indemnified Person's gross
negligence or willful misconduct with respect to acts or omissions.
II-1
<PAGE>
<PAGE>
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 each of the General Partner,
and any Special Representative, any Affiliate of the General Partner or any
Special Representative, any officer, director, shareholder, member, partner,
employee, representative or agent of the General Partner or any Special
Representative, or any employee or agent of the Partnership or its Affiliates
(each a 'Partnership Indemnified Person'), from and against any loss, damage or
claim incurred by such Partnership Indemnified Person by reason of any act or
omission performed or omitted by such Partnership Indemnified Person in good
faith on behalf of the Partnership and in a manner such Partnership Indemnified
Person reasonably believed to be within the scope of authority conferred on such
Partnership Indemnified Person by the Limited Partnership Agreement, except that
no Partnership Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Partnership Indemnified Person by
reason of gross negligence or willful misconduct with respect to such acts or
omissions. The Limited Partnership Agreement also provides that, to the fullest
extent permitted by applicable law, expenses (including legal fees) incurred by
a Partnership Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of an undertaking by or on behalf of the Partnership
Indemnified Person to repay such amount if it shall be determined that the
Partnership Indemnified Person is not entitled to be indemnified as authorized
in the Limited Partnership Agreement. The Limited Partnership Agreement further
provides that no Partnership Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Partnership or any Covered Person (as
defined therein) or for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Partnership Indemnified Person in good
faith on behalf of the Partnership and in a manner such Partnership Indemnified
Person reasonably believed to be within the scope of the authority conferred on
such Partnership Indemnified Person by the Limited Partnership Agreement or by
law, except that a Partnership Indemnified Person shall be liable for any such
loss, damage or claim incurred by reason of such Partnership Indemnified
Person's gross negligence or willful misconduct with respect to acts or
omissions.
The directors and officers of the Company and the Regular Trustees of the
Trust are covered by insurance policies indemnifying them against certain
liabilities, including certain liabilities arising under the Act, which might be
incurred by them in such capacities and against which they cannot be indemnified
by the Company or the Trust. Any agents, dealers or underwriters who execute the
agreement filed as Exhibit 1 of this Registration Statement will agree to
indemnify the Company's directors and their officers and the Trustees who signed
the Registration Statement against certain liabilities that may arise under the
Securities Act with respect to information furnished to the Company or the Trust
by or on behalf of any such indemnifying party.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
1.1* -- Form of Purchase Agreement for the offering of the Preferred Securities being registered under this
Registration Statement.
4.1 -- Certificate of Trust dated August 29, 1996, of Capita Preferred Trust.
4.2* -- Form of Amended and Restated Declaration of Trust dated , 1996, of Capita Preferred
Trust, as amended and restated.
4.3 -- Certificate of Limited Partnership, dated as of August 28, 1996, of Capita Preferred Funding L.P.
4.4* -- Form of Amended and Restated Limited Partnership Agreement dated , 1996 of Capita
Preferred Funding L.P.
4.5* -- Form of Trust Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee.
4.6* -- Form of Partnership Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee.
5.1* -- Opinion of Simpson Thacher & Bartlett.
8.1* -- Opinion of Simpson Thacher & Bartlett as to certain federal income tax matters.
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<C> <S>
12.1* -- Computation of Ratio of Earnings to Fixed Charges of AT&T Capital Corporation.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Simpson Thacher & Bartlett (to be contained in Exhibit No. 5.1).
23.3* -- Consent of Simpson Thacher & Bartlett (contained in Exhibit No. 8.1).
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 Declaration of Trust (contained in Exhibit 4.1).
25.2* -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First
National Bank of Chicago, N.A., under (i) the Trust Preferred Securities Guarantee Agreement
(contained in Exhibit 4.8) and (ii) the
Partnership Preferred Securities Guarantee Agreement (contained in Exhibit 4.9).
</TABLE>
- ------------
* To be filed by amendment.
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
<PAGE>
<PAGE>
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 30th day of August, 1996.
ANTIGUA ACQUISITION CORPORATION
By: /s/ JEFFREY F. NASH
...................................
JEFFREY F. NASH
VICE PRESIDENT, TREASURER AND
SECRETARY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints the other as his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and any registration statement related thereto pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ GUY HANDS President, Chief Executive Officer and August 30, 1996
......................................... Director (Principal Executive
(GUY HANDS) Officer)
/S/ JEFFREY F. NASH Vice President, Treasurer, Secretary and August 30, 1996
......................................... Director (Principal Financial Officer and
(JEFFREY F. NASH) Principal Accounting Officer)
</TABLE>
II-4
<PAGE>
<PAGE>
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 30th day of August, 1996.
CAPITA PREFERRED FUNDING L.P.
By: ANTIGUA ACQUISITION CORPORATION,
as General Partner
By: /s/ JEFFREY F. NASH
...................................
JEFFREY F. NASH
VICE PRESIDENT, TREASURER AND
SECRETARY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints the other as his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and any registration statement related thereto pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed below by the
following persons in the capacities with respect to the General Partner of
Capita Preferred Funding L.P. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ GUY HANDS President, Chief Executive Officer, and August 30, 1996
......................................... Director (Principal Executive Officer)
(GUY HANDS)
/S/ JEFFREY F. NASH Vice President, Treasurer, Secretary and August 30, 1996
......................................... Director (Principal Financial Officer and
(JEFFREY F. NASH) Principal Accounting Officer)
</TABLE>
II-5
<PAGE>
<PAGE>
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 30th day of August, 1996.
CAPITA PREFERRED TRUST
By: /s/ JEFFREY F. NASH
...................................
JEFFREY F. NASH
REGULAR TRUSTEE
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Guy Hands as his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and any registration statement related thereto pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacity and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ JEFFREY F. NASH Regular Trustee August 30, 1996
.........................................
(JEFFREY F. NASH)
</TABLE>
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Location of
Exhibit in
Sequential
Exhibit Numbering
Number Description of Document System
- ------- ----------------------- -----------
<C> <S> <C>
1.1* -- Form of Purchase Agreement for the offering of the Preferred Securities being registered under this
Registration Statement.
4.1 -- Certificate of Trust dated August 29, 1996, of Capita Preferred Trust.
4.2* -- Form of Amended and Restated Declaration of Trust dated , 1996, of Capita Preferred
Trust, as amended and restated.
4.3 -- Form of Certificate of Limited Partnership of Capita Preferred Funding L.P.
4.4* -- Form of Amended and Restated Limited Partnership Agreement dated , 1996 of Capita
Preferred Funding L.P.
4.5* -- Form of Trust Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and First Chicago NBD, as guarantee trustee.
4.6* -- Form of Partnership Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and First Chicago NBD, as guarantee trustee.
5.1* -- Opinion of Simpson Thacher & Bartlett.
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 -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Simpson Thacher & Bartlett (to be contained in Exhibit No. 5.1).
23.3* -- Consent of Simpson Thacher & Bartlett (contained in Exhibit No. 8.1).
25.1* -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of First Chicago
NBD, under the Declaration of Trust (contained in Exhibit 4.1).
25.2* -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of First Chicago
NBD, under (i) the Trust Preferred Securities Guarantee Agreement (contained in Exhibit 4.8) and (ii) the
Partnership Preferred Securities Guarantee Agreement (contained in Exhibit 4.9).
</TABLE>
- -------------
*To be filed by amendment.
<PAGE>
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF TRUST
The undersigned, the trustees of Capita Preferred Trust, desiring to form a
business trust pursuant to Delaware Business Trust Act, 12 Del. C. SS 3810,
hereby certify as follows:
(a) The name of the business trust being formed hereby (the 'Trust')
is 'Capita Preferred Trust.'
(b) The name and business address of the trustee of the Trust which
has its principal place of business in the State of Delaware is as follows:
First Chicago Delaware Inc.
c/o FCC National Bank
300 King Street
Wilmington, Delaware 19801
(c) This Certificate of Trust shall be effective as of the date of
filing.
Dated: August 29, 1996
/s/ Jeffrey F. Nash
.....................................
Name: Jeffrey F. Nash
Title: Regular Trustee
FIRST CHICAGO DELAWARE INC.
By: /s/ Steven Wagner
................................
Name: Steven Wagner
Title:
<PAGE>
<PAGE>
EXHIBIT 4.3
CERTIFICATE OF LIMITED PARTNERSHIP
OF
CAPITA PREFERRED FUNDING L.P.
This Certificate of Limited Partnership of Capita Preferred Funding L.P.
(the 'Partnership'), dated as of August 28, 1996, is being duly executed and
filed by Antigua Acquisition Corporation, a Delaware corporation, as general
partner, to form a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (6 Del. C., SS17-101, et seq.).
(a) Name. The name of the limited partnership formed hereby is Capita
Preferred Funding L.P.
(b) Registered Office. The address of the registered office of the
Partnership in the State of Delaware is c/o Prentice-Hall Corporation System,
Inc., 1013 Centre Road, Wilmington, New Castle County, Delaware, 19805.
(c) Registered Agent. The name and address of the registered agent for
service of process on the Partnership in the State of Delaware is Prentice-Hall
Corporation System, Inc., 1013 Centre Road, Wilmington, New Castle County,
Delaware, 19805.
(d) General Partner. The name and the business mailing address of the sole
general partner of the Partnership is: Antigua Acquisition Corporation, a
Delaware corporation, 44 Whippany Road, Morristown, New Jersey, 07962.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership as of the date first written above.
ANTIGUA ACQUISITION CORPORATION,
as sole general partner
By /s/ Jeffrey F. Nash
................................
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-3 (File No. 333- ) of our reports dated January 25, 1996 each of
which include an explanatory paragraph that describes a change in the method of
accounting for income taxes in 1993, on our audits of the consolidated financial
statements and financial statement schedule of AT&T Capital Corporation. We also
consent to the reference to our firm under the caption 'Experts'.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
August 29, 1996
<PAGE>
