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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT (PURSUANT TO
SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. 2)
------------------------
CAPITA PREFERRED TRUST
(NAME OF THE ISSUER)
CAPITA PREFERRED TRUST
CAPITA PREFERRED FUNDING L.P.
AT&T CAPITAL LEASING SERVICES, INC.
AT&T CAPITAL SERVICES CORPORATION
AT&T CAPITAL CORPORATION
NEWCOURT CREDIT GROUP INC.
(NAME OF PERSONS FILING STATEMENT)
------------------------
9.06% TRUST ORIGINATED PREFERRED SECURITIES'sm' ("TOPrS'sm'")
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
OF CAPITA PREFERRED TRUST
(TITLE OF CLASS OF SECURITIES)
139710206
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
GLENN A. VOTEK, TREASURER
AT&T CAPITAL CORPORATION
44 WHIPPANY ROAD
MORRISTOWN, NEW JERSEY 07962-1983
(973) 397-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
------------------------
COPIES TO:
<TABLE>
<S> <C>
SCOTT J. MOORE, ESQ. STEPHAN J. FEDER, ESQ.
GENERAL COUNSEL SIMPSON THACHER & BARTLETT
AT&T CAPITAL CORPORATION 425 LEXINGTON AVENUE
44 WHIPPANY ROAD NEW YORK, NEW YORK 10017-3954
MORRISTOWN, NEW JERSEY 07962-1983 (212) 455-2000
(973) 397-3000
</TABLE>
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THIS STATEMENT IS FILED IN CONNECTION WITH (CHECK THE APPROPRIATE BOX):
a. [x] THE FILING OF SOLICITATION MATERIALS OR AN INFORMATION
STATEMENT SUBJECT TO REGULATION 14A, REGULATION 14C OR RULE
13e-3(c) UNDER THE SECURITIES EXCHANGE ACT OF 1934.
b. [ ] THE FILING OF A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933.
c. [x] A TENDER OFFER.
d. [ ] NONE OF THE ABOVE.
CHECK THE FOLLOWING BOX IF THE SOLICITING MATERIALS OR INFORMATION
STATEMENT REFERRED TO IN CHECKING BOX (a) ARE PRELIMINARY COPIES: [ ]
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This Amendment No. 2 amends and supplements the Transaction Statement on
Amendment No. 1 to Schedule 13e-3 filed on July 27, 1998 (as amended and
supplemented, the "Schedule 13e-3") by the Trust, the Partnership, the
Subsidiary Issuers, AT&T Capital, and Newcourt (each as defined herein) relating
to (i) an offer (the "Offer") by AT&T Capital Corporation, a Delaware
corporation ("AT&T Capital") and an indirect wholly owned subsidiary of Newcourt
Credit Group Inc., an Ontario corporation ("Newcourt"), to purchase any and all
outstanding 9.06% Trust Originated Preferred Securities'sm' ("TOPrS'sm'")
(Liquidation Amount $25 per Trust Preferred Security) (the "Securities" or
"Trust Preferred Securities") of Capita Preferred Trust, a statutory business
trust formed under the laws of the State of Delaware and an affiliate of AT&T
Capital (the "Trust"), and (ii) a solicitation (the "Consent Solicitation") by
AT&T Capital from the holders of Trust Preferred Securities as of July 20, 1998
for consents to proposed amendments to (a) the Amended and Restated Limited
Partnership Agreement of Capita Preferred Funding L.P., a Delaware limited
partnership (the "Partnership"), that will provide for an early redemption of
partnership preferred securities issued thereunder and (b) the indentures of
AT&T Capital and two of its wholly owned subsidiaries, AT&T Capital Leasing
Services, Inc. and AT&T Capital Services Corporation (each subsidiary, a
"Subsidiary Issuer"), that will provide for early redemptions of the debentures
issued thereunder. Unless otherwise indicated, all capitalized terms used but
not defined herein shall have the meanings assigned thereto in the Offer to
Purchase and Consent Solicitation, dated as of July 27, 1998, filed as Exhibit
(d)(1) to Schedule 13E-3.
ITEM 4. TERMS OF THE TRANSACTION.
Item 4 of Schedule 13E-3 is hereby amended and supplemented as follows:
On August 19, 1998, AT&T Capital issued a press release, the full text
of which is set forth in Exhibit 11(d)(12), announcing that in connection
with the Offer, it has received the requisite consents to the Proposed
Amendments and the period during which the Offer will remain open is
extended to 12:00 Midnight, New York City time, on Wednesday, August 26,
1998. Accordingly, the Expiration Date shall be 12:00 Midnight, New York
City time, on Wednesday, August 26, 1998, unless the Offer is further
extended.
ITEM 16. ADDITIONAL INFORMATION.
Item 16 of Schedule 13E-3 is hereby amended and supplemented as follows:
On August 18, 1998, AT&T Capital issued a press release, the full text
of which is set forth in Exhibit 17(d)(10), announcing its receipt of an
order to show cause and a complaint, captioned Ruth Graifman v. AT&T
Capital Corporation, et al. (Superior Court of New Jersey, Morris County,
Chancery Division, Docket No. MRS-C-165-98, August 14, 1998), seeking, on
behalf of a putative class, an injunction against the consummation of AT&T
Capital's Offer and Consent Solicitation. The complaint alleges, among
other things, that the defendants violated their fiduciary duties in making
the Offer and Consent Solicitation and that the Offer is coercive because
the back-end Redemption Price is less than the tender offer Purchase Price.
Based on a preliminary review of the order to show cause, the
complaint and the supporting documents (a copy of which is set forth in
Exhibit 17(d)(11)) by AT&T Capital and its counsel, AT&T Capital believes
that the allegations made therein are without merit and AT&T Capital
intends to defend itself and the other defendants vigorously. Further, AT&T
Capital does not expect the application for the preliminary injunction or
the complaint to disrupt the consummation of its Offer and Consent
Solicitation.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
Item 17 is hereby amended and supplemented to add the following:
(d)(10) Press release issued by AT&T Capital on August 18, 1998.
(d)(11) Order to Show Cause, Complaint and supporting documents in
Ruth Graifman v. AT&T Capital Corporation, et al.
(d)(12) Press release issued by AT&T Capital on August 19, 1998.
2
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 19, 1998
NEWCOURT CREDIT GROUP INC.
By: /S/ GLENN A. VOTEK
...................................
GLENN A. VOTEK
TREASURER
AT&T CAPITAL CORPORATION
By: /S/ GLENN A. VOTEK
...................................
GLENN A. VOTEK
TREASURER
CAPITA PREFERRED TRUST
By: /S/ GLENN A. VOTEK
...................................
GLENN A. VOTEK
TRUSTEE
CAPITA PREFERRED FUNDING L.P.
By: AT&T CAPITAL CORPORATION,
as General Partner
By: /S/ GLENN A. VOTEK
...................................
GLENN A. VOTEK
TREASURER
AT&T CAPITAL LEASING SERVICES, INC.
By: /S/ DAVID F. BANKS
...................................
DAVID F. BANKS
CHIEF EXECUTIVE OFFICER
AT&T CAPITAL SERVICES CORPORATION
By: /S/ KENNETH BRUCHANSKI
...................................
KENNETH BRUCHANSKI
CHIEF FINANCIAL OFFICER
3
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
(d)(10) Press release issued by AT&T Capital on August 18, 1998.
(d)(11) Order to Show Cause, Complaint and supporting documents in
Ruth Graifman v. AT&T Capital Corporation, et al.
(d)(12) Press release issued by AT&T Capital on August 19, 1998.
</TABLE>
4
STATEMENT OF DIFFERENCES
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The service mark symbol shall be expressed as ........................ 'sm'
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NEWS RELEASE
For immediate release
- ---------------------
Trading Symbol: TCCPR/TCDPR Contact: Glenn Votek
Exchange: New York Executive Vice President
& Treasurer
(973) 397-3066
AT&T Capital provides update on TOPrS tender offer
Morristown, New Jersey, August 18, 1998 -- AT&T Capital Corporation (AT&T
Capital) issued the following statement today in response to an action filed
against the Company in connection with its offer to purchase US $200,000,000
9.06% Trust Originated Preferred Securities ("TOPrS") issued by an affiliated
Trust:
The Company is fully confident that, notwithstanding this
action, the planned offering will meet with the required
approval of the majority of securityholders. It regards the
action as frivolous and without merit. The Company firmly
believes that its offer of $29.69 per security represents a
fair and equitable offer. This offer represents a $2.94 per
security or 11% premium over the May 20, 1998 closing price
(the last trading date prior to the Company's public
announcement of its intention to redeem the securities) on
the New York Stock Exchange. The Company intends to actively
pursue the completion of the Offer in accordance with the
original terms.
The action, challenging the fairness and the validity of the offer, was filed by
a holder of 400 shares of the total 8,000,000 shares outstanding, individually
and on behalf of a putative class, on Thursday, August 13, 1998, in the Chancery
Court of Morris County, in Morristown, New Jersey against AT&T Capital
Corporation, certain of its officers, and the trustees for the affected
securityholders. The motion is scheduled to be heard at 9:00 a.m. on Thursday,
August 20, 1998.
-30-
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KANTROWITZ GOLDHAMER & GRAIFMAN
BARRY S. KANTROWITZ, ESQ.
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
STULL STULL & BRODY
JULES BRODY, ESQ.
AARON BRODY, ESQ.
6 East 45th Street
New York, New York 10017
(212) 687-7230
- ------------------------------------------------x
RUTH GRAIFMAN, on behalf of herself and SUPERIOR COURT OF
all others similarly situated, NEW JERSEY
Plaintiff, CHANCERY DIVISION
MORRIS COUNTY
-against- DOCKET NO.:
MRS-C-165-98
AT&T CAPITAL CORPORATION, AT&T CAPITAL
LEASING SERVICES, INC., AT&T CAPITAL SERVICES
CORP., CAPITA PREFERRED TRUST, CAPITA CLASS ACTION
PREFERRED FUNDING, L.P., DAVID F. BANKS, GLENN COMPLAINT
A. VOTEK, ROBERT J. INGATO, RAMON OLIU, JR.,
FIRST NATIONAL BANK OF CHICAGO, N.A., FIRST JURY TRIAL
CHICAGO DELAWARE, INC. DEMANDED
Defendants.
- ------------------------------------------------x
Plaintiff, by her attorneys, alleges upon information and belief, based,
in part, upon an investigation conducted by and through the undersigned counsel,
except with respect to her ownership of the Trust Originated Preferred
Securities ("TOPrS" or "Trust Preferred Securities") and her suitability to
serve as a class representative, which is alleged upon personal knowledge, as
follows:
1. Plaintiff is and has been at all relevant times, the owner of the
Trust Preferred Securities of the trust entity known as Capita Preferred Trust
("Capita" or "Trust" hereinafter). Plaintiff is and at all times relevant herein
was, a resident of the State of New York, County of Rockland.
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2
2. Defendant AT&T Capital Corporation ("AT&T Capital") is a financial
services company. AT&T Capital is a Delaware Corporation with its principal
place of business located at 44 Whippany Road, Morristown, New Jersey.
3. At all times relevant herein AT&T Capital was the sole General
Partner of Capita Preferred Funding, L.P. (the "Partnership"), the assets of
which consist of debt securities and debentures. AT&T Capital, together with the
Subsidiary Issuers (defined below) are issuers of the debentures owned by the
Partnership.
4. AT&T Capital Leasing Services, Inc. ("AT&T Capital Leasing") and AT&T
Capital Services Corp ("AT&T Capital Services") (both hereinafter referred to as
the "Subsidiary Issuers") are subsidiaries of AT&T Capital and maintain their
principal places of business at 44 Whippany Road, Morristown, New Jersey.
5. Defendant Capita Preferred Trust ("Capita" or "Trust") is a Delaware
statutory business trust, the sole assets of which are the Partnership preferred
securities. The principal place of business of Capita is located at 44 Whippany
Road, Morristown, New Jersey.
6. AT&T Capital, the Subsidiary Issuers, the Trust and the Partnership
are all related parties, maintain interlocking boards and officer positions
and/or trustee members and are referred to herein as "Related Parties."
7. Defendant David A. Banks ("Banks"), is and at all times relevant
herein was, a Director of, and Chairman of the Board of AT&T Capital, and of the
Subsidiary Issuers.
8. Defendant Glenn A. Votek ("Votek") is and at all times relevant
herein was, Executive Vice President and Treasurer of AT&T Capital's parent
company, Newcourt Credit Group Corp. ("Newcourt"), is and was simultaneously,
Executive Vice President and Treasurer of AT&T Capital. Defendant Votek, while
serving in the officerships of Newcourt and AT&T Capital, is and was also a
Trustee of the Trust. At all times relevant herein,
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3
Defendant Votek is and was a citizen of the State of New Jersey and/or maintains
his principal place of business in New Jersey.
9. Defendant Robert J. Ingato ("Ingato") is and at all relevant times
herein was, the Senior Vice President of AT&T Capital and AT&T Capita's parent
company, Newcourt. Defendant Ingato, at the same time serving as an officer of
Newcourt and AT&T Capital, is and was also a Trustee of the Trust. Defendant
Ingato is and at all relevant times was a citizen of the State of New Jersey
and/or maintains his principal place of business in New Jersey.
10. Defendant Ramon Oliu, Jr. ("Oliu") is and at all times relevant
herein was, a Senior Vice President of Newcourt and AT&T Capital. Defendant
Oliu, simultaneous with serving as an officer of Newcourt and AT&T Capital, was
also a Trustee of the Trust. Defendant Oliu is and at all relevant times was a
citizen of the State of New Jersey and/or maintains his principal place of
business in New Jersey.
11. The defendants described in paragraphs 6 through 9 above are
hereinafter sometimes referred to collectively as the "individual defendants."
12. Defendant National Bank of Chicago, N.A. is the property trustee of
the Trust and is sued herein in its capacity as property trustee. This court has
jurisdiction over said trustee by virtue of its position as trustee of a trust
which maintains its principal place of business in New Jersey.
13. Defendant First Chicago Delaware, Inc. is a trustee of the Trust and
is sued herein in its capacity as property trustee. This court has jurisdiction
over said trustee by virtue of its position as trustee of a trust which
maintains its principal place of business in New Jersey.
14. By virtue of the individual defendants' positions as officers and/or
directors of AT&T Capita and, in the case of defendants Votek, Oliu and Ingato,
as Trustees of the Trust, said defendants are in a fiduciary relationship with
the plaintiff and other public holders of
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4
Capita's Trust Preferred Securities and owe plaintiff and other members of the
Class the highest obligation of good faith, fair dealing, loyalty and due care.
15. The individual defendants are members of the Board of the Related
Entities and/or officers and are affiliated with defendants AT&T Capital and the
Subsidiary Issuers. AT&T Capital, by virtue of its position as General Partner
of the Partnership, by virtue of its ownership of all common securities of
Capita, is a controlling party in relation to Capita, is orchestrating the
proposed transaction for its own self-interest and self-dealing, to redeem
Capita's Trust Preferred Securities eight (8) years before redemption is
otherwise available under the controlling Trust instruments, at the expense of
Capita's TOPRS unit holders. The offer, made by defendants to the plaintiff and
members of the Class who are not affiliated with the controlling Related Parties
is designed and, in fact, has the effect of coercing and forcing plaintiff and
members of the Class, as holders of Capita Trust Preferred Securities, to sell
their interests therein now and give up their right to favorable interest
payments at 9.06% per annum to October 24, 2006. The defendants seek to coerce
plaintiffs into retiring the Trust Preferred Securities which constitute a debt
of the defendants, and thereafter, plaintiffs and members of the Class with
redemption at a lower price if they refuse to sell.
16. The individual defendants, by reason of their corporate
directorships, stand in a fiduciary position relative to Capita's securities
holders. The individual defendants' fiduciary duties, at all times relevant
herein, required them to exercise their best judgment, and to act in the
unqualified best interests of the Capita's unrelated securities holders. Said
defendants owe the public securities holders of Capita the highest duty of good
faith, fair dealing, due care, loyalty, and full, candid and adequate
disclosure.
17. Each defendant herein is sued individually as an aider and abettor,
as well as in his capacity as a director of the Company (in the case of the
individual defendants), or as a
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5
control person and the liability of each arises from the fact that he has
engaged in all or part of the unlawful acts, plans, schemes, or transactions
herein.
JURISDICTION AND VENUE
18. Jurisdiction and venue of this Court is based upon the fact that
defendants AT&T Capital, AT&T Capital Services, AT&T Capital Leasing, Capita,
and the individual defendants and Trustees maintain their principal place of
business in connection with the Trust in the State of New Jersey.
19. Venue is proper in this County as defendants AT&T Capital, AT&T
Capital Services, AT&T Capital Leasing, Capita and the individual defendants and
Trustees maintain their principal place of business in Morristown, New Jersey.
CLASS ACTION ALLEGATIONS
20. Plaintiff brings this action on her own behalf and as a class action
pursuant to Rule 4:32-1 of the New Jersey Rules Governing Civil Practice on
behalf of all securities holders of the TOPrS of Capita (except the defendants
herein and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in interest, who are
or will be threatened with injury arising from defendants' actions as more fully
described herein ("Class" hereinafter).
21. This action is properly maintainable as a class action.
22. The Class is so numerous that joinder of all members is
impracticable. As of the close of business on April 30, 1997, there were
8,000,000 units of Capita TOPRS outstanding and which were held by, at minimum,
hundreds, if not thousands, of holders throughout the United States.
23. A class action is superior to other methods for the fair and
efficient adjudication of the claims herein asserted, and no unusual
difficulties are likely to be encountered in the
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6
management of this class action. The likelihood of individual Class members
prosecuting separate claims is remote.
24. There are questions of law and fact which are common to the Class
and which predominate over questions affecting any individual Class member. The
common questions include, inter alia, the following:
(a) whether defendants have breached their fiduciary and other
common law duties owed by them to plaintiff and the other members of the Class;
(b) whether defendants are pursuing a scheme and course of
conduct designed to eliminate the public securities holders of Capita in
violation of the laws of the State of New Jersey in order to benefit from a
proposed acquisition of Capita securities by the Related Parties at the expense
and to the detriment of the plaintiffs and the other public unit holders who are
members of the Class;
(c) whether defendants are acting on both sides of the possible
tender offer transaction, thus presenting a conflict of interest, self-dealing
and overreaching;
(d) whether the said proposed acquisition, hereinafter described,
constitutes a breach of the duty of fair dealing with respect to the members of
the Class; and,
(e) whether the Class is entitled to injunctive relief or damages
as a result of the wrongful conduct of the defendants.
25. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the Class and plaintiff
has the same interests as the other members of the class. A class action is
superior to any other type of adjudication of this controversy.
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7
26. Defendants have acted in a manner which affects plaintiff and all
other members of the Class, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
FACTUAL BACKGROUND
27. The purpose for which defendants AT&T Capital and the Subsidiary
Issuers created the TOPrS securities, which were held by Capita, was to allow
certain of their payment instruments and obligations to be given equity
treatment by rating agencies, particularly Standard & Poor's and Moody's, while,
at the same time, allowing said defendants to treat the financing payments made
on the instruments (issued in the form of Debentures), as tax deductible
interest payments. By receiving the favorable "equity treatment", the defendants
would be entitled to better credit ratings which would reduce the cost of
financing for the defendants. At the same time the debt payments would be tax
deductible. In order to successfully achieve this goal, defendants needed to set
up a series of entities through which the debt of AT&T Capital could be
securitized and indirectly purchased by investors.
28. In order to effectuate this structure, AT&T Capital and the
Subsidiary Issuers issued debt instruments, referred to as "Debentures" in the
Capita prospectus filed with the SEC on or about October 24, 1996, ("Prospectus"
hereinafter). The intent was to sell the Debentures to the defendant
Partnership, a Related Party, of which AT&T Capital was the sole general partner
and owner of the entire general partner interest, and which entity was created
primarily, if not solely, to purchase AT&T Capital's debt.
29. In order to indirectly fund the Partnership, to allow it to purchase
the Debentures, the trust device, Capita, was created by AT&T Capital and its
affiliates.
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8
30. The TOPrS, also referred to as "Trust Preferred Securities" were
issued by Capita and sold to plaintiff and members of the Class through an
initial public offering and thereafter on the open efficient market of the New
York Stock Exchange under the symbol(s) "TCCPR" or "TCDPR".
31. The proceeds from the sale of the Trust Preferred Securities were
then used to purchase the Partnership's assets, referred to as "Partnership
Preferred Securities", which constituted the entire limited partnership interest
of the defendant Partnership. In turn, the sale proceeds from the sale by the
Partnership of its Preferred Partnership Securities to the Trust were used
together with a capital contribution by the Partnership's general partner (AT&T
Capital) to purchase the Debentures, which consisted of debt instruments of
defendants AT&T Capital and the Subsidiary Issuers.
32. As stated in the Prospectus:
AT&T Capital Corporation, a Delaware corporation (the "Company" or "AT&T
Capital"), will own all the common securities (the "Trust Commons
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 (the "Partnership").
The general partnership interest which constitutes all of the interest
in the Partnership other than the limited partnership interest
represented by the Partnership Preferred Securities, is owned by the
Company, which is the sole general partner of the Partnership (in such
capacity, the "General Partner"). Substantially all of the proceeds from
the sale of the Partnership Preferred Securities, together with the
capital contribution from the General Partner, will be used by the
Partnership to purchase the Debentures (as defined herein), which
consist of debt instruments of the Company.
THE OFFERING BY CAPITA OF TRUST PREFERRED SECURITIES
33. In an effort to create, market and sell an attractive security to
the general public, the defendants created the trust, Capita, and the Trust
Preferred Securities instruments. Upon filing the Initial Public Offering,
defendants offered and sold the Capita TOPrS for $25.00 per unit. The security
was to beat interest at an annual rate of 9.06% on the face
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9
amount of $25.00 and were not redeemable until October 24, 2006. The income
stream to the Trust was guaranteed by defendants. Thus, investors could purchase
TOPrS units and be guaranteed income at the rate of 9.06% per annum on the
$25.00 face amount through October, 2006. Upon liquidation investors would
receive a $25.00 liquidation amount per TOPrS unit.
34. As stated in the Prospectus:
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 9.06% of the liquidation amount of $25 per Trust Preferred
Security (equivalent to $2,265 per Trust Preferred Security) if, as and
when the Trust has funds available for payment.
* * *
The payment of distributions by the Trust and payments in 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 Partnership Preferred Securities are redeemable by the partnership,
in whole or in part, from time to time, on or after October 25, 2006 at
an amount per Partnership Preferred Security equal to $25 plus accrued
and unpaid distributions thereon.
THE INTERRELATIONSHIP BETWEEN THE TRUST AND DEFENDANTS
35. The Related Party defendants and the individual defendants maintain
a controlling interest in the Trust and in the Partnership through which the
Trust has provided financing indirectly to defendants AT&T Capital, and the
Subsidiary Issuers, and maintain a direct fiduciary relationship to the Trust
and to plaintiff and members of the Class as owners of the Trust's Trust
Preferred Securities.
36. For example, defendants have stated in the Prospectus that:
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
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10
beneficially owns all of the undivided beneficial interests in the
assets of the Trust (other than the beneficial interest represented by
the Trust 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 that the
Guarantees, when taken together with the Company Debenture and the
Company' obligations to pay all fees and expenses of the Trust an the
Partnership, constitute a guarantee to the extent set forth herein by
the Company of the distribution, redemption and liquidation payments
payable to the holders of the Trust Preferred Securities.
* * *
The Company will acquire Trust Common Securities in an aggregate
liquidation amount equal to at least 3% of the total capital of the
Trust. The Trust will use all the proceeds derived from the issuance of
the Trust Securities to purchase the Partnership Preferred Securities
from the Partnership and, accordingly the assets of the Trust will
consist solely of the Partnership Preferred Securities. The Trust exists
for the exclusive purpose of (i) issuing the Trust Securities
representing undivided beneficial ownership interests in the assets of
the Trust, (ii) investing the gross proceeds of the Trust Securities in
the Partnership Preferred Securities, and (iii) engaging in only those
other activities necessary or incidental thereto.
37. Moreover, three (3) of the five (5) trustees of the Trust, referred
to as the "Regular Trustees" (page 36 of the Prospectus) are "individuals who
are employees or officers of or who are affiliated with the Company." In fact,
as aforestated, defendants Votek, Ingato and Oliu were executive officers of
defendants AT&T Capital and its Subsidiary Issuers.
38. Further, AT&T Capital owns all of the Trust Common Securities, and
the Trust was set up to facilitate financing AT&T Capital's "equity treatment"
scheme.
39. Because of the controlling positions of defendants with respect to
Capita, defendants owe to Capita and to plaintiffs and members of the Class the
obligation and duty to act with the utmost good faith and fairness with regard
to self-interested dealings.
DEFENDANTS' BREACH OF DUTY AND UNFAIR DEALING
40. Defendants' initial self-interested purpose and goal in creating,
marketing and selling the Preferred Trust Securities was mistaken because the
credit rating agencies have not given the defendants significant "equity
treatment" for their payments in connection with
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11
the Trust Preferred Securities. The credit rating of AT&T Capital is BBB and
Baa3 as rated by Standard & Poor's and Moody's respectively. As conceded by
defendants in their tender offer and consent solicitation issued July 27, 1998
("Tender Offer/Consent Solicitation"):
Reasons for the Offer and Consent Solicitation. The Trust Preferred
Securities were originally issued to provide AT&T Capital and its
subsidiaries with long-term capitalization that AT&T Capital's
management believed would be treated by national statistical rating
organizations such as S&P or Moody's, in part or in full, as additional
equity capitalization. AT&T Capital's management believed such "equity
treatment" would lower AT&T Capital's debt-to-equity ratio, which is a
factor in such national statistical rating organizations' credit ratings
analyses of AT&T Capital and, as a result of AT&T Capital's becoming an
indirect wholly owned subsidiary of Newcourt on January 12, 1998, of
Newcourt. Any upgrades in the credit ratings of AT&T Capital's and
Newcourt's short-term or long-term debt would generally decrease AT&T
Capital's cost of borrowing, particularly if any such rating is in a
general rating category that signifies that the relevant debt of AT&T
Capital is in a higher investment grade rating category. As of the date
hereof, AT&T Capital's and Newcourt's long-term credit ratings by S&P
and Moody's are BBB and Baa3, respectively.
However, AT&T Capital's and Newcourt's management subsequently became
aware that Moody's did not give AT&T Capital significant "equity
treatment" in respect of the Trust Preferred Securities... AT&T
Capital's and Newcourt's management believe that such redemption (in
conjunction with a recent Newcourt equity placement, a portion of which
was contributed to AT&T Capital) would strengthen the consolidated
financial condition of AT&T Capital and its subsidiaries by reducing
their outstanding debt-to-equity ratio, thereby possible resulting in
improved credit ratings for AT&T Capital and Newcourt.
41. Despite the obligation to deal with complete fairness with plaintiff
and the members of the Class, Defendants have, as aforementioned, issued and/or
caused to be issued the Tender Offer/Consent Solicitation dated July 27, 1998,
which constitutes an offering to buy the Trust Preferred Securities from
plaintiff and members of the Class at the price of $29.69 and, in addition,
requiring, as a condition of acceptance of the offer that each selling unit
holder consent to amendment of the trust indenture and other controlling
documents to allow defendants to drastically accelerate the redemption date by
which defendants can cause the Trust to "call" all of the Trust Preferred
Securities. The acceleration which defendants seek moves the redemption date up
from October 25, 2006 to June 30, 1998 and would effectively allow the
defendants to redeem all of the Trust Preferred Securities
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12
now, at a price of $29.25 per Security, an amount significantly less than the
tender offer amount.
42. As conceded by defendants in the Tender Offer/Consent Solicitation:
The Redemption Price is less than the Purchase Price being offered by
AT&T Capital for tender of Securities in the Offer. If holders of
Securities fail to validly tender their Securities in the Offer and,
AT&T Capital obtains the Requisite Consents upon the terms and
conditions of the Offer, and AT&T Capital accepts for payment and
purchases the Securities in the Offer then such non-tendering holders
will only receive the Redemption Price, plus accrued and unpaid
distribution thereon, for Securities that have not been validly
tendered in the Offer.
43. The effect of defendants' tender offer and consent solicitation is
to place plaintiff and members of the Class in a position of fear of being
forced to redeem their units for less money at the point of redemption if they
do not jump on the "tender offer bandwagon" and accept defendants' offer now.
44. Thus, plaintiff and the other members of the Class are placed in the
untenable and unfair position of being forced to sell their Trust Preferred
Securities, give their consent to allow defendant to redeem the units of
non-tendering holders for less, and forego the right to receive the 9.06%
interest rate through October 24, 2006, regardless of whether they want to do
so.
45. The sole purpose of defendants' coercive offer is one of
self-interest on the part of defendants, to wit, to extinguish the attractive
securities which plaintiff and members of the Class were lulled into purchasing
based on the long-term guaranteed income stream being offered. As defendants
have readily conceded, the sole reason defendants seek to extinguish the
security is because their scheme to obtain favorable equity treatment and, at
the same time, obtain the tax deduction for the payment of interest, failed in
its stated purpose.
46. Although defendants claim in the Prospectus that they are not paying
any consideration to holders for the consents to allow the early redemption, in
fact, by paying
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13
unit holders who give their consent more than those who do not, defendants are,
in fact, paying unit holders precisely for such consent.
47. In the case of the named plaintiff, plaintiff purchased 400 units of
the Trust Preferred Securities at a cost of $27.18 per unit on or about February
2, 1998, for a total cost of $10,936.73. Based on the price paid by plaintiff,
the interest due of 9.06% on the face amount of $25.00 per unit, resulted in an
effective yield to plaintiff of 8.33%. Even taking into account the premium of
selling her units for $29.69 to defendants, plaintiff, after payment of capital
gains tax and commission paid on the purchase and sale, and a subsequent
repurchase, would have to obtain an equivalent yield of in excess of 7.63% in
order to be placed in an equal position. However, currently, equivalent senior
corporate debt instruments, rated BBB, maturing in 5 to 10 years would yield
less than the Trust Preferred Securities.;
48. Similarly, members of the Class who purchased their units at the
initial public offering price of $25.00 per unit, after capital gains tax and
taking into account the purchase and sales commission, would need to purchase an
equivalent BBB-rated instrument with an effective yield of no less than
approximately 8.1208% to break even.
49. Thus, it is in defendants' sole interest to extinguish the Trust
Preferred Securities which yield favorable rates to plaintiff and members of the
Class. Conversely, it is contrary to the interests of Plaintiff and the other
members of the Class to be coerced into selling their TOPrS units.
50. The proposed transaction serves no legitimate business purpose of
Capita but rather is an attempt by defendants to unfairly benefit AT&T Capital,
and the Subsidiary Issuers from the transaction at the expense of Capita's
public securities holders.
51. Defendants' Tender Offer/Consent Solicitation Price of $29.69 per
share, which defendants have combined with the threat of reduced payments to
those holders who do not
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14
accept (and who will therefore be forced to receive less) is and was
unconscionable, unfair and grossly inadequate to plaintiff and the Class
members, particularly in light of the fact that defendants will, if the Tender
Offer/Consent Solicitation is successful, be able to retire today what would
otherwise be a long-term high interest debt it is paying to plaintiff and the
Class.
52. The Tender Offer/Consent Solicitation contains no fairness opinion.
In fact, defendants boldly state in the Tender Offer/Consent Solicitation that
no such obligation of fairness exists and no fiduciary obligations require
defendants to act fairly in connection with seeking to retire its debt by
offering to purchase the units, while at the same time making it conditional on
the coercive tactic of threatening to treat those not agreeing to the offer
differently and by requiring an earlier redemption than plaintiff and the Class
agreed to when they purchased the Trust Preferred Securities.
53. The proposed plan will deny plaintiffs and the other members of the
Class their right to receive the 9.06% interest stream up to October, 2006, and
to share proportionately in the future success and growth in profitability of
Capita and its valuable assets, while permitting defendants to reap huge
benefits from the contemplated transaction.
54. The terms of the proposed Tender Offer/Consent Solicitation
constitutes an unfair and illegal business practiced upon the plaintiff and
members of the Class because, among other things:
(a) The Tender Offer/Consent Solicitation is coercive and
intrinsically unfair and is a tactic which violates the basic obligations on the
part of defendants as fiduciaries;
(b) The Tender/Offer Consent Solicitation constitutes
self-dealing and self-interest on the part of defendant who are Trustees of the
Trust and hold all Common Securities of the Trust and is the general partner of
the Partnership, while at the same time
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15
acting as the debtor and guarantor with regard to the Trust Preferred Securities
held by plaintiff and members of the Class;
(c) The intrinsic value of the TOPrS units of Capita is
materially in excess of $29.69 per share and/or $29.25 per share (for
non-tendering holders), giving due consideration to the possibilities of the
value of the 9.06% income stream and growth and profitability of Capita in light
of its guaranteed income of 9.06% to October 24, 2006.
(d) The $29.69 per share price is not the result of arm's length
negotiations and was not based upon any independent evaluation of the current
value of Capita's holdings, property, assets or business, but was fixed
arbitrarily by defendants, as part of a plan by defendants to obtain complete
ownership of Capita's assets and business at the lowest possible price, to
obtain for itself benefits disproportionate with those to be received by the
public stockholders, which facts were not and perhaps will not be disclosed
since it is not in defendants' interests to disclose such facts.
55. Because the defendants are in possession of corporate information
concerning Capita's securities, property, assets, businesses and future
financial prospects, the degree of knowledge and economic power between
defendants and the public stockholders is unequal, making it grossly and
inherently unfair and comprises "unfair dealing" by defendant to coercively
obtain ownership of Capita's Trust Preferred Securities, property and assets
from the public common securities holders.
56. AT&T and the Subsidiary Issuers, by reason for the foregoing acts,
practices and course of conduct, and have breached and continue to breach their
duty as one in a controlling position with respect to Capita and both buyer and
seller of the securities held by Capita. The individual defendants have breached
and continue to breach their duties as Trustees of Capita to the securities
holders including plaintiffs and the other members of the Class herein.
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16
COUNT I
(PRELIMINARY AND PERMANENT INJUNCTIVE RELIEF)
57. Plaintiff and the members of the Class repeat and reallege each and
every allegation set forth hereinabove as if set forth in full herein.
58. Plaintiff and the members of the Class will suffer irreparable
damage unless defendants are enjoined from continuing to breach their fiduciary
duties and from carrying out the aforesaid coercive plan and scheme of self
interest to the detriment of plaintiff and members of the Class.
59. Plaintiff and the other members of the Class have no adequate remedy
at law which can make them whole without the preliminary and permanent
injunctive relief requested herein.
COUNT II
(BREACH OF FIDUCIARY DUTY)
60. Plaintiff and members of the Class repeat and reallege each and
every allegation set forth hereinabove as if set forth in full herein.
61. To the extent plaintiffs and members of the Class can be partially
satisfied by monetary damages, plaintiff and members of the Class hereby demand
such monetary damages as will allow plaintiffs to recoup their losses and/or
recision damages.
COUNT III
(DECLARATORY JUDGMENT)
62. Plaintiff and members of the Class repeat and reallege each and
every allegation set forth hereinabove as if set forth in full herein.
63. Plaintiff seeks a declaration that the Tender Offer/Consent
Solicitation is unduly coercive, and unfair on its face as a matter of law.
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17
JURY DEMAND
Plaintiff hereby demands a jury trial on all issues which may be tried
by a jury to be determined in the above entitled action.
WHEREFORE, plaintiff demands judgment against the defendants jointly and
severally, as follows:
(1) declaring this action to be a class action and certifying
plaintiff as the class representative and her counsel as class counsel;
(2) enjoining, preliminarily and permanently, AT&T Capital's
offer for acquisition of the Capita securities stock owned by plaintiffs and the
other members of the class;
(3) to the extent, if any, that the contemplated transaction or
transactions complained of are consummated prior to the entry of this Court's
final judgment, rescinding such transaction or transactions, and granting, inter
alia, recessionary damages;
(4) directing the defendants pay to plaintiffs and other members
of the class all damages caused to them and account for all profits and any
special benefits obtained as a result of their unlawful conduct;
(5) awarding to plaintiffs the costs and disbursements of this
action, including a reasonable allowance for the fees and expenses of
plaintiff's attorneys and experts; and
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18
(6) Granting plaintiffs and other members of the class such other
and further relief as may be just and proper.
Dated: Montvale, New Jersey
August 13, 1998
KANTROWITZ, GOLDHAMER & GRAIFMAN
By: /s/ Barry S. Kantrowitz
-------------------------------
BARRY S. KANTROWITZ
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
STULL, STULL & BRODY
JULES BRODY, ESQ.
AARON BRODY, ESQ.
6 East 45th Street
New York, New York 10017
(212) 687-7230
COUNSEL FOR PLAINTIFF
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19
DESIGNATION OF TRIAL ATTORNEY
Please take notice that in accordance with R. 4:25-4 Barry S.
Kantrowitz, Esq. is designated as trial counsel.
Dated: Montvale, New Jersey
August 13, 1998 KANTROWITZ, GOLDHAMER & GRAIFMAN
BY: /s/ Barry S. Kantrowitz
-------------------------------
Barry S. Kantrowitz, Esq.
JURY DEMAND
Plaintiff, RUTH GRAIFMAN, by her attorneys, KANTROWITZ, GOLDHAMER &
GRAIFMAN, pursuant to Rule 4:35-1(a) hereby make demand for a jury trial on all
issues to be determined in the above entitled action.
Dated: Montvale, New Jersey
August 13, 1998 KANTROWITZ, GOLDHAMER & GRAIFMAN
BY: /s/ Barry S. Kantrowitz
-------------------------------
Barry S. Kantrowitz, Esq.
CERTIFICATION PURSUANT TO R.4:5-1
I hereby certify that the matter in controversy is not the subject of
any other action or proceeding, pending or contemplated of which I presently
know, and that I know of no other party who should be joined as a party at this
time.
Dated: Montvale, New Jersey
August 13, 1998 KANTROWITZ, GOLDHAMER & GRAIFMAN
BY: /s/ Barry S. Kantrowitz
-------------------------------
Barry S. Kantrowitz, Esq.
<PAGE>
<PAGE>
KANTROWITZ, GOLDHAMER & GRAIFMAN
BARRY S. KANTROWITZ, ESQ.
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
STULL STULL & BRODY
JULES BRODY, ESQ.
AARON BRODY, ESQ.
6 East 45th Street
New York, New York 10017
(212) 687-7230
- -------------------------------------------------
RUTH GRAIFMAN, on behalf of herself and SUPERIOR COURT OF
all others similarly situated, NEW JERSEY
Plaintiff, CHANCERY DIVISION
MORRIS COUNTY
-against- DOCKET NO.:
MRS-C-165-98
AT&T CAPITAL CORPORATION, AT&T CAPITAL
LEASING SERVICES, INC., AT&T CAPITAL SERVICES
CORP., CAPITA PREFERRED TRUST, CAPITA ORDER TO SHOW CAUSE
PREFERRED FUNDING, L.P., DAVID F. BANKS, GLENN WITH TEMPORARY
A. VOTEK, ROBERT J. INGATO, RAMON OLIU, JR., RESTRAINTS
FIRST NATIONAL BANK OF CHICAGO, N.A., FIRST
CHICAGO DELAWARE, INC.
Defendants.
- -------------------------------------------------
THIS MATTER having been opened to the Court by KANTROWITZ, GOLDHAMER &
GRAIFMAN, ESQS., William T. Schiffman, Esq., appearing, attorneys for the
plaintiffs, and it appearing upon a reading of the Declaration of Ruth Graifman
and Certification of William T. Schiffman, Esq., filed in support hereof that
immediate, substantial and irreparable loss, injury and damage may result to the
named plaintiff and the proposed class of plaintiffs herein unless the relief
requested herein is granted, and good and sufficient reason appearing for the
entry of this Order,
IT IS on this 14th day of August, 1998,
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2
ORDERED, that the defendants shall show cause before this Court at the
Morris County Courthouse, Morristown, New Jersey, on the 20th day of August,
1998, at 9:00 a.m. o'clock in the forenoon or as soon thereafter as counsel can
be heard, as to why an order should not be entered as follows:
1. Declaring this action to be a class action and certifying the
plaintiff as the class representative and her counsel as class counsel;
2. Enjoining and restraining all of the defendants from
consummating AT&T Capital Corporation's tender offer and consent
solicitation for the acquisition of the Capita Trust Preferred
Securities owned by the plaintiff and the other members of the class,
which offer required, as a condition of acceptance, consent to redeem
the units of non-tendering holders for an inferior price, or otherwise
requiring plaintiffs to respond to that tender offer by August 21, 1998,
at 12:00 a.m.;
3. Directing defendants to pay to plaintiff and the other members
of the class all damages caused to them and requiring defendants to
account for all profits and any special benefits obtained as a result of
their unlawful conduct;
4. Awarding to plaintiffs the costs and disbursements of this
action, including a reasonable allowance for the fees and expenses of
plaintiffs' attorneys and experts; and
5. For such other and further relief as to this Court may seem
just and proper; and it is further
ORDERED that a copy of this Order, the accompanying certifications, and
the Summons and Complaint be served upon the defendants as soon as practicable
or, in any event, no later than August 17, 1998.
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3
ORDERED, that responsive pleadings shall be filed with the Court and
served upon counsel for the plaintiffs no later than August 19, 1998.
/s/ J.S.C.
--------------------------------
<PAGE>
<PAGE>
KANTROWITZ, GOLDHAMER & GRAIFMAN
BARRY S. KANTROWITZ, ESQ.
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
STULL STULL & BRODY
JULES BRODY, ESQ.
MARK LEVINE, ESQ.
6 East 45th Street
New York, New York 10017
(212) 687-7230
Attorneys for Plaintiff
- ------------------------------------------------x
RUTH GRAIFMAN, on behalf of herself and SUPERIOR COURT OF
all others similarly situated, NEW JERSEY
Plaintiff, CHANCERY DIVISION
MORRIS COUNTY
-against- DOCKET NO.:
MRS-C-165-98
AT&T CAPITAL CORPORATION, AT&T CAPITAL LEASING SERVICES,
INC., AT&T CAPITAL SERVICES, CORP., CAPITA PREFERRED TRUST,
CAPITA PREFERRED FUNDING, L.P., DAVID F. BANKS, GLENN A.
VOTEK, ROBERT J. INGATO, RAMON OLIU, JR., FIRST NATIONAL
BANK OF CHICAGO, N.A., FIRST CHICAGO DELAWARE, INC.
Defendants.
- ------------------------------------------------x
PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT
OF HER MOTION FOR PRELIMINARY INJUNCTION
Plaintiff submits this memorandum of law in support of her motion for
preliminary injunction.
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2
PRELIMINARY STATEMENT
This motion for a preliminary injunction to restrain consummating of a
tender offer is being made on behalf of Ruth Graifman, a holder of Capita
Preferred Trust 9.06% Trust Originated Preferred Securities ("Preferred Trust
Securities") and on behalf of all other holders of the Preferred Trust
Securities. The basis of this motion is that AT&T Capital Corp. ("AT&T
Capital"), an affiliate of Capita Preferred Trust, has commenced a coercive
tender offer for all 8,000,000 units of Preferred Trust Securities, for a price
of $29.69 per security. As explained below, all of the unit holders of the
Preferred Trust Securities will be compelled to tender their shares or else, as
set forth clearly in tender offer materials ("Tender Offer Materials") provided
by AT&T Capital, will receive substantially less consideration for their
holdings. A preliminary injunction is needed in order to prevent the tender
offer from being consummated until the terms of the tender offer are modified to
remove the coercive features.
I. STATEMENT OF FACTS
A. Factual Background
Ruth Graifman is a holder of TOPrS securities who is being coerced into
tendering her securities in a tender offer being made by AT&T Capital or with
being forced to have her securities redeemed prematurely at a price
substantially lower than in the tender offer. (See Declaration of Ruth Graifman
submitted herewith).
The purpose for which defendants AT&T Capital and the Subsidiary Issuers
created the TOPrS securities, which were held by Capita, was to allow certain of
their payment instruments and obligations to be given equity treatment by rating
agencies, particularly Standard & Poor's and Moody's, while, at the same time,
allowing said defendants to treat the financing payments made on the instruments
(issued in the form of Debentures), as tax deductible interest payments. By
receiving the favorable "equity treatment", the defendants
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3
would be entitled to better credit ratings which would reduce the cost of
financing for the defendants. At the same time the debt payments would be tax
deductible. In order to successfully achieve this goal, defendants needed to set
up a series of entities through which the debt of AT&T Capital could be
securitized and indirectly purchased by investors. (Exhibit B to Certification
of William Schiffman, AT&T Capital Corporation Tender Offer Materials dated July
27, 1998 at p. 20).
In order to effectuate this structure, AT&T Capital and the Subsidiary
Issuers created a complex structure of interrelated entities. Said defendants
issued debt instruments, referred to as "Debentures" in the Capita prospectus
filed with the SEC on or about October 24, 1996, ("Prospectus" hereinafter).
(Ex. C to Schiffman Cert., Prospectus at p. 1). The intent was to sell the
Debentures to the defendant Partnership, a Related Party, of which AT&T Capital
was the sole general partner and owner of the entire general partner interest,
and which entity was created primarily, if not solely, to purchase AT&T
Capital's debt. (Ex. C at p. 13). In order to indirectly fund the Partnership,
to allow it to purchase the Debentures, the trust device, Capita, was created by
AT&T Capital and its affiliates. (Ex. B at p. 25).
The TOPrS, also referred to as "Trust Preferred Securities" were issued
by Capita and sold to members of the Class through an initial public offering
(Ex. B at p. 25) and thereafter on the New York Stock Exchange under the
symbol(s) "TCCPR" or "TCDPR". (Ex. B at p. 22). The proceeds from the sale of
the Trust Preferred Securities were then used to purchase the Partnership's
assets, referred to as "Partnership Preferred Securities", which constituted the
entire limited partnership interest of the defendant Partnership (Ex. B at p.
25). In turn, the sale proceeds from the sale by the Partnership of its
Preferred Partnership Securities to the Trust were used together with a capital
contribution by the Partnership's general partner (AT&T Capital) to purchase the
Debentures, which consisted of debt instruments of defendants AT&T Capital and
the Subsidiary Issuers (Ex. B at p. 26).
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4
As stated in the Prospectus:
AT&T Capital Corporation, a Delaware corporation (the "Company" or "AT&T
Capital"), will own all the common securities (the "Trust Commons
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 (the "Partnership").
The general partnership interest which constitutes all of the interest
in the Partnership other than the limited partnership interest
represented by the Partnership Preferred Securities, is owned by the
Company, which is the sole general partner of the Partnership (in such
capacity, the "General Partner"). Substantially all of the proceeds from
the sale of the Partnership Preferred Securities, together with the
capital contribution from the General Partner, will be used by the
Partnership to purchase the Debentures (as defined herein), which
consist of debt instruments of the Company.
(Ex. C at p. 1).
B. The Offering By Capita of Trust Preferred Securities
In an effort to create, market and sell an attractive security to the
general public, the defendants created the trust, Capita, and the Trust
Preferred Securities instruments. Upon filing the Initial Public Offering,
defendants offered and sold the Capita TOPrS for $25.00 per unit. (Ex. C at p.
1). The security was to bear interest at an annual rate of 9.06% on the face
amount of $25.00 (Ex. C at p. 1) and were not redeemable until October 24, 2006.
(Ex. B at p. 7). The income stream to the Trust was guaranteed by defendants.
(Ex. B at pp. 25-26). Upon liquidation, investors would receive a $25.00
liquidation amount per TOPrS unit. (Ex. C at p. 10).
C. The Interrelationship Between The Trust and Defendants
AT&T Capital wears multiple hats as controlling party of the Trust,
seller of the debt, purchaser of the debt and general partner of the
intermediary partnership. Not it seeks to be purchaser of the debt as well. The
Related Party defendants (as defined in the Complaint, Exhibit A to Schiffman
Cert.) and the individual defendants (as set forth in the Complaint) maintain a
controlling interest in the Trust and in the Partnership through which the Trust
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5
has provided financing indirectly to defendants AT&T Capital, and the Subsidiary
Issuers, and maintain a direct fiduciary relationship to the Trust and to
plaintiff and members of the Class as owners of the Trust's Trust Preferred
Securities.
For example, defendants have stated in the Prospectus that:
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 interest represented by the Trust 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 that the Guarantees, when taken
together with the Company Debenture and the Company's obligations to pay
all fees and expenses of the Trust an the Partnership, constitute a
guarantee to the extent set forth herein by the Company of the
distribution, redemption and liquidation payments payable to the holders
of the Trust Preferred Securities.
* * *
The Company will acquire Trust Common Securities in an aggregate
liquidation amount equal to at least 3% of the total capital of the
Trust. The Trust will use all the proceeds derived from the issuance of
the Trust Securities to purchase the Partnership Preferred Securities
from the Partnership and, accordingly the assets of the Trust will
consist solely of the Partnership Preferred Securities. The Trust exists
for the exclusive purpose of (i) issuing the Trust Securities
representing undivided beneficial ownership interests in the assets of
the Trust, (ii) investing the gross proceeds of the Trust Securities in
the Partnership Preferred Securities, and (iii) engaging in only those
other activities necessary or incidental thereto.
(Ex. C at p. 5-6).
Moreover, three (3) of the five (5) trustees of the Trust, referred to
as the "Regular Trustees" (Ex. C at p. 36) are "individuals who are employees or
officers of or who are affiliated with the Company." In fact, as aforestated,
defendants Votek, Ingato and Oliu were executive officers of defendants AT&T
Capital and its Subsidiary Issuers.
Further, AT&T Capital owns all of the Trust Common Securities, and the
Trust was set up to facilitate financing AT&T Capital's "equity treatment"
scheme. (Ex. B at p 26).
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6
D. Defendants' Breach of Duty and Unfair Dealing
Defendants' initial self-interested purpose and goal in creating,
marketing and selling the Preferred Trust Securities was mistaken and has not
been realized because the credit rating agencies have not given the defendants
significant "equity treatment" for their payments in connection with the Trust
Preferred Securities. The credit rating of AT&T Capital is BBB and Baa3 as rated
by Standard and Poor's and Moody's respectively. (Ex. B at p. 20). As conceded
by defendants in their tender offer and consent solicitation issued July 27,
1998 defendants made a mistake:
Reasons for the Offer and Consent Solicitation. The Trust Preferred
Securities were originally issued to provide AT&T Capital and its
subsidiaries with long-term capitalization that AT&T Capital's
management believed would be treated by national statistical rating
organizations such as S&P or Moody's, in part or in full, as additional
equity capitalization. AT&T Capital's management believed such "equity
treatment" would lower AT&T Capital's debt-to-equity ratio, which is a
factor in such national statistical rating organizations' credit ratings
analyses of AT&T Capital and, as a result of AT&T Capital's becoming an
indirect wholly owned subsidiary of Newcourt on January 12, 1998, of
Newcourt. Any upgrades in the credit ratings of AT&T Capital's and
Newcourt's short-term or long-term debt would generally decrease AT&T
Capital's cost of borrowing, particularly if any such rating is in a
general rating category that signifies that the relevant debt of AT&T
Capital is in a higher investment grade rating category. As of the date
hereof, AT&T Capital's and Newcourt's long-term credit ratings by S&P
and Moody's are BBB and Baa3, respectively.
However, AT&T Capital's and Newcourt's management subsequently became
aware that Moody's did not give AT&T Capital significant "equity
treatment" in respect of the Trust Preferred Securities... AT&T
Capital's and Newcourt's management believe that such redemption (in
conjunction with a recent Newcourt equity placement, a portion of which
was contributed to AT&T Capital) would strengthen the consolidated
financial condition of AT&T Capital and its subsidiaries by reducing
their outstanding debt-to-equity ratio, thereby possibly resulting in
improved credit ratings for AT&T Capital and Newcourt.
(Ex. B at p. 20).
Despite the obligation to deal with complete fairness with plaintiff and
the members of the Class, Defendants have, as aforementioned, issued and/or
caused to be issued the Tender Offer/Materials dated July 27, 1998, which
constitutes an offering to buy the Trust Preferred Securities from plaintiff and
members of the Class at the price of $29.69 (Ex. B at p.
<PAGE>
<PAGE>
7
5) and, in addition, requiring, as a condition of acceptance of the offer that
each selling unit holder consent to amendment of the trust indenture and other
controlling documents to allow defendants to drastically accelerate the
redemption date by which defendants can cause the Trust to "call" all of the
Trust Preferred Securities (Ex. B at p. 7). The acceleration which defendants
seek moves the redemption date up from October 25, 2006 to June 30, 1998 and
would effectively allow the defendants to redeem all of the Trust Preferred
Securities now, at an inferior price of $29.25 per Security, an amount
significantly less than the tender offer amount. (Ex. B at pp. 8, 12, 19.)
As conceded by defendants in the Tender Offer/Materials:
The Redemption Price is less than the Purchase Price being offered by
AT&T Capital for tender of Securities in the Offer. If holders of
Securities fail to validly tender their Securities in the Offer and,
AT&T Capital obtains the Requisite Consents upon the terms and
conditions of the Offer, and AT&T Capital accepts for payment and
purchases the Securities in the Offer, then such non-tendering holders
will only receive the Redemption Price, plus accrued and unpaid
distribution thereon, for Securities that have not been validly tendered
in the Offer.
(Ex. B at p. 8)
II. STANDARDS FOR GRANTING OF PRELIMINARY INJUNCTION
To obtain a preliminary injunction, plaintiff must demonstrate both a
reasonable probability of success on the merits and some irreparable harm which
will occur absent the injunction. Crowe v. De Gioia, 90 N.J. 126, 133, 447 A.2d
173, 176 (1982); Subcarrier Communications, Inc. v. Day, 299 N.J. Super. 634,
638, 691 A.2d 876, 878 (App. Div. 1997); Paternoster v. Shuster, 269 N.J. Super.
544, 555, 687 A.2d 330, 336 (App. Div. 1997). Additionally, the Court must
balance the hardships to the parties in granting or not granting the preliminary
injunction. Crowe v. De Gioia, 90 N.J. at 134, 447 A.2d at 177. The point of a
preliminary injunction is to "maintain the parties in substantially the same
condition when the final decree is entered as they were when the litigation
began". Crowe v. De Gioia, 90 N.J. at 134, 447 A.2d at 177, quoting, Peters v.
Public Service Corp. of New Jersey, 132 N.J.
<PAGE>
<PAGE>
8
Eq. 500 (Ch. 1942), aff'd, o.b., 1333 N.J. Eq. 283 (E. & A. 1943). Further, a
preliminary injunction may be granted only if the legal right underlying the
movant's claim is settled. Crowe v. De Gioia, 90 N.J. at 133, 687 A. 2d at 177.
Tender offers which by reason of their terms are wrongfully coercive are
appropriate grounds to grant a preliminary injunction. Eisenberg v. Chicago,
Milwaukee Corp., 537 A.2d 1051, 1056-57 (Del. Ch. 1987) (granting preliminary
injunction against coercive tender offer under analogous Delaware criteria).
III. THERE IS A REASONABLE PROBABILITY
OF PLAINTIFF PREVAILING ON THE MERITS
This case involves a transaction in which an interested board (of
trustees) has set the terms of the transaction and caused it to be effectuated,
or at least set its effectuation in process. Under such circumstances, under
Delaware law, the defendants will be required to establish the "entire fairness"
of the transaction Weinberger v. UOP, Inc. Del. Supr., 457 A.2d 701 (1983). They
will not be able to do so.(1)
Transactions which have uniformly been found to violate the principle of
"entire fairness" are those tender offers which by their nature are coercive and
give shareholders no real or effective choice with respect to making the
decision to tender. AC Acquisition Corp. v. Anderson Clayton & Co., 519 A.2d 103
(Del. Ch. 1986). Such transactions are subject to injunctive relief. Id. See
also, Paramount Communications, Inc. v. QVC Network, Inc., 637 A. 2d 34, 46
(Del. Supr. 1994) (finding that two tiered tender offers providing less
consideration on the "back end" are coercive and inherently problematic).
The standards applicable to the plaintiff's claim of inequitable
coercion is whether the "defendants have taken actions that operate inequitably
to induce the [securities holders] to tender their [securities] for reasons
unrelated to the economic merits of the offer" Ivanhoe
- -----------------
(1) The trust was created under the laws of the state of Delaware and thus
Delaware substantive law should apply.
<PAGE>
<PAGE>
9
Partners v. Newmont Mining Corp., Del. Ch., 533 A.2d 585, 605 (1987). Here,
plaintiff has demonstrated that the entire fairness standard applies and that
the transaction is inherently coercive. That the transaction is for the benefit
of the insiders, and not the securities holders, is no secret, as the Tender
Offer Materials clearly state that the purpose of the transaction is to benefit
AT&T Capital. As the Tender Offer Materials state, "AT&T Capital's and
Newcourt's management believe that such redemption . . . would strengthen the
consolidated financial condition of AT&T Capital and its subsidiaries by
reducing their outstanding aggregate consolidated indebtedness, and such
reduction would lower AT&T Capital's consolidated debt-to-equity ratio, thereby
possibly resulting in improved credit ratings for AT&T Capital and Newcourt."
(Ex. B at p. 20). That description, the absence of a "fairness opinion" and the
linking of the tender of securities to the consent to amend the redemption
demonstrate that this transaction was created to benefit the insiders, not the
security holders.
Furthermore, those persons who tender will receive $29.69 in cash,
while, those who do not tender will receive the inferior price of $29.25 as part
of the redemption (Ex. B at pp. 8, 12, 19) and a security holder can not tender
without also giving consent to the amendment of the agreement that will permit
redemption of all securities on June 30, 1998 instead of October 25, 2006 (Ex. B
at p. 18). That will cause the switchboard to light up with calls of securities
holders trying to tender to avoid being stuck with the lower consideration,
without regard to the adequacy of the value of the consideration since simple
logic dictates that it is inevitable that AT&T Capital will receive enough votes
(4,000,001 out of 8,000,000) to cause the amendment to be effectuated, causing
such persons who do not consent to receive a lesser amount for his or her
securities. In addition, it will guarantee providing the necessary consent to
accelerate the redemption. In essence, AT&T Capital is bribing those unit
holders to give consent to an early redemption while punishing those who do not.
<PAGE>
<PAGE>
10
A tender offer was enjoined as coercive in Eisenberg v. Chicago,
Milwaukee Corp., supra, 537 A.2d at 1062, where a tender offer by the company
for its own stock included a representation that the company intended to delist
its stock from the New York Stock Exchange after the tender offer. Such a
delisting would negatively effect the liquidity and the price at which
shareholders would be able to sell the stock. The Chancery Court believed that
the shareholder could feel compelled to tender their shares without regard to
the economics of the deal since the alternative was to hold stock of a delisted
company which would be worth less. As in the Eisenberg action, here, securities
owners will feel compelled to tender or be left with securities which, as in the
case of Eisenberg, may be worth less. The within action is more compelling
since, in this action, the securities are guaranteed by the company to be worth
less. There is not even a question of value of the remaining shares, as in
Eisenberg. In the instant action, the fact that by tendering, one is helping to
assure that those who do not receive less makes it a remarkably stronger case in
favor of injunction and supporting the proposition that there is a probability
of success on the merits. Thus, it can also be shown by clear and convincing
evidence that the legal rights of the plaintiff and the other members of the
class are not unsettled.
IV. PLAINTIFF HAS SHOWN IRREPARABLE HARM
AND THAT THE EQUITIES BALANCE IN HER FAVOR
This is clearly a case in which the equities balance in favor of
granting an injunction and in which the plaintiff and the class of securities
holders of 8,000,000 units will suffer irreparable injury if an injunction is
not granted. In Eisenberg v. Milwaukee Corp., 537 A.2d at 1062, the Delaware
Chancery Court recognized that monetary damages will not be sufficient to remedy
the fundamental flaw in the tender offer. As the Chancery Court stated:
Here the principal dispute is not that the offering price is unfair.
Rather, at issue is the shareholders' right to make an informed,
uncoerced decision. That right is specific, and its enforcement requires
a specific, not a substitutional, remedy. As this Court has recognized,
to permit a deficient offer to go forward might forever deprive the
tendering shareholders of their right to be treated fairly. In that
event the harm
<PAGE>
<PAGE>
11
could not easily be undone, and given the nature of the shareholder
interests at stake, damages would not be a meaningful or adequate
remedy. Therefore, the threatened harm is irreparable. Joseph v. Shell
Oil Company, supra, 482 A.2d at 344; In Re Anderson, Clayton
Shareholders' Litigation, Del. Ch., 519 A.2d 669, 676 (1986). An
injunction is the remedy most likely to achieve disclosure of the
information necessary to achieve an informed decision and to eliminate
the Offer's coercive aspects. See Sealy Mattress Company of New Jersey,
Inc. v. Sealy, Inc., Del. Ch., 532 A.2d 1324, 1340-41 (1987).
In contrast, if an injunction is granted here, there will be little, if
any, harm or inconvenience to defendants other than the inconvenience of
modifying the structure of the tender offer so that it is no longer coercive.
That can be accomplished in a number of ways including, but not limited to,
severing the link between the tender and the consent to amend the terms on
redemption or causing those who do not tender to receive the same consideration
as those who did tender.
CONCLUSION
For the reasons stated herein, in the Complaint and in the accompanying
Order to Show Cause, the Court should grant the injunctive relief herein
requested.
Dated: August 13, 1998 Respectfully submitted,
KANTROWITZ, GOLDHAMER & GRAIFMAN
By: /s/ Barry S. Kantrowitz
--------------------------------
BARRY S. KANTROWITZ
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
STULL STULL & BRODY
JULES BRODY
MARK LEVINE
6 East 45th Street
New York, New York 10017
(212) 687-7230
Attorneys for Plaintiff
<PAGE>
<PAGE>
KANTROWITZ GOLDHAMER & GRAIFMAN
BARRY S. KANTROWITZ, ESQ.
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
STULL STULL & BRODY
JULES BRODY, ESQ.
AARON BRODY, ESQ.
6 East 45th Street
New York, New York 10017
(212) 687-7230
- ------------------------------------------------x
RUTH GRAIFMAN, on behalf of herself and all others
similarly situated,
Plaintiff,
-against-
DECLARATION OF RUTH
AT&T CAPITAL CORPORATION, AT&T CAPITAL GRAIFMAN IN SUPPORT
LEASING SERVICES,INC., AT&T CAPITAL SERVICES OF MOTION FOR
CORP., CAPITA PREFERRED TRUST, CAPITA INJUNCTIVE RELIEF
PREFERRED FUNDING, L.P., DAVID F. BANKS,
GLENN A. VOTEK, ROBERT J. INGATO, RAMON OLIU,
JR., FIRST NATIONAL BANK OF CHICAGO, N.A., FIRST
CHICAGO DELAWARE, INC.,
Defendants.
- ------------------------------------------------x
RUTH GRAIFMAN, being duly sworn, deposes and declares:
1. I am the named plaintiff in the above captioned action and make this
affidavit in support of the within motion for immediate injunctive relief on
behalf of myself and a class ("Class") of similarly situated investors in the
Trust Preferred Securities of Capita Preferred Trust ("Capita").
2. In this action, I seek to prevent AT&T Capital Corp. ("AT&T Capital")
from successfully concluding the tender offer and consent solicitation which was
mailed to me on
<PAGE>
<PAGE>
2
or after July 27, 1998 ("Tender Offer Materials") and received by me the
beginning of this month.
3. I originally purchased these securities because of the attractive
rate of return of 9.06% for the guaranteed period through October 24, 2006. I
paid approximately $27.18 for 400 shares of Capita's Trust Preferred Securities,
for a total price of $10,936.73 (inclusive of commission), thus producing a net
yield of 8.33%. A copy of my trade confirmation statement is annexed to these
papers as Exhibit D.
4. The Tender Offer Materials seek to purchase the securities for $29.69
per unit. In addition, the Tender Offer Materials make acceptance conditionally
tied to consenting to allow AT&T Capital to move the redemption date up to June
30, 1998, and further setting the redemption price at $29.25 per unit. Thus, one
who does not accept the tender offer, will have their shares redeemed
subsequently at an inferior price. I submit to the Court that this constitutes a
coercive transaction which will force unit holders to allow AT&T Capital to buy
out of its obligations at a relatively small premium which will hardly allow
reinvestment in a similar instrument (i.e., rated BBB and running approximately
eight years for the same yield (particularly after one takes into account the
capital gains tax, and additional commissions on the repurchase and resale of a
similar instrument). Worse, it requires a unit holder to sell, whether they want
to or not.
5. The value to me of this security was as a current and continuous
income stream at this yield amount, particularly as I am over 65 years of age
and was interested in the security as a retirement investment. As a result of
this tender offer and request for consent, I am placed in the untenable position
of either having to yield to the demand of AT&T Capital to sell or having the
units redeemed thereafter at the lesser price. This hardly presents a fair and
open choice.
<PAGE>
<PAGE>
3
6. Although I am not able to follow the entire complex structure of the
inter-relationships between Capita, AT&T Capital and the other various
affiliates, it is obvious that AT&T Capital created the Capita Trust vehicle and
controls its board of trustees, that AT&T is the common shareholder of the
Trust, is the seller of the debt instrument to the Trust (through the defendant
Capita Preferred Funding, L.P.) and is now the purchaser of the Trust's
securities for the purpose of extinguishing its own debt. Yet, AT&T Capital has
the temerity to state that it has no duty to be fair with the purchasers of its
Capita Trust Preferred Securities. Legal arguments aside, I submit to the Court
that this statement defies common sense.
7. In sum, I respectfully submit to the Court that the tender offer
should be enjoined from proceeding in its present form and that AT&T Capital be
required to restructure its tender offer to eliminate the coercive aspects to
myself and others similarly situated.
/s/ Ruth Graifman
-----------------------------
RUTH GRAIFMAN
<PAGE>
<PAGE>
KANTROWITZ, GOLDHAMER & GRAIFMAN
BARRY S. KANTROWITZ, ESQ.
111 Chestnut Ridge Road
Montvale, New Jersey 07645
(201) 391-7000
STULL STULL & BRODY
JULES BRODY, ESQ.
AARON BRODY, ESQ.
6 East 45th Street
New York, New York 10017
(212) 687-7230
- ------------------------------------------------x
RUTH GRAIFMAN, on behalf of herself and all others SUPERIOR COURT OF
similarly situated, NEW JERSEY
Plaintiff, LAW DIVISION
MORRIS COUNTY
-against-
CERTIFICATION OF
AT&T CAPITAL CORPORATION, AT&T CAPITAL WILLIAM T.
LEASING SERVICES, INC., AT&T CAPITAL SERVICES SCHIFFMAN IN
CORP., CAPITA PREFERRED TRUST, CAPITA SUPPORT OF
PREFERRED FUNDING, L.P., DAVID F. BANKS, GLENN APPLICATION FOR
A. VOTEK, ROBERT J. INGATO, RAMON OLIU, JR., IMMEDIATE
FIRST NATIONAL BANK OF CHICAGO, N.A., FIRST INJUNCTIVE RELIEF
CHICAGO DELAWARE, INC.
Defendants.
- ------------------------------------------------x
I, William T. Schiffman, hereby certify as follows:
1. I am an attorney licensed to practice before the Courts of the State
of New Jersey and I am an associate in the law firm of Kantrowitz, Goldhamer &
Graifman, attorneys of record for plaintiff and the other members of the
putative class who are purchasers of the securities referred to herein
(hereinafter referred to as "Class"). I make this certification in support of
Plaintiff's Order to Show Cause which requests the entry of a preliminary
injunction to enjoin the requiring of the Plaintiff and the members of the Class
to respond to the tender offer and consent solicitation (referred to herein as
"Tender Offer Materials") of AT&T Capital Corporation
<PAGE>
<PAGE>
2
("AT&T"), dated July 27, 1998. I am familiar with the underlying transactions
and the need for emergent relief and temporary restraints.
2. A copy of the Complaint is annexed hereto as Exhibit "A". A copy of
the Tender Offer Materials is annexed hereto as Exhibit "B".
INTRODUCTORY STATEMENT
3. Defendants have engaged in a very unique and complex series of
business transactions. Plaintiffs and members of the Class invested in a
publicly traded financial instrument for the purpose of collecting a guaranteed
interest rate for a guaranteed period of time. The interest is paid to
Plaintiffs as owners of Trust Originated Preferred Securities ("TOPrS" or "Trust
Preferred Securities") issued by the Capita Preferred Trust ("Capita") and other
affiliated or subsidiary issuers of the securities, which is based on the debt
issued by defendant AT&T.
4. TOPrS are particularly attractive investments and were marketed as
such because they paid a relatively high interest rate, 9.06%, for a guaranteed
period of time, through October 24, 2006, and were marketed further as not being
callable or redeemable until that date.
5. TOPrS, as purchased by Plaintiff and members of the Class, were the
end result of a series of transactions which permitted AT&T to have their
financial "cake" and "eat it too." They were designed by AT&T to allow issuance
of certain financial instruments and have them treated as equity by various
rating agencies such as Standard & Poor's and Moody's. This treatment improved
AT&T's ratings and allowed it to borrow money at a favorable rate. At the same
time, due to the manner of structuring the transactions, AT&T would be able to
receive a tax deduction for the payments under the instruments which indirectly
inured to the benefit of the Trust in which Plaintiff and the Class owned Trust
Preferred Securities. Normally, a payment on an equity instrument, such as a
dividend on common stock, is not deductible to the issuing
<PAGE>
<PAGE>
3
corporation. Conversely, carrying debt has a negative effect on the ability to
borrow money at a favorable rate. However, in this series of transactions, AT&T
was to obtain the tax deduction and obtain "equity treatment", thus improving
its financial picture.
6. AT&T set up a series of entities through which the instruments were
purchased by Plaintiffs. AT&T did this by issuing debt instruments, referred to
as "Debentures," in the prospectus filed with the SEC on or about October 24,
1996, by defendant Capita (Prospectus").(1) The Debentures were then to be sold
to a partnership, defendant Capita Preferred Funding, L.P. ("Partnership"), a
related party to AT&T and of which AT&T was the sole general partner. This
Partnership existed primarily, if not solely, to purchase the AT&T debentures.
7. Capita, in turn, was created by AT&T to purchase the limited
partnership interests in the Partnership in order for the Partnership, in turn,
to purchase the AT&T Debentures. To raise public money for the Capita Trust, the
security, the TOPrS, were issued by Capita and then sold to plaintiff and the
Class through an Initial Public Offering ("IPO"). Thereafter, the TOPrS were
sold publicly on the New York Stock Exchange under the symbols "TCCPR" or
"TCDPR". The proceeds of the sales of these publicly traded instruments were
used to purchase the Partnership's assets. The Partnership then used the funds,
together with additional capital from AT&T, to purchase the Debentures.
8. The IPO offered and sold the TOPrS for $25.00 per unit with annual
interest at a rate of 9.06%. These payments were guaranteed and the instruments
were not redeemable until October 25, 2006. Upon liquidation October 25, 2006,
the investors received back their original $25.00 investment.(2)
- -----------------
(1) A copy of the Prospectus is annexed hereto as Exhibit "C".
(2) The named plaintiff purchased the instruments after the IPO at a
price of approximately $27.18. Other plaintiffs undoubtedly purchased at various
other prices.
(continued...)
<PAGE>
<PAGE>
4
9. The interrelationship between three (3) of the five (5) trustees of
the Trust, AT&T and other related entities results in AT&T wearing the multiple
hats of Trustee, purchaser of the debt, issuer of the debt and general partner
of the intermediary partnership, creating a situation where AT&T, controlling
all sides of the multi-faceted transaction, has a fiduciary duty to act with the
utmost fairness and good faith dealing. However, in contrast to this duty, the
instant transaction constitutes naked self-dealing and is a transparent coercive
tender offer. So much so, that defendants have placed themselves in the awkward
position of being required to take the stance in the Tender Offer Materials that
no fairness need be shown. Moreover, the Tender Offer Materials fail to include
any fairness opinion.
10. An emergent situation exists in this action as a result of the
tender deadline in the Tender Offer Materials to Plaintiff and the Class.
Defendants state quite clearly and candidly in the tender offer that they are
redeeming these securities to reduce debt because they made a mistake in
anticipating that the debt would be given "equity treatment." (See Pg. 20 of the
Tender Offer Materials). Having erred in this assessment, defendants seek to
compel Plaintiff and the Class to redeem the shares now, rather than after
October 24, 2006. What Defendants seek to do is coerce Plaintiff and the class
to accept an offer of $29.69 or risk receiving the inferior redemption price
later.
11. The coercion is extremely open and not at all subtle. Defendants are
conditioning the tender offer acceptance on Plaintiffs' consent to accelerate
the original redemption date. Plaintiff and the Class members originally
purchased believing that they could hold these instruments until the year 2006.
Now AT&T is, in essence, stating, "agree to accept $29.69 for your units or risk
a lower price when we redeem your shares thereafter." If one of the Class
accepts the offer then he or she receives the $29.69. If, however, they reject
the offer and if a
- -----------------
(2) (...continued)
Obviously, a higher purchase price had the effect of decreasing the effective
yield of the instrument.
<PAGE>
<PAGE>
5
sufficient number of other holders of the securities accepts the offer then all
non-accepting holders will be forced to accept the Redemption Price of $29.95.
Those Class members placing a value on receipt of current income are forced to
sell regardless of that fact.
The named Plaintiff, Ruth Graifman, is over 65 years of age and
purchased 400 units of The Trust Preferred Securities as part of her retirement
portfolio. (A copy of Plaintiff's confirmation trading statement is annexed
hereto as Exhibit "D"). The guaranteed interest rate was extremely important to
her. Now she is being forced to take a much lower yield if she accepts the
tender offer or, worse yet, if she rejects it she will end up with an even lower
yield. She is being placed between the proverbial rock and a hard place.
If defendants are not immediately enjoined and restrained from
proceeding with the Tender Offer Materials, due by August 21, 1998(3), it may
never be possible for Plaintiff and the Class to unravel the transactional mess
created by defendants, which will seriously and irreparably harm the Plaintiff
and the Class. If defendants are required to postpone temporarily the tender
offer then there is no harm to defendants because they will only be required to
continue to abide by the original terms of their debtor-creditor relationship
with Plaintiff and the Class. If Plaintiffs are ultimately successful then
Plaintiffs remain whole and defendants are not harmed. If Plaintiff and the
Class are ultimately unsuccessful then defendants will only have been required
to delay the consummation of their intended transactions which, by its own
terms, can be extended by defendants at their sole discretion.
12. By the coercive nature of the tender offer, Defendants are breaching
their fiduciary and other legally mandated duties notwithstanding their
posturing in the Tender Offer Materials that such duties do not exist. The IPO
was filed on or about October 22, 1996, and, on information and belief, the bulk
of the sales were consummated at that time or shortly thereafter.
- -----------------
(3) The Tender Offer Materials, in fact, state that acceptance of the
offer must be received two (2) days prior to the August 21 deadline.
<PAGE>
<PAGE>
6
Plaintiff and the Class members have held these investments for varying periods
of time, but are suddenly faced with this classic "Hobson's Choice." Plaintiff
and the Class are placed under artificially created pressure by defendants to
accept the tender offer, by the unnatural structure of the deal which extracts a
consent to redeem the shares of non-tendering holders at an inferior price.
There is really no alternative. All Class members are forced to grab the offer
now rather than risk a worse redemption option later. Plaintiffs were only
barely given three (3) weeks to make up their minds. As the tender offer date
draws closer, the Plaintiff and the Class are going to feel increased pressure
all of which comes from the self-serving motivations of the defendants. At the
very least, the temporary restraints must be granted to "stop the clock" and
give the parties, including all of the Plaintiffs, a better ability to consider
their options. If the temporary restraints are not granted then the chances of
unraveling the tender offer is essentially non-existent. Irreparable damage will
have been done and the defendants will have no incentive to cooperate or even
negotiate. Defendants must be prevented, if only temporarily, from coercing
Plaintiff and the Class to accept the unacceptable.
THE EMERGENT NEED FOR INJUNCTIVE RELIEF
Because of the time constraint imposed by the August 19th deadline
(i.e., the August 21st deadline, subtracting two days pursuant to the
defendants' imposed condition of receiving it two days in advance), the need for
immediate relief is essential, and without such relief, Plaintiff the Class will
be irreparably injured.
I hereby certify that the foregoing statements made by me are true. I am
aware that if any of the foregoing statements is willfully false I am subject to
punishment.
/s/ William T. Schiffman
--------------------------------
WILLIAM T. SCHIFFMAN
Dated: August 13, 1998
<PAGE>
<PAGE>
NEWS RELEASE
Trading Symbol: NCT/TCCPR/TCDPR Contact: GLENN VOTEK
Exchange: NEW YORK EXECUTIVE VICE PRESIDENT
& TREASURER
(973) 397-3066
AT&T CAPITAL RECEIVES CONSENTS TO FINALIZE TOPrS TENDER OFFER
MORRISTOWN, NEW JERSEY, AUGUST 19, 1998 -- AT&T Capital Corporation, a wholly
owned subsidiary of Newcourt Credit Group Inc., announced today that it received
consents from the holders of record of a majority of the outstanding
US$200,000,000 9.06% Trust Originated Preferred Securities (the 'Securities')
issued by Capita Preferred Trust, an affiliate of the company, to certain
proposed amendments to the terms of the Securities thereby enabling the company
to finalize its previously announced tender offer (the 'Offer') for the
Securities.
In accordance with the terms of the Offer, the expiration date will be extended
to expire on 12:00 Midnight (New York City time) on Wednesday, August 26, 1998.
It is expected that payment will be made for the Securities on Tuesday,
September 1, 1998 (the 'Settlement Date') unless the Offer is further extended.
The purchase price for Securities validly tendered and not withdrawn on or prior
to the Expiration Date is $29.69 per Security (the 'Purchase Price'), plus an
amount equal to any accrued and unpaid distribution accumulated on each tendered
Security up to but not including the Settlement Date, net to the seller in cash.
This Offer represents a $2.94 (or 11%) per security premium over the May 20,
1998 closing price (the last trading date prior to the Company's public
announcement of its intention to redeem the Securities) on the New York Stock
Exchange.
-more-
<PAGE>
<PAGE>
Securities not tendered will be redeemed by the company on the Settlement Date
for a price of $29.95 per Security (the 'Redemption Price'), plus accrued and
unpaid distribution accumulated on each redeemed Security up to, but not
including the Settlement Date, net to the seller in cash. The Redemption Price
is less than the Purchase Price being offered by company for the tender of the
Securities in the Offer. If the company accepts for payment and purchases
Securities tendered in the Offer, the non-tendering holders will only receive
the Redemption Price for those Securities not validly tendered.
The dealer manager for the Offer is Merrill Lynch & Co. The information agent is
Georgeson & Company Inc. Questions or requests for assistance may be directed to
Merrill Lynch toll-free at (888) 654-8637 or to the information agent toll-free
at (800) 223-2064.
AT&T Capital Corporation is a wholly owned subsidiary of Newcourt Credit Group
Inc. Newcourt is one of the world's leading sources of asset-backed financing
serving the corporate and commercial markets with owned and managed assets of
US$23.1 billion (C$34.0 billion) and a global capability in 24 countries. The
Trust Preferred Securities trade on the New York Stock Exchange under the
symbols 'TCCPR' or 'TCDPR'.
<PAGE>
