Exhibit 10.1

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AMENDED AND RESTATED DECLARATION
OF TRUST

by and among

WILMINGTON TRUST COMPANY,
as Delaware Trustee,

WILMINGTON TRUST COMPANY,
as Institutional Trustee,

ALLIANCE FINANCIAL CORPORATION,
as Sponsor,

and

J. DANIEL MOHR, JOHN H. WATT, JR. and
JACK H. WEBB,
as Administrators,

Dated as of September 21, 2006

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TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

Page

 

 

 

 

 

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ARTICLE I INTERPRETATION AND DEFINITIONS

 

1

 

Section 1.1.

 

Definitions

 

1

 

 

 

ARTICLE II ORGANIZATION

 

8

 

Section 2.1.

 

Name

 

8

 

Section 2.2.

 

Office

 

8

 

Section 2.3.

 

Purpose

 

8

 

Section 2.4.

 

Authority

 

8

 

Section 2.5.

 

Title to Property of the Trust

 

8

 

Section 2.6.

 

Powers and Duties of the Trustees and the Administrators

 

9

 

Section 2.7.

 

Prohibition of Actions by the Trust and the Institutional Trustee

 

12

 

Section 2.8.

 

Powers and Duties of the Institutional Trustee

 

13

 

Section 2.9.

 

Certain Duties and Responsibilities of the Trustees and Administrators

 

14

 

Section 2.10.

 

Certain Rights of Institutional Trustee

 

15

 

Section 2.11.

 

Delaware Trustee

 

17

 

Section 2.12.

 

Execution of Documents

 

17

 

Section 2.13.

 

Not Responsible for Recitals or Issuance of Securities

 

17

 

Section 2.14.

 

Duration of Trust

 

17

 

Section 2.15.

 

Mergers

 

18

 

 

 

ARTICLE III SPONSOR

 

19

 

Section 3.1.

 

Sponsor’s Purchase of Common Securities

 

19

 

Section 3.2.

 

Responsibilities of the Sponsor

 

19

 

Section 3.3.

 

Expenses

 

19

 

Section 3.4.

 

Right to Proceed

 

20

 

 

 

ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

 

20

 

Section 4.1.

 

Number of Trustees

 

20

 

Section 4.2.

 

Delaware Trustee; Eligibility

 

20

 

Section 4.3.

 

Institutional Trustee; Eligibility

 

21

 

Section 4.4.

 

Administrators

 

21

 

Section 4.5.

 

Appointment, Removal and Resignation of Trustees and Administrators

 

21

 

Section 4.6.

 

Vacancies Among Trustees

 

23

 

Section 4.7.

 

Effect of Vacancies

 

23

 

Section 4.8.

 

Meetings of the Trustees and the Administrators

 

23

 

Section 4.9.

 

Delegation of Power

 

24

 

Section 4.10.

 

Conversion, Consolidation or Succession to Business

 

24

 

 

 

ARTICLE V DISTRIBUTIONS

 

24

 

Section 5.1.

 

Distributions

 

24

 

 

 

ARTICLE VI ISSUANCE OF SECURITIES

 

24

 

Section 6.1.

 

General Provisions Regarding Securities

 

24

 

Section 6.2.

 

Paying Agent, Transfer Agent and Registrar

 

25

 

Section 6.3.

 

Form and Dating

 

25

 

Section 6.4.

 

Book-Entry Capital Securities

 

26

 

Section 6.5.

 

Mutilated, Destroyed, Lost or Stolen Certificates

 

27

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Section 6.6.

 

Temporary Securities

 

28

 

Section 6.7.

 

Cancellation

 

28

 

Section 6.8.

 

CUSIP Numbers

 

28

 

Section 6.9.

 

Rights of Holders; Waivers of Past Defaults

 

28

 

 

 

ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST

 

30

 

Section 7.1.

 

Dissolution and Termination of Trust

 

30

 

 

 

ARTICLE VIII TRANSFER OF INTERESTS

 

31

 

Section 8.1.

 

General

 

31

 

Section 8.2.

 

Transfer Procedures and Restrictions

 

32

 

Section 8.3.

 

Deemed Security Holders

 

34

 

 

 

ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL
TRUSTEE OR OTHERS

 

34

 

Section 9.1.

 

Liability

 

34

 

Section 9.2.

 

Exculpation

 

35

 

Section 9.3.

 

Fiduciary Duty

 

35

 

Section 9.4.

 

Indemnification

 

35

 

Section 9.5.

 

Outside Businesses

 

37

 

Section 9.6.

 

Compensation; Fee

 

38

 

 

 

ARTICLE X ACCOUNTING

 

38

 

Section 10.1.

 

Fiscal Year

 

38

 

Section 10.2.

 

Certain Accounting Matters

 

38

 

Section 10.3.

 

Banking

 

39

 

Section 10.4.

 

Withholding

 

39

 

 

 

ARTICLE XI AMENDMENTS AND MEETINGS

 

39

 

Section 11.1.

 

Amendments

 

39

 

Section 11.2.

 

Meetings of the Holders of Securities; Action by Written Consent

 

41

 

 

 

ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE

 

42

 

Section 12.1.

 

Representations and Warranties of Institutional Trustee

 

42

 

Section 12.2.

 

Representations of the Delaware Trustee

 

42

 

 

 

ARTICLE XIII MISCELLANEOUS

 

43

 

Section 13.1.

 

Notices

 

43

 

Section 13.2.

 

Governing Law

 

44

 

Section 13.3.

 

Intention of the Parties

 

44

 

Section 13.4.

 

Headings

 

44

 

Section 13.5.

 

Successors and Assigns

 

44

 

Section 13.6.

 

Partial Enforceability

 

44

 

Section 13.7.

 

Counterparts

 

45

 

 

Annex I

Terms of Securities

Exhibit A-1

Form of Capital Security Certificate

Exhibit A-2

Form of Common Security Certificate

Exhibit B

Specimen of Initial Debenture

Exhibit C

Placement Agreement

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AMENDED AND RESTATED

DECLARATION OF TRUST

OF

ALLIANCE FINANCIAL CAPITAL TRUST II

September 21, 2006

          AMENDED AND RESTATED DECLARATION OF TRUST (“Declaration”) dated and
effective as of September 21, 2006, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and by the
holders, from time to time, of undivided beneficial interests in the Trust (as
defined herein) to be issued pursuant to this Declaration;

          WHEREAS, the Trustees, the Administrators and the Sponsor established
Alliance Financial Capital Trust II (the “Trust”), a statutory trust under the
Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated
as of September 5, 2006 (the “Original Declaration”), and a Certificate of Trust
filed with the Secretary of State of the State of Delaware on September 5, 2006,
for the sole purpose of issuing and selling certain securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in certain debentures of the Debenture Issuer (as defined
herein);

          WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and

          WHEREAS, the Trustees, the Administrators and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration;

          NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory trust under the Statutory Trust Act and that
this Declaration constitutes the governing instrument of such statutory trust,
the Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration. The parties hereto
hereby agree as follows:

ARTICLE I

INTERPRETATION AND DEFINITIONS

          Section 1.1. Definitions.  

          Unless the context otherwise requires:

          (a)     Capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this Section
1.1;

          (b)     a term defined anywhere in this Declaration has the same
meaning throughout;

          (c)     all references to “the Declaration” or “this Declaration” are
to this Declaration as modified, supplemented or amended from time to time;

          (d)     all references in this Declaration to Articles and Sections
and Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified; and

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          (e)     a reference to the singular includes the plural and vice
versa.

          “Acceleration Event of Default” has the meaning set forth in the
Indenture.

          “Additional Interest” has the meaning set forth in the Indenture.

          “Administrative Action” has the meaning set forth in paragraph 4(a) of
Annex I.

          “Administrators” means each of J. Daniel Mohr, John H. Watt, Jr. and
Jack H. Webb, solely in such Person’s capacity as Administrator of the Trust
created and continued hereunder and not in such Person’s individual capacity, or
such Administrator’s successor in interest in such capacity, or any successor
appointed as herein provided.

          “Affiliate” has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.

          “Applicable Depositary Procedures” means, with respect to any transfer
or transaction involving a Book-Entry Capital Security, the rules and procedures
of the Depositary for such Book-Entry Capital Security, in each case to the
extent applicable to such transaction and as in effect from time to time.

          “Authorized Officer” of a Person means any Person that is authorized
to bind such Person.

          “Bankruptcy Event” means, with respect to any Person:

          (a)     a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or

          (b)     such Person shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of such Person of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due.

          “Book-Entry Capital Securities” means a Capital Security, the
ownership and transfer of which shall be made through book entries by a
Depositary.

          “Business Day” means any day other than Saturday, Sunday or any other
day on which banking institutions in New York City or Wilmington, Delaware are
permitted or required by any applicable law or executive order to close.

          “Capital Securities” has the meaning set forth in paragraph 1(a) of
Annex I.

          “Capital Security Certificate” means a definitive Certificate in fully
registered form representing a Capital Security substantially in the form of
Exhibit A-1.

          “Capital Treatment Event” has the meaning set forth in paragraph 4(a)
of Annex I.

          “Certificate” means any certificate evidencing Securities.

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          “Closing Date” has the meaning set forth in the Placement Agreement.

          “Code” means the Internal Revenue Code of 1986, as amended from time
to time, or any successor legislation.

          “Common Securities” has the meaning set forth in paragraph 1(b) of
Annex I.

          “Common Security Certificate” means a definitive Certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.

          “Company Indemnified Person” means (a) any Administrator; (b) any
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.

          “Corporate Trust Office” means the office of the Institutional Trustee
at which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-1600, Attn: Corporate Trust
Administration.

          “Coupon Rate” has the meaning set forth in paragraph 2(a) of Annex I.

          “Covered Person” means: (a) any Administrator, officer, director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) any of the Trust’s Affiliates; and (b) any Holder of Securities.

          “Creditor” has the meaning set forth in Section 3.3.

          “Debenture Issuer” means Alliance Financial Corporation, a New York
corporation, in its capacity as issuer of the Debentures under the Indenture.

          “Debenture Trustee” means Wilmington Trust Company, as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.

          “Debentures” means the Floating Rate Junior Subordinated Deferrable
Interest Debentures due 2036 to be issued by the Debenture Issuer under the
Indenture.

          “Defaulted Interest” has the meaning set forth in the Indenture.

          “Definitive Capital Securities Certificates” means Capital Securities
issued in certificated, fully registered form that are not Global Capital
Securities.

          “Delaware Trustee” has the meaning set forth in Section 4.2.

          “Depositary” means an organization registered as a clearing agency
under the Exchange Act that is designated as Depositary by the Administrators or
any successor thereto. DTC will be the initial Depositary.

          “Depositary Participant” means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Depositary effects
book-entry transfers and pledges of securities deposited with the Depositary.

          “Determination Date” has the meaning set forth in paragraph 4(a) of
Annex I.

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          “Direct Action” has the meaning set forth in Section 2.8(d).

          “Distribution” means a distribution payable to Holders of Securities
in accordance with Section 5.1.

          “Distribution Payment Date” has the meaning set forth in
paragraph 2(b) of Annex I.

          “Distribution Period” means (i) with respect to the Distribution paid
on the first Distribution Payment Date, the period beginning on (and including)
the date of original issuance and ending on (but excluding) the Distribution
Payment Date in December 2006 and (ii) thereafter, with respect to a
Distribution paid on each successive Distribution Payment Date, the period
beginning on (and including) the preceding Distribution Payment Date and ending
on (but excluding) such current Distribution Payment Date.

          “Distribution Rate” means, for the Distribution Period beginning on
(and including) the date of original issuance and ending on (but excluding) the
Distribution Payment Date in December 2006, the rate per annum of 7.04%, and for
each Distribution Period beginning on or after the Distribution Payment Date in
December 2006, the Coupon Rate for such Distribution Period.

          “DTC” means The Depository Trust Company or any successor thereto.

          “Event of Default” means any one of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):

          (a)     the occurrence of an Indenture Event of Default; or

          (b)     default by the Trust in the payment of any Redemption Price or
Special Redemption Price of any Security when it becomes due and payable; or

          (c)     default in the performance, or breach, in any material
respect, of any covenant or warranty of the Institutional Trustee in this
Declaration (other than those specified in clause (a) or (b) above) and
continuation of such default or breach for a period of 60 days after there has
been given, by registered or certified mail to the Institutional Trustee and to
the Sponsor by the Holders of at least 25% in aggregate liquidation amount of
the outstanding Capital Securities, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a “Notice
of Default” hereunder; or

          (d)     the occurrence of a Bankruptcy Event with respect to the
Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.

          “Extension Period” has the meaning set forth in paragraph 2(b) of
Annex I.

          “Federal Reserve” has the meaning set forth in paragraph 3 of Annex I.

          “Fiduciary Indemnified Person” shall mean each of the Institutional
Trustee (including in its individual capacity), the Delaware Trustee (including
in its individual capacity), any Affiliate of the Institutional Trustee or
Delaware Trustee and any officers, directors, shareholders, members, partners,

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employees, representatives, custodians, nominees or agents of the Institutional
Trustee or Delaware Trustee.

          “Fiscal Year” has the meaning set forth in Section 10.1.

          “Global Capital Security” means a Capital Securities Certificate
evidencing ownership of Book-Entry Capital Securities.

          “Guarantee” means the guarantee agreement to be dated as of the
Closing Date, of the Sponsor in respect of the Capital Securities.

          “Holder” means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Statutory Trust Act.

          “Indemnified Person” means a Company Indemnified Person or a Fiduciary
Indemnified Person.

          “Indenture” means the Indenture dated as of the Closing Date, between
the Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued, as such Indenture and
any supplemental indenture may be amended, supplemented or otherwise modified
from time to time.

          “Indenture Event of Default” means an “Event of Default” as defined in
the Indenture.

          “Institutional Trustee” means the Trustee meeting the eligibility
requirements set forth in Section 4.3.

          “Interest” means any interest due on the Debentures including any
Additional Interest and Defaulted Interest.

          “Investment Company” means an investment company as defined in the
Investment Company Act.

          “Investment Company Act” means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.

          “Investment Company Event” has the meaning set forth in paragraph 4(a)
of Annex I.

          “Liquidation” has the meaning set forth in paragraph 3 of Annex I.

          “Liquidation Distribution” has the meaning set forth in paragraph 3 of
Annex I.

          “Majority in liquidation amount of the Securities” means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.

          “Maturity Date” has the meaning set forth in paragraph 4(a) of Annex
I.

          “Officers’ Certificates” means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers’
Certificate delivered with respect to compliance with a condition or covenant
providing for it in this Declaration shall include:

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          (a)     a statement that each officer signing the Certificate has read
the covenant or condition and the definitions relating thereto;

          (b)     a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Certificate;

          (c)     a statement that each such officer has made such examination
or investigation as, in such officer’s opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

          (d)     a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.

          “OTS” has the meaning set forth in paragraph 3 of Annex I.

          “Owner” means each Person who is the beneficial owner of Book-Entry
Capital Securities as reflected in the records of the Depositary or, if a
Depositary Participant is not the beneficial owner, then the beneficial owner as
reflected in the records of the Depositary Participant.

          “Paying Agent” has the meaning specified in Section 6.2.

          “Person” means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

          “Placement Agreement” means the Placement Agreement relating to the
offering and sale of Capital Securities in the form of Exhibit C.

          “Property Account” has the meaning set forth in Section 2.8(c).

          “Pro Rata” has the meaning set forth in paragraph 8 of Annex I.

          “QIB” means a “qualified institutional buyer” as defined in Rule 144A
under the Securities Act.

          “Quorum” means a majority of the Administrators or, if there are only
two Administrators, both of them.

          “Redemption Date” has the meaning set forth in paragraph 4(a) of
Annex I.

          “Redemption/Distribution Notice” has the meaning set forth in
paragraph 4(e) of Annex I.

          “Redemption Price” has the meaning set forth in paragraph 4(a) of
Annex I.

          “Registrar” has the meaning set forth in Section 6.2.

          “Relevant Trustee” has the meaning set forth in Section 4.5(a).

          “Responsible Officer” means, with respect to the Institutional
Trustee, any officer within the Corporate Trust Office of the Institutional
Trustee, including any vice-president, any assistant vice-president, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or other officer of the Corporate Trust Office of the Institutional Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate

6

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trust matter, any other officer to whom such matter is referred because of that
officer’s knowledge of and familiarity with the particular subject.

          “Restricted Securities Legend” has the meaning set forth in Section
8.2(b).

          “Rule 3a-5” means Rule 3a-5 under the Investment Company Act.

          “Rule 3a-7” means Rule 3a-7 under the Investment Company Act.

          “Securities” means the Common Securities and the Capital Securities.

          “Securities Act” means the Securities Act of 1933, as amended from
time to time, or any successor legislation.

          “Special Event” has the meaning set forth in paragraph 4(a) of
Annex I.

          “Special Redemption Date” has the meaning set forth in paragraph 4(a)
of Annex I.

          “Special Redemption Price” has the meaning set forth in paragraph 4(a)
of Annex I.

          “Sponsor” means Alliance Financial Corporation, a New York
corporation, or any successor entity in a merger, consolidation or amalgamation,
in its capacity as sponsor of the Trust.

          “Statutory Trust Act” means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. §§ 3801, et seq. as may be amended from time to time.

          “Successor Entity” has the meaning set forth in Section 2.15(b).

          “Successor Delaware Trustee” has the meaning set forth in Section
4.5(e).

          “Successor Institutional Trustee” has the meaning set forth in Section
4.5(b).

          “Successor Securities” has the meaning set forth in Section 2.15(b).

          “Super Majority” has the meaning set forth in paragraph 5(b) of
Annex I.

          “Tax Event” has the meaning set forth in paragraph 4(a) of Annex I.

          “10% in liquidation amount of the Securities” means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.

          “3-Month LIBOR” has the meaning set forth in paragraph 4(a) of
Annex I.

          “Transfer Agent” has the meaning set forth in Section 6.2.

          “Treasury Regulations” means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

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          “Trust Property” means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Property Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Institutional Trustee pursuant to the trusts of this
Declaration.

          “Trustee” or “Trustees” means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.

          “U.S. Person” means a United States Person as defined in Section
7701(a)(30) of the Code.

ARTICLE II

ORGANIZATION

          Section 2.1. Name.  The Trust is named “Alliance Financial Capital
Trust II,” as such name may be modified from time to time by the Administrators
following written notice to the Holders of the Securities. The Trust’s
activities may be conducted under the name of the Trust or any other name deemed
advisable by the Administrators.

          Section 2.2. Office.  The address of the principal office of the Trust
is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-1600. On at least 10 Business Days written notice to
the Holders of the Securities, the Administrators may designate another
principal office, which shall be in a state of the United States or in the
District of Columbia.

          Section 2.3. Purpose.  The exclusive purposes and functions of the
Trust are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the Debentures, (c) to facilitate direct investment in the
assets of the Trust through issuance of the Common Securities and the Capital
Securities and (d) except as otherwise limited herein, to engage in only those
other activities necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, pledge any of
its assets, or otherwise undertake (or permit to be undertaken) any activity
that would cause the Trust not to be classified for United States federal income
tax purposes as a grantor trust.

          Section 2.4. Authority.  Except as specifically provided in this
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
in accordance with its powers shall constitute the act of and serve to bind the
Trust. In dealing with the Trustees acting on behalf of the Trust, no Person
shall be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively on the
power and authority of the Trustees as set forth in this Declaration. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders. The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.

          Section 2.5. Title to Property of the Trust.  Except as provided in
Section 2.8 with respect to the Debentures and the Property Account or as
otherwise provided in this Declaration, legal title to all assets of the Trust
shall be vested in the Trust. The Holders shall not have legal title to any part
of the assets of the Trust, but shall have an undivided beneficial interest in
the assets of the Trust.

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          Section 2.6. Powers and Duties of the Trustees and the Administrators.

          (a)     The Trustees and the Administrators shall conduct the affairs
of the Trust in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance with
the following provisions (i) and (ii), the Trustees and the Administrators shall
have the authority to enter into all transactions and agreements determined by
the Institutional Trustee to be appropriate in exercising the authority, express
or implied, otherwise granted to the Trustees or the Administrators, as the case
may be, under this Declaration, and to perform all acts in furtherance thereof,
including without limitation, the following:

 

 

 

 

 

          (i)      Each Administrator shall have the power and authority to act
on behalf of the Trust with respect to the following matters:

 

 

 

 

 

 

          (A) the issuance and sale of the Securities;

 

 

 

 

 

 

          (B) to cause the Trust to enter into, and to execute and deliver on
behalf of the Trust, such agreements as may be necessary or desirable in
connection with the purposes and function of the Trust, including agreements
with the Paying Agent;

 

 

 

 

 

 

          (C) ensuring compliance with the Securities Act, applicable state
securities or blue sky laws;

 

 

 

 

 

 

          (D) the sending of notices (other than notices of default), and other
information regarding the Securities and the Debentures to the Holders in
accordance with this Declaration;

 

 

 

 

 

 

          (E) the consent to the appointment of a Paying Agent, Transfer Agent
and Registrar in accordance with this Declaration, which consent shall not be
unreasonably withheld or delayed;

 

 

 

 

 

 

          (F) execution and delivery of the Securities in accordance with this
Declaration;

 

 

 

 

 

 

          (G) execution and delivery of closing certificates pursuant to the
Placement Agreement and the application for a taxpayer identification number;

 

 

 

 

 

 

          (H) unless otherwise determined by the Holders of a Majority in
liquidation amount of the Securities or as otherwise required by the Statutory
Trust Act, to execute on behalf of the Trust (either acting alone or together
with any or all of the Administrators) any documents that the Administrators
have the power to execute pursuant to this Declaration;

 

 

 

 

 

 

          (I) the taking of any action incidental to the foregoing as the
Institutional Trustee may from time to time determine is necessary or advisable
to give effect to the terms of this Declaration for the benefit of the Holders
(without consideration of the effect of any such action on any particular
Holder);

 

 

 

 

 

 

          (J) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including Distributions,
voting rights, redemptions and exchanges, and to issue relevant notices to the
Holders of Capital Securities and Holders of Common Securities as to such
actions and applicable record dates; and

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          (K) to duly prepare and file all applicable tax returns and tax
information reports that are required to be filed with respect to the Trust on
behalf of the Trust.

 

 

 

 

          (ii)      As among the Trustees and the Administrators, the
Institutional Trustee shall have the power, duty and authority to act on behalf
of the Trust with respect to the following matters:

 

 

 

 

 

          (A) the establishment of the Property Account;

 

 

 

 

 

          (B) the receipt of the Debentures;

 

 

 

 

 

          (C) the collection of interest, principal and any other payments made
in respect of the Debentures in the Property Account;

 

 

 

 

 

          (D) the distribution through the Paying Agent of amounts owed to the
Holders in respect of the Securities;

 

 

 

 

 

          (E) the exercise of all of the rights, powers and privileges of a
holder of the Debentures;

 

 

 

 

 

          (F) the sending of notices of default and other information regarding
the Securities and the Debentures to the Holders in accordance with this
Declaration;

 

 

 

 

 

          (G) the distribution of the Trust Property in accordance with the
terms of this Declaration;

 

 

 

 

 

          (H) to the extent provided in this Declaration, the winding up of the
affairs of and liquidation of the Trust and the preparation, execution and
filing of the certificate of cancellation with the Secretary of State of the
State of Delaware;

 

 

 

 

 

          (I) after any Event of Default (provided that such Event of Default is
not by or with respect to the Institutional Trustee) the taking of any action
incidental to the foregoing as the Institutional Trustee may from time to time
determine is necessary or advisable to give effect to the terms of this
Declaration and protect and conserve the Trust Property for the benefit of the
Holders (without consideration of the effect of any such action on any
particular Holder); and

 

 

 

 

 

          (J) to take all action that may be necessary for the preservation and
the continuation of the Trust’s valid existence, rights, franchises and
privileges as a statutory trust under the laws of the State of Delaware.

 

 

 

 

          (iii)     The Institutional Trustee shall have the power and authority
to act on behalf of the Trust with respect to any of the duties, liabilities,
powers or the authority of the Administrators set forth in Section 2.6(a)(i)(D),
(E) and (F) herein but shall not have a duty to do any such act unless
specifically requested to do so in writing by the Sponsor, and shall then be
fully protected in acting pursuant to such written request; and in the event of
a conflict between the action of the Administrators and the action of the
Institutional Trustee, the action of the Institutional Trustee shall prevail.

          (b)     So long as this Declaration remains in effect, the Trust (or
the Trustees or Administrators acting on behalf of the Trust) shall not
undertake any business, activities or transaction except as expressly provided
herein or contemplated hereby. In particular, neither the Trustees nor the

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Administrators may cause the Trust to (i) acquire any investments or engage in
any activities not authorized by this Declaration, (ii) sell, assign, transfer,
exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust
Property or interests therein, including to Holders, except as expressly
provided herein, (iii) take any action that would reasonably be expected (x) to
cause the Trust to fail or cease to qualify as a “grantor trust” for United
States federal income tax purposes or (y) to require the trust to register as an
Investment Company under the Investment Company Act, (iv) incur any indebtedness
for borrowed money or issue any other debt or (v) take or consent to any action
that would result in the placement of a lien on any of the Trust Property. The
Institutional Trustee shall, at the sole cost and expense of the Trust, defend
all claims and demands of all Persons at any time claiming any lien on any of
the Trust Property adverse to the interest of the Trust or the Holders in their
capacity as Holders.

          (c)     In connection with the issuance and sale of the Capital
Securities, the Sponsor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Sponsor in furtherance of the following prior to the date
of this Declaration are hereby ratified and confirmed in all respects):

 

 

 

 

          (i)     the taking of any action necessary to obtain an exemption from
the Securities Act;

 

 

 

 

          (ii)     the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Capital Securities and
the determination of any and all such acts, other than actions which must be
taken by or on behalf of the Trust, and the advice to the Administrators of
actions they must take on behalf of the Trust, and the preparation for execution
and filing of any documents to be executed and filed by the Trust or on behalf
of the Trust, as the Sponsor deems necessary or advisable in order to comply
with the applicable laws of any such States in connection with the sale of the
Capital Securities;

 

 

 

 

          (iii)     the negotiation of the terms of, and the execution and
delivery of, the Placement Agreement providing for the sale of the Capital
Securities; and

 

 

 

          (iv)     the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.

          (d)     Notwithstanding anything herein to the contrary, the
Administrators and the Holders of a Majority in liquidation amount of the Common
Securities are authorized and directed to conduct the affairs of the Trust and
to operate the Trust so that the Trust will not (i) be deemed to be an
Investment Company required to be registered under the Investment Company Act,
and (ii) fail to be classified as a “grantor trust” for United States federal
income tax purposes. The Administrators and the Holders of a Majority in
liquidation amount of the Common Securities shall not take any action
inconsistent with the treatment of the Debentures as indebtedness of the
Debenture Issuer for United States federal income tax purposes. In this
connection, the Administrators and the Holders of a Majority in liquidation
amount of the Common Securities are authorized to take any action, not
inconsistent with applicable laws, the Certificate of Trust or this Declaration,
as amended from time to time, that each of the Administrators and the Holders of
a Majority in liquidation amount of the Common Securities determines in their
discretion to be necessary or desirable for such purposes.

          (e)     All expenses incurred by the Administrators or the Trustees
pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Trustees and the Administrators shall have no obligations with respect to such
expenses (for purposes of clarification, this Section 2.6(e) does not
contemplate the payment by the Sponsor of acceptance or annual administration
fees owing to the Trustees under this

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Declaration or the fees and expenses of the Trustees’ counsel in connection with
the closing of the transactions contemplated by this Declaration).

          (f)     The assets of the Trust shall consist of the Trust Property.

          (g)     Legal title to all Trust Property shall be vested at all times
in the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee and the Administrators for the benefit
of the Trust in accordance with this Declaration.

          (h)     If the Institutional Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.

          Section 2.7. Prohibition of Actions by the Trust and the Institutional
Trustee.

          (a)     The Trust shall not, and the Institutional Trustee shall cause
the Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Institutional
Trustee shall cause the Trust not to:

 

 

 

 

          (i)      invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of the Securities
pursuant to the terms of this Declaration and of the Securities;

 

 

 

 

          (ii)     acquire any assets other than as expressly provided herein;

 

 

 

 

          (iii)    possess Trust Property for other than a Trust purpose;

 

 

 

 

          (iv)     make any loans or incur any indebtedness other than loans
represented by the Debentures;

 

 

 

 

          (v)      possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Securities in any way whatsoever other than
as expressly provided herein;

 

 

 

 

          (vi)     issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities;

 

 

 

 

          (vii)    carry on any “trade or business” as that phrase is used in
the Code; or

 

 

 

          (viii)   other than as provided in this Declaration (including
Annex I), (A) direct the time, method and place of exercising any trust or power
conferred upon the Debenture Trustee with respect to the Debentures, (B) waive
any past default that is waivable under the Indenture, (C) exercise any right to
rescind or annul any declaration that the principal of all the Debentures shall
be due and payable, or (D) consent to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required unless
the Trust shall have received a written opinion of counsel to the effect that
such modification will not cause the Trust to cease to be classified as a
“grantor trust” for United States federal income tax purposes.

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          Section 2.8. Powers and Duties of the Institutional Trustee.

          (a)     The legal title to the Debentures shall be owned by and held
of record in the name of the Institutional Trustee in trust for the benefit of
the Trust and the Holders of the Securities. The right, title and interest of
the Institutional Trustee to the Debentures shall vest automatically in each
Person who may hereafter be appointed as Institutional Trustee in accordance
with Section 4.5. Such vesting and cessation of title shall be effective whether
or not conveyancing documents with regard to the Debentures have been executed
and delivered.

          (b)     The Institutional Trustee shall not transfer its right, title
and interest in the Debentures to the Administrators or to the Delaware Trustee.

          (c)     The Institutional Trustee shall:

 

 

 

          (i)     establish and maintain a segregated non-interest bearing trust
account (the “Property Account”) in the name of and under the exclusive control
of the Institutional Trustee, and maintained in the Institutional Trustee’s
trust department, on behalf of the Holders of the Securities and, upon the
receipt of payments of funds made in respect of the Debentures held by the
Institutional Trustee, deposit such funds into the Property Account and make
payments, or cause the Paying Agent to make payments, to the Holders of the
Capital Securities and Holders of the Common Securities from the Property
Account in accordance with Section 5.1. Funds in the Property Account shall be
held uninvested until disbursed in accordance with this Declaration;

 

 

 

          (ii)    engage in such ministerial activities as shall be necessary or
appropriate to effect the redemption of the Capital Securities and the Common
Securities to the extent the Debentures are redeemed or mature; and

 

 

 

          (iii)   upon written notice of distribution issued by the
Administrators in accordance with the terms of the Securities, engage in such
ministerial activities as shall be necessary or appropriate to effect the
distribution of the Debentures to Holders of Securities upon the occurrence of
certain circumstances pursuant to the terms of the Securities.

          (d)     The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust which arises out of or in
connection with an Event of Default of which a Responsible Officer of the
Institutional Trustee has actual knowledge or arises out of the Institutional
Trustee’s duties and obligations under this Declaration; provided, however, that
if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of the
Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder (a “Direct Action”) on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of the Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of the Capital Securities in such Direct
Action; provided, however, that no Holder of the Common Securities may exercise
such right of subrogation so long as an Event of Default with respect to the
Capital Securities has occurred and is continuing.

          (e)     The Institutional Trustee shall continue to serve as a Trustee
until either:

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          (i)     the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders of the Securities pursuant to the
terms of the Securities and this Declaration; or

 

 

 

          (ii)    a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 4.5.

          (f)     The Institutional Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a Holder of the Debentures
under the Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to this Declaration (including Annex I) and the terms of the
Securities.

          The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.

          Section 2.9. Certain Duties and Responsibilities of the Trustees and
Administrators.

          (a)     The Institutional Trustee, before the occurrence of any Event
of Default and after the curing or waiving of all such Events of Default that
may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Declaration and no implied covenants shall be
read into this Declaration against the Institutional Trustee. In case an Event
of Default has occurred (that has not been cured or waived pursuant to Section
6.8), the Institutional Trustee shall exercise such of the rights and powers
vested in it by this Declaration, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

          (b)     The duties and responsibilities of the Trustees and the
Administrators shall be as provided by this Declaration. Notwithstanding the
foregoing, no provision of this Declaration shall require any Trustee or
Administrator to expend or risk their own funds or otherwise incur any financial
liability in the performance of any of their duties hereunder, or in the
exercise of any of their rights or powers if it shall have reasonable grounds to
believe that repayment of such funds or adequate protection against such risk of
liability is not reasonably assured to it. Whether or not therein expressly so
provided, every provision of this Declaration relating to the conduct or
affecting the liability of or affording protection to the Trustees or
Administrators shall be subject to the provisions of this Article. Nothing in
this Declaration shall be construed to relieve an Administrator or a Trustee
from liability for its own negligent act, its own negligent failure to act, or
its own willful misconduct. To the extent that, at law or in equity, a Trustee
or an Administrator has duties and liabilities relating to the Trust or to the
Holders, such Trustee or such Administrator shall not be liable to the Trust or
to any Holder for such Trustee’s or such Administrator’s good faith reliance on
the provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of the Administrators or
the Trustee otherwise existing at law or in equity, are agreed by the Sponsor
and the Holders to replace such other duties and liabilities of the
Administrators or the Trustees.

          (c)     All payments made by the Institutional Trustee or a Paying
Agent in respect of the Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the
Institutional Trustee or a Paying Agent to make payments in accordance with the
terms hereof. Each Holder, by its acceptance of a Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees and the Administrators are not personally liable to it for any amount
distributable in respect of any Security or

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for any other liability in respect of any Security. This Section 2.9(c) does not
limit the liability of the Trustees expressly set forth elsewhere in this
Declaration.

          (d)     The Institutional Trustee shall not be liable for its own acts
or omissions hereunder except as a result of its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

 

 

 

          (i)     the Institutional Trustee shall not be liable for any error of
judgment made in good faith by an Authorized Officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was negligent
in ascertaining the pertinent facts;

 

 

 

          (ii)    the Institutional Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation amount
of the Capital Securities or the Common Securities, as applicable, relating to
the time, method and place of conducting any proceeding for any remedy available
to the Institutional Trustee, or exercising any trust or power conferred upon
the Institutional Trustee under this Declaration;

 

 

 

          (iii)   the Institutional Trustee’s sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures and the
Property Account shall be to deal with such property in a similar manner as the
Institutional Trustee deals with similar property for its fiduciary accounts
generally, subject to the protections and limitations on liability afforded to
the Institutional Trustee under this Declaration;

 

 

 

          (iv)    the Institutional Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree in writing with the
Sponsor; and money held by the Institutional Trustee need not be segregated from
other funds held by it except in relation to the Property Account maintained by
the Institutional Trustee pursuant to Section 2.8(c)(i) and except to the extent
otherwise required by law; and

 

 

 

          (v)     the Institutional Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Sponsor with their
respective duties under this Declaration, nor shall the Institutional Trustee be
liable for any default or misconduct of the Administrators or the Sponsor.

          Section 2.10. Certain Rights of Institutional Trustee. Subject to the
provisions of Section 2.9:

          (a)     the Institutional Trustee may conclusively rely and shall
fully be protected in acting or refraining from acting in good faith upon any
resolution, opinion of counsel, certificate, written representation of a Holder
or transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;

          (b)     if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor’s written instructions as to the course of action
to be taken and the Institutional Trustee shall take

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such action, or refrain from taking such action, as the Institutional Trustee
shall be instructed in writing, in which event the Institutional Trustee shall
have no liability except for its own negligence or willful misconduct;

          (c)     any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an Officers’
Certificate;

          (d)     whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before undertaking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may request and conclusively rely upon an Officers’ Certificate as to factual
matters which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrators;

          (e)     the Institutional Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;

          (f)     the Institutional Trustee may consult with counsel of its
selection (which counsel may be counsel to the Sponsor or any of its Affiliates)
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and in accordance with such advice; the
Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;

          (g)     the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any of the Holders pursuant to this Declaration, unless
such Holders shall have offered to the Institutional Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction; provided, that nothing contained in this Section 2.10(g) shall be
taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the
occurrence of an Event of Default (that has not been cured or waived pursuant to
Section 6.9), to exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs;

          (h)     the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more Holders, but
the Institutional Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;

          (i)     the Institutional Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys and the Institutional Trustee shall not be
responsible for any misconduct or negligence on the part of or for the
supervision of, any such agent or attorney appointed with due care by it
hereunder;

          (j)     whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder
the Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities which instructions may only be given by the Holders of the
same proportion in liquidation amount of the Capital Securities as would be
entitled to direct the Institutional Trustee under the terms of the Capital
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right

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or taking such other action until such instructions are received, and
(iii) shall be fully protected in acting in accordance with such instructions;

          (k)     except as otherwise expressly provided in this Declaration,
the Institutional Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration;

          (l)     when the Institutional Trustee incurs expenses or renders
services in connection with a Bankruptcy Event, such expenses (including the
fees and expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy law or
law relating to creditors rights generally;

          (m)     the Institutional Trustee shall not be charged with knowledge
of an Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder, the Sponsor or the Debenture
Trustee;

          (n)     any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be required to
inquire as to the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee’s or its
agent’s taking such action; and

          (o)     no provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.

          Section 2.11. Delaware Trustee. Notwithstanding any other provision of
this Declaration other than Section 4.1, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of any of the Trustees or the Administrators
described in this Declaration (except as may be required under the Statutory
Trust Act). Except as set forth in Section 4.1, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of §
3807 of the Statutory Trust Act.

          Section 2.12. Execution of Documents. Unless otherwise determined in
writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute on behalf of the
Trust any documents that the Trustees or the Administrators, as the case may be,
have the power and authority to execute pursuant to Section 2.6.

          Section 2.13. Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be taken as
the statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration, the
Debentures or the Securities.

          Section 2.14. Duration of Trust. The Trust, unless earlier dissolved
pursuant to the provisions of Article VII hereof, shall be in existence for 35
years from the Closing Date.

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          Section 2.15. Mergers.

          (a)     The Trust may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 2.15(b) and (c) and except in connection with the
liquidation of the Trust and the distribution of the Debentures to Holders of
Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of
Annex I.

          (b)     The Trust may, with the consent of the Institutional Trustee
and without the consent of the Holders of the Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state; provided that:

 

 

 

 

          (i)       if the Trust is not the surviving entity, such successor
entity (the “Successor Entity”) either:

 

 

 

 

 

          (A) expressly assumes all of the obligations of the Trust under the
Securities; or

 

 

 

 

 

          (B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the “Successor Securities”) so
that the Successor Securities rank the same as the Securities rank with respect
to Distributions and payments upon Liquidation, redemption and otherwise;

 

 

 

 

          (ii)       the Sponsor expressly appoints a trustee of the Successor
Entity that possesses substantially the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;

 

 

 

 

          (iii)      such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of the Holders
of the Securities (including any Successor Securities) in any material respect;

 

 

 

 

          (iv)      the Institutional Trustee receives written confirmation from
Moody’s Investor Services, Inc. and any other nationally recognized statistical
rating organization that rates securities issued by the initial purchaser of the
Capital Securities that it will not reduce or withdraw the rating of any such
securities because of such merger, conversion, consolidation, amalgamation or
replacement;

 

 

 

 

          (v)       such Successor Entity has a purpose substantially identical
to that of the Trust;

 

 

 

 

          (vi)      prior to such merger, consolidation, amalgamation or
replacement, the Trust has received an opinion of a nationally recognized
independent counsel to the Trust experienced in such matters to the effect that:

 

 

 

 

 

          (A) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the Holders of the
Securities (including any Successor Securities) in any material respect;

 

 

 

 

 

          (B) following such merger, consolidation, amalgamation or replacement,
neither the Trust nor the Successor Entity will be required to register as an
Investment Company; and

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          (C) following such merger, consolidation, amalgamation or replacement,
the Trust (or the Successor Entity) will continue to be classified as a “grantor
trust” for United States federal income tax purposes;

 

 

 

 

          (vii)     the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided by the
Guarantee;

 

 

 

          (viii)    the Sponsor owns 100% of the common securities of any
Successor Entity; and

 

 

 

          (ix)      prior to such merger, consolidation, amalgamation or
replacement, the Institutional Trustee shall have received an Officers’
Certificate of the Administrators and an opinion of counsel, each to the effect
that all conditions precedent under this Section 2.15(b) to such transaction
have been satisfied.

          (c)     Notwithstanding Section 2.15(b), the Trust shall not, except
with the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.

ARTICLE III

SPONSOR

          Section 3.1. Sponsor’s Purchase of Common Securities. On the Closing
Date, the Sponsor will purchase all of the Common Securities issued by the Trust
in an amount at least equal to 3% of the capital of the Trust, at the same time
as the Capital Securities are sold.

          Section 3.2. Responsibilities of the Sponsor. In connection with the
issue and sale of the Capital Securities, the Sponsor shall have the exclusive
right and responsibility to engage in, or direct the Administrators to engage
in, the following activities:

          (a)     to determine the States in which to take appropriate action to
qualify the Trust or to qualify or register for sale all or part of the Capital
Securities and to do any and all such acts, other than actions which must be
taken by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems necessary or advisable in order to comply with the applicable
laws of any such States, to protect the limited liability of the Holders of the
Capital Securities or to enable the Trust to effect the purposes for which it
was created; and

          (b)     to negotiate the terms of and/or execute on behalf of the
Trust, the Placement Agreement and other related agreements providing for the
sale of the Capital Securities.

          Section 3.3. Expenses. In connection with the offering, sale and
issuance of the Debentures to the Trust and in connection with the sale of the
Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer,
shall:

          (a)     pay all reasonable costs and expenses owing to the Debenture
Trustee pursuant to Section 6.6 of the Indenture;

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          (b)     be responsible for and shall pay all debts and obligations
(other than with respect to the Securities) and all costs and expenses of the
Trust, the offering, sale and issuance of the Securities (including fees to the
placement agents in connection therewith), the costs and expenses (including
reasonable counsel fees and expenses) of the Institutional Trustee and the
Administrators, the costs and expenses relating to the operation of the Trust,
including, without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, Paying Agents, Registrars, Transfer Agents,
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets and the enforcement by the Institutional Trustee of
the rights of the Holders (for purposes of clarification, this Section 3.3(b)
does not contemplate the payment by the Sponsor of acceptance or annual
administration fees owing to the Trustees pursuant to the services to be
provided by the Trustees under this Declaration or the fees and expenses of the
Trustees’ counsel in connection with the closing of the transactions
contemplated by this Declaration); and

          (c)     pay any and all taxes (other than United States withholding
taxes attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.

          The Sponsor’s obligations under this Section 3.3 shall be for the
benefit of, and shall be enforceable by, any Person to whom such debts,
obligations, costs, expenses and taxes are owed (a “Creditor”) whether or not
such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor’s obligations under this Section 3.3 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements as
may be necessary or desirable in order to give full effect to the provisions of
this Section 3.3.

          Section 3.4. Right to Proceed. The Sponsor acknowledges the rights of
Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.

ARTICLE IV

INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

          Section 4.1. Number of Trustees. The number of Trustees shall
initially be two, and;

          (a)     at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and

          (b)     after the issuance of any Securities, the number of Trustees
may be increased or decreased by vote of the Holder of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holder of
the Common Securities; provided, however, that there shall be a Delaware Trustee
if required by Section 4.2; and there shall always be one Trustee who shall be
the Institutional Trustee, and such Trustee may also serve as Delaware Trustee
if it meets the applicable requirements, in which case Section 2.11 shall have
no application to such entity in its capacity as Institutional Trustee.

          Section 4.2. Delaware Trustee; Eligibility.

          (a)     If required by the Statutory Trust Act, one Trustee (the
“Delaware Trustee”) shall be:

                    (i)     a natural person at least 21 years of age who is a
resident of the State of Delaware; or

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          (ii)     if not a natural person, an entity which is organized under
the laws of the United States or any state thereof or the District of Columbia,
has its principal place of business in the State of Delaware, and otherwise
meets the requirements of applicable law, including § 3807 of the Statutory
Trust Act.

          (b)     The initial Delaware Trustee shall be Wilmington Trust
Company.

          Section 4.3. Institutional Trustee; Eligibility.

          (a)     There shall at all times be one Trustee which shall:

 

 

 

          (i)     not be an Affiliate of the Sponsor;

 

 

 

          (ii)    not offer or provide credit or credit enhancement to the
Trust; and

 

 

 

          (iii)   be a banking corporation or trust company organized and doing
business under the laws of the United States of America or any state thereof or
the District of Columbia, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million U.S.
dollars ($50,000,000.00), and subject to supervision or examination by Federal,
state, or District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes of
this Section 4.3(a)(iii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.

          (b)     If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 4.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section 4.5.

          (c)     If the Institutional Trustee has or shall acquire any
“conflicting interest” within the meaning of Section 310(b) of the Trust
Indenture Act of 1939, as amended, the Institutional Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to this Declaration.

          (d)     The initial Institutional Trustee shall be Wilmington Trust
Company.

          Section 4.4. Administrators. Each Administrator shall be a U.S.
Person, 21 years of age or older and authorized to bind the Sponsor. The initial
Administrators shall be J. Daniel Mohr, John H. Watt, Jr. and Jack H. Webb.
There shall at all times be at least one Administrator. Except where a
requirement for action by a specific number of Administrators is expressly set
forth in this Declaration and except with respect to any action the taking of
which is the subject of a meeting of the Administrators, any action required or
permitted to be taken by the Administrators may be taken by, and any power of
the Administrators may be exercised by, or with the consent of, any one such
Administrator.

          Section 4.5. Appointment, Removal and Resignation of Trustees and
Administrators.

          (a)     No resignation or removal of any Trustee (the “Relevant
Trustee”) and no appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of this Section 4.5.

          (b)     Subject to Section 4.5(a), a Relevant Trustee may resign at
any time by giving written notice thereof to the Holders of the Securities and
by appointing a successor Relevant Trustee. Upon the

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resignation of the Institutional Trustee, the Institutional Trustee shall
appoint a successor by requesting from at least three Persons meeting the
eligibility requirements their expenses and charges to serve as the successor
Institutional Trustee on a form provided by the Administrators, and selecting
the Person who agrees to the lowest expense and charges (the “Successor
Institutional Trustee”). If the instrument of acceptance by the successor
Relevant Trustee required by this Section 4.5 shall not have been delivered to
the Relevant Trustee within 60 days after the giving of such notice of
resignation or delivery of the instrument of removal, the Relevant Trustee may
petition, at the expense of the Trust, any federal, state or District of
Columbia court of competent jurisdiction for the appointment of a successor
Relevant Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Relevant Trustee. The Institutional
Trustee shall have no liability for the selection of such successor pursuant to
this Section 4.5.

          (c)     Unless an Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by an act of the Holders of a
Majority in liquidation amount of the Common Securities. If any Trustee shall be
so removed, the Holders of the Common Securities, by act of the Holders of a
Majority in liquidation amount of the Common Securities delivered to the
Relevant Trustee, shall promptly appoint a successor Relevant Trustee, and such
successor Trustee shall comply with the applicable requirements of this Section
4.5. If an Event of Default shall have occurred and be continuing, the
Institutional Trustee or the Delaware Trustee, or both of them, may be removed
by the act of the Holders of a Majority in liquidation amount of the Capital
Securities, delivered to the Relevant Trustee (in its individual capacity and on
behalf of the Trust). If any Trustee shall be so removed, the Holders of Capital
Securities, by act of the Holders of a Majority in liquidation amount of the
Capital Securities then outstanding delivered to the Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of this Section 4.5. If no
successor Relevant Trustee shall have been so appointed by the Holders of a
Majority in liquidation amount of the Capital Securities and accepted
appointment in the manner required by this Section 4.5 within 30 days after
delivery of an instrument of removal, the Relevant Trustee or any Holder who has
been a Holder of the Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any federal, state or
District of Columbia court of competent jurisdiction for the appointment of a
successor Relevant Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a successor Relevant Trustee or
Trustees.

          (d)     The Institutional Trustee shall give notice of each
resignation and each removal of a Trustee and each appointment of a successor
Trustee to all Holders and to the Sponsor. Each notice shall include the name of
the successor Relevant Trustee and the address of its Corporate Trust Office if
it is the Institutional Trustee.

          (e)     Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or is
adjudged by a court to have become incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by the
Institutional Trustee following the procedures in this Section 4.5 (with the
successor being a Person who satisfies the eligibility requirement for a
Delaware Trustee set forth in this Declaration) (the “Successor Delaware
Trustee”).

          (f)     In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Securities and the Trust and (b) shall add to or change any of the provisions of
this Declaration as shall be necessary to provide for or facilitate the
administration of the Trust by more

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than one Relevant Trustee, it being understood that nothing herein or in such
amendment shall constitute such Relevant Trustees co-trustees and upon the
execution and delivery of such amendment the resignation or removal of the
retiring Relevant Trustee shall become effective to the extent provided therein
and each such successor Relevant Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Relevant Trustee; but, on request of the Trust or any successor
Relevant Trustee, such retiring Relevant Trustee shall duly assign, transfer and
deliver to such successor Relevant Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the Securities and the Trust subject to the payment of all unpaid fees,
expenses and indemnities of such retiring Relevant Trustee.

          (g)     No Institutional Trustee or Delaware Trustee shall be liable
for the acts or omissions to act of any Successor Institutional Trustee or
Successor Delaware Trustee, as the case may be.

          (h)     The Holders of the Capital Securities will have no right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Holders of the Common Securities.

          (i)     Any successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Delaware Trustee in
the State of Delaware.

          Section 4.6. Vacancies Among Trustees. If a Trustee ceases to hold
office for any reason and the number of Trustees is not reduced pursuant to
Section 4.1, a vacancy shall occur. A resolution certifying the existence of
such vacancy by the Trustees or, if there are more than two, a majority of the
Trustees, shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with a Trustee appointed in accordance with Section 4.5.

          Section 4.7. Effect of Vacancies. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to dissolve, terminate or
annul the Trust or terminate this Declaration. Whenever a vacancy in the number
of Trustees shall occur, until such vacancy is filled by the appointment of a
Trustee in accordance with Section 4.5, the Institutional Trustee shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by this Declaration.

          Section 4.8. Meetings of the Trustees and the Administrators. Meetings
of the Administrators shall be held from time to time upon the call of an
Administrator. Regular meetings of the Administrators may be held in person in
the United States or by telephone, at a place (if applicable) and time fixed by
resolution of the Administrators. Notice of any in-person meetings of the
Trustees with the Administrators or meetings of the Administrators shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 48 hours before such meeting. Notice of
any telephonic meetings of the Trustees with the Administrators or meetings of
the Administrators or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 24 hours before a meeting. Notices shall contain a brief
statement of the time, place and anticipated purposes of the meeting. The
presence (whether in person or by telephone) of a Trustee or an Administrator,
as the case may be, at a meeting shall constitute a waiver of notice of such
meeting except where the Trustee or an Administrator, as the case may be,
attends a meeting for the express purpose of objecting to the transaction of any
activity on the grounds that the meeting has not been lawfully called or
convened. Unless provided otherwise in this Declaration, any action of the
Trustees or the Administrators, as the case may be, may be taken at a meeting by
vote of a majority of the Trustees or the Administrators present (whether in
person or by telephone) and eligible to vote with respect to such matter,
provided that a Quorum is present, or without a meeting by the unanimous written
consent of the Trustees or the Administrators. Meetings of

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the Trustees and the Administrators together shall be held from time to time
upon the call of any Trustee or an Administrator.

          Section 4.9. Delegation of Power.

          (a)     Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 that is
a U.S. Person his or her power for the purpose of executing any documents
contemplated in Section 2.6; and

          (b)     the Administrators shall have power to delegate from time to
time to such of their number the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Administrators
or otherwise as the Administrators may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.

          Section 4.10. Conversion, Consolidation or Succession to Business. Any
Person into which the Institutional Trustee or the Delaware Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the
Institutional Trustee or the Delaware Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Institutional Trustee or the Delaware Trustee shall be the successor of the
Institutional Trustee or the Delaware Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under this Article and, provided,
further, that such Person shall file an amendment to the Certificate of Trust
with the Secretary of State of the State of Delaware as contemplated in Section
4.5(i).

ARTICLE V

DISTRIBUTIONS

          Section 5.1. Distributions. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder’s Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of Interest or any
principal on the Debentures held by the Institutional Trustee, the Institutional
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a “Distribution”) of such amounts to Holders.

ARTICLE VI

ISSUANCE OF SECURITIES

          Section 6.1. General Provisions Regarding Securities.

          (a)     The Administrators shall, on behalf of the Trust, issue one
series of capital securities substantially in the form of Exhibit A-1
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I and one series of common securities
representing undivided beneficial interests in the assets of the Trust having
such terms as are set forth in Annex I. The Trust shall issue no securities or
other interests in the assets of the Trust other than the Capital Securities and
the Common Securities. The Capital Securities rank pari passu to, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Capital Securities as set forth in Annex I.

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          (b)     The Certificates shall be signed on behalf of the Trust by one
or more Administrators. Such signature shall be the facsimile or manual
signature of any Administrator. In case any Administrator of the Trust who shall
have signed any of the Securities shall cease to be such Administrator before
the Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrator, and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be an Administrator of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
facsimile or manual signature of an Authorized Officer of the Institutional
Trustee. Such signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration. Upon written order of the Trust
signed by one Administrator, the Institutional Trustee shall authenticate the
Capital Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated.

          (c)     The Capital Securities issued to QIBs shall be, except as
provided in Section 6.4, Book-Entry Capital Securities issued in the form of one
or more Global Capital Securities registered in the name of the Depositary or
its nominee and deposited with the Depositary or a custodian for the Depositary
for credit by the Depositary to the respective accounts of the Depositary
Participants thereof (or such other accounts as they may direct). The Capital
Securities issued to a Person other than a QIB shall be issued in the form of a
Definitive Capital Securities Certificate.

          (d)     The consideration received by the Trust for the issuance of
the Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.

          (e)     Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and, except as provided in Section 9.1(b) with respect to the Common
Securities, non-assessable.

          (f)     Every Person, by virtue of having become a Holder in
accordance with the terms of this Declaration, shall be deemed to have expressly
assented and agreed to the terms of, and shall be bound by, this Declaration and
the Guarantee.

          Section 6.2. Paying Agent, Transfer Agent and Registrar. The Trust
shall maintain in Wilmington, Delaware, an office or agency where the Capital
Securities may be presented for payment (“Paying Agent”), and an office or
agency where Securities may be presented for registration of transfer or
exchange (the “Transfer Agent”). The Trust shall keep or cause to be kept at
such office or agency a register for the purpose of registering Securities,
transfers and exchanges of Securities, such register to be held by a registrar
(the “Registrar”). The Administrators may appoint the Paying Agent, the
Registrar and the Transfer Agent and may appoint one or more additional Paying
Agents or one or more co-Registrars, or one or more co-Transfer Agents in such
other locations as it shall determine. The term “Paying Agent” includes any
additional paying agent, the term “Registrar” includes any additional registrar
or co-Registrar and the term “Transfer Agent” includes any additional transfer
agent. The Administrators may change any Paying Agent, Transfer Agent or
Registrar at any time without prior notice to any Holder. The Administrators
shall notify the Institutional Trustee of the name and address of any Paying
Agent, Transfer Agent and Registrar not a party to this Declaration. The
Administrators hereby initially appoint the Institutional Trustee to act as
Paying Agent, Transfer Agent and Registrar for the Capital Securities and the
Common Securities. The Institutional Trustee or any of its Affiliates in the
United States may act as Paying Agent, Transfer Agent or Registrar.

          Section 6.3. Form and Dating. The Capital Securities and the
Institutional Trustee’s certificate of authentication thereon shall be
substantially in the form of Exhibit A-1, and the Common Securities

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shall be substantially in the form of Exhibit A-2, each of which is hereby
incorporated in and expressly made a part of this Declaration. Certificates may
be typed, printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Administrators, as conclusively
evidenced by their execution thereof. The Securities may have letters, numbers,
notations or other marks of identification or designation and such legends or
endorsements required by law, stock exchange rule, agreements to which the Trust
is subject if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Sponsor). The Trust at the direction
of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the
Institutional Trustee in writing. Each Capital Security shall be dated on or
before the date of its authentication. The terms and provisions of the
Securities set forth in Annex I and the forms of Securities set forth in
Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent
applicable, the Institutional Trustee, the Delaware Trustee, the Administrators
and the Sponsor, by their execution and delivery of this Declaration, expressly
agree to such terms and provisions and to be bound thereby. Capital Securities
will be issued only in blocks having a stated liquidation amount of not less
than $100,000.00 and any multiple of $1,000.00 in excess thereof.

          The Capital Securities are being offered and sold by the Trust
pursuant to the Placement Agreement in definitive, registered form without
coupons and with the Restricted Securities Legend.

          Section 6.4. Book-Entry Capital Securities.

          (a)     A Global Capital Security may be exchanged, in whole or in
part, for Definitive Capital Securities Certificates registered in the names of
Owners only if such exchange complies with Article VIII and (i) the Depositary
advises the Administrators and the Institutional Trustee in writing that the
Depositary is no longer willing or able to properly discharge its
responsibilities with respect to the Global Capital Security, and no qualified
successor is appointed by the Administrators within ninety (90) days of receipt
of such notice, (ii) the Depositary ceases to be a clearing agency registered
under the Exchange Act and the Administrators fail to appoint a qualified
successor within ninety (90) days of obtaining knowledge of such event, (iii)
the Administrators at their option advise the Institutional Trustee in writing
that the Trust elects to terminate the book-entry system through the Depositary,
or (iv) an Indenture Event of Default has occurred and is continuing. Upon the
occurrence of any event specified in clause (i), (ii), (iii) or (iv) above, the
Administrators shall notify the Depositary and instruct the Depositary to notify
all Owners of Book-Entry Capital Securities and the Institutional Trustee of the
occurrence of such event and of the availability of Definitive Capital
Securities Certificates to Owners of the Capital Securities requesting the same.
Upon the issuance of Definitive Capital Securities Certificates, the
Administrators and the Institutional Trustee shall recognize the Holders of the
Definitive Capital Securities Certificates as Holders. Notwithstanding the
foregoing, if an Owner of a beneficial interest in a Global Capital Security
wishes at any time to transfer an interest in such Global Capital Security to a
Person other than a QIB, such transfer shall be effected, subject to the
Applicable Depositary Procedures, in accordance with the provisions of this
Section 6.4 and Article VIII, and the transferee shall receive a Definitive
Capital Securities Certificate in connection with such transfer. A holder of a
Definitive Capital Securities Certificate that is a QIB may upon request, and in
accordance with the provisions of this Section 6.4 and Article VIII, exchange
such Definitive Capital Securities Certificate for a beneficial interest in a
Global Capital Security.

          (b)     If any Global Capital Security is to be exchanged for
Definitive Capital Securities Certificates or canceled in part, or if any
Definitive Capital Securities Certificate is to be exchanged in whole or in part
for any Global Capital Security, then either (i) such Global Capital Security
shall be so surrendered for exchange or cancellation as provided in this Section
6.4 and Article VIII or (ii) the aggregate liquidation amount represented by
such Global Capital Security shall be reduced, subject to Section 6.3, or
increased by an amount equal to the liquidation amount represented by that
portion of the

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Global Capital Security to be so exchanged or canceled, or equal to the
liquidation amount represented by such Definitive Capital Securities
Certificates to be so exchanged for any Global Capital Security, as the case may
be, by means of an appropriate adjustment made on the records of the Registrar,
whereupon the Institutional Trustee, in accordance with the Applicable
Depositary Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender to the Administrators or the Registrar of any Global Capital Security
or Securities by the Depositary, accompanied by registration instructions, the
Administrators, or any one of them, shall execute the Definitive Capital
Securities Certificates in accordance with the instructions of the Depositary.
None of the Registrar, Administrators, or the Institutional Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be fully protected in relying on, such instructions.

          (c)     Every Definitive Capital Securities Certificate executed and
delivered upon registration or transfer of, or in exchange for or in lieu of, a
Global Capital Security or any portion thereof shall be executed and delivered
in the form of, and shall be, a Global Capital Security, unless such Definitive
Capital Securities Certificate is registered in the name of a Person other than
the Depositary for such Global Capital Security or a nominee thereof.

          (d)     The Depositary or its nominee, as registered owner of a Global
Capital Security, shall be the Holder of such Global Capital Security for all
purposes under this Declaration and the Global Capital Security, and Owners with
respect to a Global Capital Security shall hold such interests pursuant to the
Applicable Depositary Procedures. The Registrar, the Administrators and the
Institutional Trustee shall be entitled to deal with the Depositary for all
purposes of this Declaration relating to the Global Capital Securities
(including the payment of the liquidation amount of and Distributions on the
Book-Entry Capital Securities represented thereby and the giving of instructions
or directions by Owners of Book-Entry Capital Securities represented thereby and
the giving of notices) as the sole Holder of the Book-Entry Capital Securities
represented thereby and shall have no obligations to the Owners thereof. None of
the Administrators, the Institutional Trustee nor the Registrar shall have any
liability in respect of any transfers effected by the Depositary.

          (e)     The rights of the Owners of the Book-Entry Capital Securities
shall be exercised only through the Depositary and shall be limited to those
established by law, the Applicable Depositary Procedures and agreements between
such Owners and the Depositary and/or the Depositary Participants; provided,
however, solely for the purpose of determining whether the Holders of the
requisite amount of Capital Securities have voted on any matter provided for in
this Declaration, to the extent that Capital Securities are represented by a
Global Capital Security, the Administrators and the Institutional Trustee may
conclusively rely on, and shall be fully protected in relying on, any written
instrument (including a proxy) delivered to the Institutional Trustee by the
Depositary setting forth the Owners’ votes or assigning the right to vote on any
matter to any other Persons either in whole or in part. To the extent that
Capital Securities are represented by a Global Capital Security, the initial
Depositary will make book-entry transfers among the Depositary Participants and
receive and transmit payments on the Capital Securities that are represented by
a Global Capital Security to such Depositary Participants, and none of the
Sponsor, the Administrators or the Institutional Trustee shall have any
responsibility or obligation with respect thereto.

          (f)     To the extent that a notice or other communication to the
Holders is required under this Declaration, for so long as Capital Securities
are represented by a Global Capital Security, the Administrator and the
Institutional Trustee shall give all such notices and communications to the
Depositary, and shall have no obligations to the Owners.

          Section 6.5. Mutilated, Destroyed, Lost or Stolen Certificates.

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          If:

          (a)     any mutilated Certificates should be surrendered to the
Registrar, or if the Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate; and

          (b)     there shall be delivered to the Registrar, the Administrators
and the Institutional Trustee such security or indemnity as may be required by
them to keep each of them harmless;

then, in the absence of notice that such Certificate shall have been acquired by
a protected purchaser, an Administrator on behalf of the Trust shall execute
(and in the case of a Capital Security Certificate, the Institutional Trustee
shall authenticate) and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 6.5, the Registrar or the Administrators may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.

          Section 6.6. Temporary Securities. Until definitive Securities are
ready for delivery, the Administrators may prepare and, in the case of the
Capital Securities, the Institutional Trustee shall authenticate, temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Administrators consider
appropriate for temporary Securities. Without unreasonable delay, the
Administrators shall prepare and, in the case of the Capital Securities, the
Institutional Trustee shall authenticate, definitive Securities in exchange for
temporary Securities.

          Section 6.7. Cancellation. The Administrators at any time may deliver
Securities to the Institutional Trustee for cancellation. The Registrar shall
forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.

          Section 6.8. CUSIP Numbers. The Trust in issuing the Securities may
use “CUSIP” numbers (if then generally in use), and, if so, the Institutional
Trustee shall use CUSIP numbers in notice of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption and that
identification numbers printed on the Securities and any such redemption shall
not be affected by any defect in or omission of such numbers. The Trust shall
promptly notify the Institutional Trustee in writing of any change in the CUSIP
numbers.

          Section 6.9. Rights of Holders; Waivers of Past Defaults.

          (a)     The legal title to the Trust Property is vested exclusively in
the Institutional Trustee (in its capacity as such) in accordance with Section
2.5, and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Trust except as described below. The
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no preemptive
or similar rights.

          (b)     For so long as any Capital Securities remain outstanding, if
upon an Acceleration Event of Default, the Debenture Trustee fails or the
holders of not less than 25% in principal amount of the

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outstanding Debentures fail to declare the principal of all of the Debentures to
be immediately due and payable, the Holders of a Majority in liquidation amount
of the Capital Securities then outstanding shall have the right to make such
declaration by a notice in writing to the Institutional Trustee, the Sponsor and
the Debenture Trustee.

          At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee, subject to the provisions hereof, fails
to annul any such declaration and waive such default, the Holders of a Majority
in liquidation amount of the Capital Securities, by written notice to the
Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and
annul such declaration and its consequences if:

 

 

 

 

          (i)     the Debenture Issuer has paid or deposited with the Debenture
Trustee a sum sufficient to pay

 

 

 

 

          (A) all overdue installments of interest on all of the Debentures,

 

 

 

 

 

          (B) any accrued Additional Interest on all of the Debentures,

 

 

 

 

 

          (C) the principal of (and premium, if any, on) any Debentures that
have become due otherwise than by such declaration of acceleration and interest
and Additional Interest thereon at the rate borne by the Debentures, and

 

 

 

 

 

          (D) all sums paid or advanced by the Debenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Debenture Trustee and the Institutional Trustee, their agents and
counsel; and

 

 

 

 

          (ii)     all Events of Default with respect to the Debentures, other
than the non-payment of the principal of the Debentures that has become due
solely by such acceleration, have been cured or waived as provided in Section
5.7 of the Indenture.

          The Holders of at least a Majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default under the Indenture or any Indenture Event of Default,
except a default or Indenture Event of Default in the payment of principal or
interest on the Debentures (unless such default or Indenture Event of Default
has been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default under the Indenture or an Indenture Event of
Default in respect of a covenant or provision that under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Debenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.

          Upon receipt by the Institutional Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of any
part of the Capital Securities, a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after

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expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.8.

          (c)     Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.8, the Holders of at least a Majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.

ARTICLE VII

DISSOLUTION AND TERMINATION OF TRUST

          Section 7.1. Dissolution and Termination of Trust.

          (a)     The Trust shall dissolve on the first to occur of:

 

 

 

          (i)     unless earlier dissolved, on December 15, 2041, the expiration
of the term of the Trust;

 

 

 

          (ii)    upon a Bankruptcy Event with respect to the Sponsor, the Trust
or the Debenture Issuer;

 

 

 

          (iii)   upon the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor (other than in connection with a merger,
consolidation or similar transaction not prohibited by the Indenture, this
Declaration or the Guarantee, as the case may be) or upon the revocation of the
charter of the Sponsor and the expiration of 90 days after the date of
revocation without a reinstatement thereof;

 

 

 

          (iv)    upon the distribution of the Debentures to the Holders of the
Securities, upon exercise of the right of the Holder of all of the outstanding
Common Securities to dissolve the Trust as provided in Annex I hereto;

 

 

 

          (v)     upon the entry of a decree of judicial dissolution of the
Holder of the Common Securities, the Sponsor, the Trust or the Debenture Issuer;

 

 

 

          (vi)    when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been paid
to the Holders in accordance with the terms of the Securities; or

 

 

 

          (vii)    before the issuance of any Securities, with the consent of
all of the Trustees and the Sponsor.

          (b)     As soon as is practicable after the occurrence of an event
referred to in Section 7.1(a), and after satisfaction of liabilities to
creditors of the Trust as required by applicable law, including of the Statutory
Trust Act, and subject to the terms set forth in Annex I, the Institutional
Trustee shall terminate the Trust by filing a certificate of cancellation with
the Secretary of State of the State of Delaware.

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          (c)     The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.

ARTICLE VIII

TRANSFER OF INTERESTS

          Section 8.1. General.

          (a)     Subject to Section 8.1(c), where Capital Securities are
presented to the Registrar or a co-registrar with a request to register a
transfer or to exchange them for an equal number of Capital Securities
represented by different certificates, the Registrar shall register the transfer
or make the exchange if its requirements for such transactions are met. To
permit registrations of transfer and exchanges, the Trust shall issue and the
Institutional Trustee shall authenticate Capital Securities at the Registrar’s
request.

          (b)     Upon issuance of the Common Securities, the Sponsor shall
acquire and retain beneficial and record ownership of the Common Securities and
for so long as the Securities remain outstanding, and to the fullest extent
permitted by applicable law, the Sponsor shall maintain 100% ownership of the
Common Securities; provided, however, that any permitted successor of the
Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S.
Person may succeed to the Sponsor’s ownership of the Common Securities.

          (c)     Capital Securities may only be transferred, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration
and in the terms of the Securities. To the fullest extent permitted by
applicable law, any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void and will be deemed to be
of no legal effect whatsoever and any such transferee shall be deemed not to be
the holder of such Capital Securities for any purpose, including but not limited
to the receipt of Distributions on such Capital Securities, and such transferee
shall be deemed to have no interest whatsoever in such Capital Securities.

          (d)     The Registrar shall provide for the registration of Securities
and of transfers of Securities, which will be effected without charge but only
upon payment (with such indemnity as the Registrar may require) in respect of
any tax or other governmental charges that may be imposed in relation to it.
Upon surrender for registration of transfer of any Securities, the Registrar
shall cause one or more new Securities of the same tenor to be issued in the
name of the designated transferee or transferees. Every Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder’s attorney duly authorized in writing. Each Security surrendered for
registration of transfer shall be canceled by the Institutional Trustee pursuant
to Section 6.7. A transferee of a Security shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Security. By acceptance of a Security, each transferee shall be
deemed to have agreed to be bound by this Declaration.

          (e)     The Trust shall not be required (i) to issue, register the
transfer of, or exchange any Securities during a period beginning at the opening
of business fifteen days before the day of any selection of Securities for
redemption and ending at the close of business on the earliest date on which the
relevant notice of redemption is deemed to have been given to all Holders of the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.

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          Section 8.2. Transfer Procedures and Restrictions.

          (a)     The Capital Securities shall bear the Restricted Securities
Legend, which shall not be removed unless there is delivered to the Trust such
satisfactory evidence, which may include an opinion of counsel satisfactory to
the Institutional Trustee, as may be reasonably required by the Trust, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of the
Securities Act. Upon provision of such satisfactory evidence, the Institutional
Trustee, at the written direction of the Trust, shall authenticate and deliver
Capital Securities that do not bear the legend.

          (b)     Except as permitted by Section 8.2(a), each Capital Security
shall bear a legend (the “Restricted Securities Legend”) in substantially the
following form and a Capital Security shall not be transferred except in
compliance with such legend, unless otherwise determined by the Sponsor, upon
the advice of counsel expert in securities law, in accordance with applicable
law:

 

 

 

          [If the Capital Security is to be Global Capital Security- THIS
CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY (“DTC”) OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR
CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION, AND NO
TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL
SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR
ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

 

 

 

          UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC TO ALLIANCE FINANCIAL CAPITAL TRUST II OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]

 

 

 

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE

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TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF
REGULATIONS UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED
INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE SPONSOR’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE
DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE
TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE SECURITIES ACT.

 

 

 

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH
A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON
OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION

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4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE
EXEMPTION.

 

 

 

          THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

 

 

 

          THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.

          (c)     To permit registrations of transfers and exchanges, the Trust
shall execute and the Institutional Trustee shall authenticate Capital
Securities at the Registrar’s request.

          (d)     Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Registrar or
the Sponsor may require) in respect of any tax or other governmental charge that
may be imposed in relation to it.

          (e)     All Capital Securities issued upon any registration of
transfer or exchange pursuant to the terms of this Declaration shall evidence
the same security and shall be entitled to the same benefits under this
Declaration as the Capital Securities surrendered upon such registration of
transfer or exchange.

          Section 8.3. Deemed Security Holders. The Trust, the Administrators,
the Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat
the Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators, the Trustees, the
Paying Agent, the Transfer Agent or the Registrar shall have actual or other
notice thereof.

ARTICLE IX

LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS

          Section 9.1. Liability.

          (a)     Except as expressly set forth in this Declaration, the
Guarantee and the terms of the Securities, the Sponsor shall not be:

 

 

 

          (i)     personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders of the Securities which
shall be made solely from assets of the Trust; or

 

 

 

          (ii)    required to pay to the Trust or to any Holder of the
Securities any deficit upon dissolution of the Trust or otherwise.

          (b)     The Holder of the Common Securities shall be liable for all of
the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust’s assets.

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          (c)     Pursuant to the Statutory Trust Act, the Holders of the
Capital Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.

          Section 9.2. Exculpation.

          (a)     No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Declaration or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person’s negligence or willful
misconduct with respect to such acts or omissions.

          (b)     An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person’s
professional or expert competence and, if selected by such Indemnified Person,
has been selected by such Indemnified Person with reasonable care by or on
behalf of the Trust, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
Distributions to Holders of Securities might properly be paid.

          Section 9.3. Fiduciary Duty.

          (a)     To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of the Indemnified
Person.

          (b)     Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:

 

 

 

          (i)     in its “discretion” or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors as
it desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the Trust or any
other Person; or

 

 

 

          (ii)    in its “good faith” or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.

          Section 9.4. Indemnification.

          (a)     The Sponsor shall indemnify, to the full extent permitted by
law, any Indemnified Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Trust) arising out of or in connection with the
acceptance or administration of this Declaration by reason of the fact that he
is or was an Indemnified Person against expenses (including reasonable
attorneys’ fees and expenses), judgments, fines and amounts paid in settlement
actually and

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reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Indemnified Person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.

          (b)     The Sponsor shall indemnify, to the full extent permitted by
law, any Indemnified Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Trust to procure a judgment in its favor arising out of or in connection
with the acceptance or administration of this Declaration by reason of the fact
that he is or was an Indemnified Person against expenses (including reasonable
attorneys’ fees and expenses) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust; provided, however, that no such indemnification
shall be made in respect of any claim, issue or matter as to which such
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.

          (c)     To the extent that an Indemnified Person shall be successful
on the merits or otherwise (including dismissal of an action without prejudice
or the settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this Section
9.4, or in defense of any claim, issue or matter therein, he shall be
indemnified, to the full extent permitted by law, against expenses (including
attorneys’ fees and expenses) actually and reasonably incurred by him in
connection therewith.

          (d)     Any indemnification of an Administrator under paragraphs (a)
and (b) of this Section 9.4 (unless ordered by a court) shall be made by the
Sponsor only as authorized in the specific case upon a determination that
indemnification of the Indemnified Person is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (i) by the Administrators by a majority
vote of a Quorum consisting of such Administrators who were not parties to such
action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion, or (iii) by the Common Security
Holder of the Trust.

          (e)     To the fullest extent permitted by law, expenses (including
reasonable attorneys’ fees and expenses) incurred by an Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be
paid by the Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Sponsor as authorized in this Section 9.4.
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrators by a
majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion or
(iii) by the Common Security Holder of the Trust, that, based upon the facts
known to the Administrators, counsel or the Common Security Holder at the time
such determination is made, such Indemnified Person acted in bad faith or in a
manner that such Indemnified Person did not believe to be in the best interests
of the Trust,

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or, with respect to any criminal proceeding, that such Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.

          (f)     The Trustees, at the sole cost and expense of the Sponsor,
retain the right to representation by counsel of their own choosing in any
action, suit or any other proceeding for which they are indemnified under
paragraphs (a) and (b) of this Section 9.4, without affecting their right to
indemnification hereunder or waiving any rights afforded to it under this
Declaration or applicable law.

          (g)     The indemnification and advancement of expenses provided by,
or granted pursuant to, the other paragraphs of this Section 9.4 shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Sponsor or Capital Security
Holders of the Trust or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. All rights to
indemnification under this Section 9.4 shall be deemed to be provided by a
contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.

          (h)     The Sponsor or the Trust may purchase and maintain insurance
on behalf of any Person who is or was an Indemnified Person against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Sponsor would have the
power to indemnify him against such liability under the provisions of this
Section 9.4.

          (i)     For purposes of this Section 9.4, references to “the Trust”
shall include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any Person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.

          (j)     The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, (i) continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person; and (ii) survive the termination or expiration
of this Declaration or the earlier removal or resignation of an Indemnified
Person.

          Section 9.5. Outside Businesses. Any Covered Person, the Sponsor, the
Delaware Trustee and the Institutional Trustee may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders of Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. None of any
Covered Person, the Sponsor, the Delaware Trustee or the Institutional Trustee
shall be obligated to present any particular investment or other opportunity to
the Trust even if such opportunity is of a character that, if presented to the
Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the
Delaware Trustee and the Institutional Trustee shall have the right to take for
its own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Covered Person,
the Delaware Trustee and the Institutional Trustee

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may engage or be interested in any financial or other transaction with the
Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee
or agent for, or act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.

          Section 9.6. Compensation; Fee. The Sponsor agrees:

          (a)     to pay to the Trustees from time to time such compensation for
all services rendered by them hereunder as the parties shall agree from time to
time (which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust); and

          (b)     except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Declaration (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence, bad faith or
willful misconduct.

          For purposes of clarification, this Section 9.6 does not contemplate
the payment by the Sponsor of acceptance or annual administration fees owing to
the Trustees under this Declaration or the fees and expenses of the Trustees’
counsel in connection with the closing of the transactions contemplated by this
Declaration.

          The provisions of this Section 9.6 shall survive the dissolution of
the Trust and the termination of this Declaration and the removal or resignation
of any Trustee.

          No Trustee may claim any lien or charge on any property of the Trust
as a result of any amount due pursuant to this Section 9.6.

ARTICLE X

ACCOUNTING

          Section 10.1. Fiscal Year. The fiscal year (“Fiscal Year”) of the
Trust shall be the calendar year, or such other year as is required by the Code.

          Section 10.2. Certain Accounting Matters.

          (a)     At all times during the existence of the Trust, the
Administrators shall keep, or cause to be kept at the principal office of the
Trust in the United States, as defined for purposes of Treasury Regulations
section 301.7701-7, full books of account, records and supporting documents,
which shall reflect in reasonable detail each transaction of the Trust. The
books of account shall be maintained, at the Sponsor’s expense, in accordance
with generally accepted accounting principles, consistently applied. The books
of account and the records of the Trust shall be examined by and reported upon
(either separately or as part of the Sponsor’s regularly prepared consolidated
financial report) as of the end of each Fiscal Year of the Trust by a firm of
independent certified public accountants selected by the Administrators.

          (b)     The Administrators shall cause to be duly prepared and
delivered to each of the Holders of Securities Form 1099 or such other annual
United States federal income tax information statement required by the Code,
containing such information with regard to the Securities held by each Holder as
is required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the Administrators
shall endeavor to deliver all such statements within 30 days after the end of
each Fiscal Year of the Trust.

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          (c)     The Administrators, at the Sponsor’s expense, shall cause to
be duly prepared at the principal office of the Sponsor in the United States, as
‘United States’ is defined in Section 7701(a)(9) of the Code (or at the
principal office of the Trust if the Sponsor has no such principal office in the
United States), and filed an annual United States federal income tax return on a
Form 1041 or such other form required by United States federal income tax law,
and any other annual income tax returns required to be filed by the
Administrators on behalf of the Trust with any state or local taxing authority.

          Section 10.3. Banking. The Trust shall maintain in the United States,
as defined for purposes of Treasury Regulations section 301.7701-7, one or more
bank accounts in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Debentures held by the
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.

          Section 10.4. Withholding. The Institutional Trustee or any Paying
Agent and the Administrators shall comply with all withholding requirements
under United States federal, state and local law. The Institutional Trustee or
any Paying Agent shall request, and each Holder shall provide to the
Institutional Trustee or any Paying Agent, such forms or certificates as are
necessary to establish an exemption from withholding with respect to the Holder,
and any representations and forms as shall reasonably be requested by the
Institutional Trustee or any Paying Agent to assist it in determining the extent
of, and in fulfilling, its withholding obligations. The Administrators shall
file required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Institutional Trustee or any Paying Agent is required to withhold and pay over
any amounts to any authority with respect to distributions or allocations to any
Holder, the amount withheld shall be deemed to be a Distribution in the amount
of the withholding to the Holder. In the event of any claimed overwithholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount required to be withheld was not withheld from actual Distributions
made, the Institutional Trustee or any Paying Agent may reduce subsequent
Distributions by the amount of such withholding.

ARTICLE XI

AMENDMENTS AND MEETINGS

          Section 11.1. Amendments.

          (a)     Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed (i) by the Institutional Trustee, or
(ii) if the amendment affects the rights, powers, duties, obligations or
immunities of the Delaware Trustee, by the Delaware Trustee.

          (b)     Notwithstanding any other provision of this Article XI, an
amendment may be made, and any such purported amendment shall be valid and
effective only if:

 

 

 

          (i)     the Institutional Trustee shall have first received

 

 

 

          (A) an Officers’ Certificate from each of the Trust and the Sponsor
that such amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities); and

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          (B) an opinion of counsel (who may be counsel to the Sponsor or the
Trust) that such amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities); and

 

 

 

 

          (ii)     the result of such amendment would not be to

 

 

 

 

 

          (A) cause the Trust to cease to be classified for purposes of United
States federal income taxation as a grantor trust; or

 

 

 

 

 

          (B) cause the Trust to be deemed to be an Investment Company required
to be registered under the Investment Company Act.

          (c)     Except as provided in Section 11.1(d), (e) or (h), no
amendment shall be made, and any such purported amendment shall be void and
ineffective, unless the Holders of a Majority in liquidation amount of the
Capital Securities shall have consented to such amendment.

          (d)     In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date or change any
conversion or exchange provisions or (ii) restrict the right of a Holder to
institute suit for the enforcement of any such payment on or after such date.

          (e)     Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.

          (f)     Article III shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Securities.

          (g)     The rights of the Holders of the Capital Securities under
Article IV to appoint and remove Trustees shall not be amended without the
consent of the Holders of a Majority in liquidation amount of the Capital
Securities.

          (h)     This Declaration may be amended by the Institutional Trustee
and the Holders of a Majority in liquidation amount of the Common Securities
without the consent of the Holders of the Capital Securities to:

 

 

 

          (i)     cure any ambiguity;

 

 

 

          (ii)    correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this Declaration;

 

 

 

          (iii)    add to the covenants, restrictions or obligations of the
Sponsor; or

 

 

 

          (iv)    modify, eliminate or add to any provision of this Declaration
to such extent as may be necessary to ensure that the Trust will be classified
for United States federal income tax purposes at all times as a grantor trust
and will not be required to register as an Investment Company (including without
limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other
applicable rule under the Investment Company Act or written change in
interpretation or application thereof by any legislative body, court, government
agency or regulatory authority) which amendment does not have a material adverse
effect on the rights, preferences or privileges of the Holders of Securities;

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provided, however, that no such modification, elimination or addition referred
to in clauses (i), (ii), (iii) or (iv) shall adversely affect in any material
respect the powers, preferences or special rights of Holders of Capital
Securities.

          Section 11.2. Meetings of the Holders of Securities; Action by Written
Consent.

          (a)     Meetings of the Holders of any class of Securities may be
called at any time by the Administrators (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration or the terms
of the Securities. The Administrators shall call a meeting of the Holders of
such class if directed to do so by the Holders of at least 10% in liquidation
amount of such class of Securities. Such direction shall be given by delivering
to the Administrators one or more calls in a writing stating that the signing
Holders of the Securities wish to call a meeting and indicating the general or
specific purpose for which the meeting is to be called. Any Holders of the
Securities calling a meeting shall specify in writing the Certificates held by
the Holders of the Securities exercising the right to call a meeting and only
those Securities represented by such Certificates shall be counted for purposes
of determining whether the required percentage set forth in the second sentence
of this paragraph has been met.

          (b)     Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of the
Securities:

 

 

 

          (i)     notice of any such meeting shall be given to all the Holders
of the Securities having a right to vote thereat at least 7 days and not more
than 60 days before the date of such meeting. Whenever a vote, consent or
approval of the Holders of the Securities is permitted or required under this
Declaration, such vote, consent or approval may be given at a meeting of the
Holders of the Securities. Any action that may be taken at a meeting of the
Holders of the Securities may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the Holders of the Securities
owning not less than the minimum amount of Securities in liquidation amount that
would be necessary to authorize or take such action at a meeting at which all
Holders of the Securities having a right to vote thereon were present and
voting. Prompt notice of the taking of action without a meeting shall be given
to the Holders of the Securities entitled to vote who have not consented in
writing. The Administrators may specify that any written ballot submitted to the
Holders of the Securities for the purpose of taking any action without a meeting
shall be returned to the Trust within the time specified by the Administrators;

 

 

 

          (ii)    each Holder of a Security may authorize any Person to act for
it by proxy on all matters in which a Holder of Securities is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. No proxy shall be valid after the expiration of 11 months from the
date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Holder of the Securities executing it. Except
as otherwise provided herein, all matters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Holders of the Securities
were stockholders of a Delaware corporation; each meeting of the Holders of the
Securities shall be conducted by the Administrators or by such other Person that
the Administrators may designate; and

 

 

 

          (iii)   unless the Statutory Trust Act, this Declaration, or the terms
of the Securities otherwise provides, the Administrators, in their sole
discretion, shall establish all other provisions relating to meetings of Holders
of Securities, including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by any Holders of the Securities, waiver of
any

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such notice, action by consent without a meeting, the establishment of a record
date, quorum requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote; provided, however, that each
meeting shall be conducted in the United States (as that term is defined in
Treasury Regulations section 301.7701-7).

ARTICLE XII

REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND THE DELAWARE TRUSTEE

          Section 12.1. Representations and Warranties of Institutional Trustee.
The initial Institutional Trustee represents and warrants to the Trust and to
the Sponsor at the date of this Declaration, and each Successor Institutional
Trustee represents and warrants to the Trust and the Sponsor at the time of the
Successor Institutional Trustee’s acceptance of its appointment as Institutional
Trustee, that:

          (a)     the Institutional Trustee is a Delaware banking corporation
with trust powers, duly organized and validly existing under the laws of the
State of Delaware with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;

          (b)     the execution, delivery and performance by the Institutional
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Institutional Trustee. This Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors’ rights generally and to general principles of equity (regardless of
whether considered in a proceeding in equity or at law);

          (c)     the execution, delivery and performance of this Declaration by
the Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and

          (d)     no consent, approval or authorization of, or registration with
or notice to, any state or federal banking authority is required for the
execution, delivery or performance by the Institutional Trustee of this
Declaration.

          Section 12.2. Representations of the Delaware Trustee. The Trustee
that acts as initial Delaware Trustee represents and warrants to the Trust and
to the Sponsor at the date of this Declaration, and each Successor Delaware
Trustee represents and warrants to the Trust and the Sponsor at the time of the
Successor Delaware Trustee’s acceptance of its appointment as Delaware Trustee
that:

          (a)     if it is not a natural person, the Delaware Trustee is duly
organized, validly existing and in good standing under the laws of the State of
Delaware;

          (b)     if it is not a natural person, the execution, delivery and
performance by the Delaware Trustee of this Declaration has been duly authorized
by all necessary corporate action on the part of the Delaware Trustee. This
Declaration has been duly executed and delivered by the Delaware Trustee, and
under Delaware law (excluding any securities laws) constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency and other similar laws affecting creditors’ rights
generally and to general principles of equity and the discretion of the court
(regardless of whether considered in a proceeding in equity or at law);

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          (c)     if it is not a natural person, the execution, delivery and
performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the charter or by-laws of the Delaware Trustee;

          (d)     it has trust power and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, this Declaration;

          (e)     no consent, approval or authorization of, or registration with
or notice to, any state or federal banking authority governing the trust powers
of the Delaware Trustee is required for the execution, delivery or performance
by the Delaware Trustee of this Declaration; and

          (f)     the Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, it is an entity which has its
principal place of business in the State of Delaware and, in either case, a
Person that satisfies for the Trust the requirements of Section 3807 of the
Statutory Trust Act.

ARTICLE XIII

MISCELLANEOUS

          Section 13.1. Notices. All notices provided for in this Declaration
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:

          (a)     if given to the Trust, in care of the Administrators at the
Trust’s mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities):

 

 

 

Alliance Financial Capital Trust II
c/o Alliance Financial Corporation
120 Madison Street
MONY Tower II, 18th Floor
Syracuse, New York 13202
Attention: J. Daniel Mohr
Telecopy: 315-475-3558

          (b)     if given to the Delaware Trustee, at the Delaware Trustee’s
mailing address set forth below (or such other address as the Delaware Trustee
may give notice of to the Holders of the Securities):

 

 

 

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140

          (c)     if given to the Institutional Trustee, at the Institutional
Trustee’s mailing address set forth below (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):

 

 

 

Wilmington Trust Company
Rodney Square North
1100 North Market Street

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Wilmington, Delaware 19890-1600
Attention: Corporate Trust Administration
Telecopy: 302-636-4140

          (d)     if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice of to the Trust):

 

 

 

Alliance Financial Corporation
120 Madison Street
MONY Tower II, 18th Floor
Syracuse, New York 13202
Attention: J. Daniel Mohr
Telecopy: 315-475-3558

          (e)     if given to any other Holder, at the address set forth on the
books and records of the Trust.

          All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

          Section 13.2. Governing Law. This Declaration and the rights of the
parties hereunder shall be governed by and interpreted in accordance with the
law of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; provided, however,
that there shall not be applicable to the Trust, the Trustees or this
Declaration any provision of the laws (statutory or common) of the State of
Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, or (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.

          Section 13.3. Intention of the Parties. It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.

          Section 13.4. Headings. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.

          Section 13.5. Successors and Assigns. Whenever in this Declaration any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether or not so expressed.

          Section 13.6. Partial Enforceability. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or

44

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the application of such provision to persons or circumstances other than those
to which it is held invalid, shall not be affected thereby.

          Section 13.7. Counterparts. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and Administrators to any of
such counterpart signature pages. All of such counterpart signature pages shall
be read as though one, and they shall have the same force and effect as though
all of the signers had signed a single signature page.

Signatures appear on the following page

45

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          IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

 

 

 

 

 

 

WILMINGTON TRUST COMPANY,
as Delaware Trustee

 

 

 

 

 

By: 

/s/ Michele C. Harra

 

 

--------------------------------------------------------------------------------

 

 

Name: Michele C. Harra

 

 

 

Title: Financial Services Officer

 

 

 

 

 

 

WILMINGTON TRUST COMPANY,
as Institutional Trustee

 

 

 

 

 

By: 

/s/ Michele C. Harra

 

 

--------------------------------------------------------------------------------

 

 

Name: Michele C. Harra

 

 

 

Title: Financial Services Officer

 

 

 

 

ALLIANCE FINANCIAL CORPORATION,
as Sponsor

 

 

 

 

 

By: 

/s/ J. Daniel Mohr

 

 

--------------------------------------------------------------------------------

 

 

Name: J. Daniel Mohr

 

 

 

Title: Treasurer & CFO

 

 

 

 

 

 

ADMINISTRATORS OF ALLIANCE FINANCIAL CAPITAL TRUST II

 

 

 

 

 

By: 

/s/ J. Daniel Mohr

 

 

--------------------------------------------------------------------------------

 

 

Administrator

 

 

 

 

 

By: 

/s/ Jack H. Webb

 

 

--------------------------------------------------------------------------------

 

 

Administrator

 

 

 

 

 

By: 

/s/ John H. Watt, Jr.

 

 

--------------------------------------------------------------------------------

 

 

Administrator

 

46

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ANNEX I

TERMS OF SECURITIES

                     Pursuant to Section 6.1 of the Amended and Restated
Declaration of Trust, dated as of September 21, 2006 (as amended from time to
time, the “Declaration”), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration):

          1.        Designation and Number.

                    (a)     15,000 Floating Rate Capital Securities of Alliance
Financial Capital Trust II (the “Trust”), with an aggregate stated liquidation
amount with respect to the assets of the Trust of fifteen million dollars
($15,000,000.00) and a stated liquidation amount with respect to the assets of
the Trust of $1,000.00 per Capital Security, are hereby designated for the
purposes of identification only as the “Capital Securities”. The Capital
Security Certificates evidencing the Capital Securities shall be substantially
in the form of Exhibit A-1 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.

                    (b)     464 Floating Rate Common Securities of the Trust
(the “Common Securities”) will be evidenced by Common Security Certificates
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.

          2.        Distributions.

                    (a)     Distributions will be payable on each Security for
the Distribution Period beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2006 at a rate per annum of 7.04% and shall bear interest for each successive
Distribution Period beginning on (and including) the Distribution Payment Date
in December 2006, and each succeeding Distribution Payment Date, and ending on
(but excluding) the next succeeding Distribution Payment Date at a rate per
annum equal to the 3-Month LIBOR, determined as described below, plus 1.65% (the
“Coupon Rate”), applied to the stated liquidation amount thereof, such rate
being the rate of interest payable on the Debentures to be held by the
Institutional Trustee. Distributions in arrears will bear interest thereon
compounded quarterly at the applicable Distribution Rate (to the extent
permitted by law). Distributions, as used herein, include cash distributions and
any such compounded distributions unless otherwise noted. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. The amount of the Distribution payable for any
Distribution Period will be calculated by applying the Distribution Rate to the
stated liquidation amount outstanding at the commencement of the Distribution
Period on the basis of the actual number of days in the Distribution Period
concerned divided by 360. All percentages resulting from any calculations on the
Capital Securities will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to
9.87655% (or .0987655), and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest cent (with one-half cent being
rounded upward)).

                    (b)     Distributions on the Securities will be cumulative,
will accrue from the date of original issuance, and will be payable, subject to
extension of distribution payment periods as described herein, quarterly in
arrears on March 15, June 15, September 15 and December 15 of each year, or if
such day is not a Business Day, then the next succeeding Business Day (each a
“Distribution Payment Date”)

I-1

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(it being understood that interest accrues for any such non-Business Day),
commencing on the Distribution Payment Date in December 2006 when, as and if
available for payment. The Debenture Issuer has the right under the Indenture to
defer payments of interest on the Debentures, so long as no Acceleration Event
of Default has occurred and is continuing, by deferring the payment of interest
on the Debentures for up to 20 consecutive quarterly periods (each an “Extension
Period”) at any time and from time to time, subject to the conditions described
below, during which Extension Period no interest shall be due and payable.
During any Extension Period, interest will continue to accrue on the Debentures,
and interest on such accrued interest will accrue at an annual rate equal to the
Distribution Rate in effect for each such Extension Period, compounded quarterly
from the date such interest would have been payable were it not for the
Extension Period, to the extent permitted by law (such interest referred to
herein as “Additional Interest”). No Extension Period may end on a date other
than a Distribution Payment Date. At the end of any such Extension Period, the
Debenture Issuer shall pay all interest then accrued and unpaid on the
Debentures (together with Additional Interest thereon); provided, however, that
no Extension Period may extend beyond the Maturity Date and provided further,
however, that during any such Extension Period, the Debenture Issuer and its
Affiliates shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Debenture Issuer’s or its Affiliates’ capital stock (other than payments of
dividends or distributions to the Debenture Issuer) or make any guarantee
payments with respect to the foregoing, or (ii) make any payment of principal of
or interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Debenture Issuer or any Affiliate that rank pari passu in all
respects with or junior in interest to the Debentures (other than, with respect
to clauses (i) and (ii) above, (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Debenture Issuer in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Debenture Issuer (or
securities convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of any exchange or conversion of any class or
series of the Debenture Issuer’s capital stock (or any capital stock of a
subsidiary of the Debenture Issuer) for any class or series of the Debenture
Issuer’s capital stock or of any class or series of the Debenture Issuer’s
indebtedness for any class or series of the Debenture Issuer’s capital stock,
(c) the purchase of fractional interests in shares of the Debenture Issuer’s
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholders’ rights plan, or the issuance of
rights, stock or other property under any stockholders’ rights plan, or the
redemption or repurchase of rights pursuant thereto, (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith, or (f) payments under the Capital Securities
Guarantee). Prior to the termination of any Extension Period, the Debenture
Issuer may further extend such period, provided that such period together with
all such previous and further consecutive extensions thereof shall not exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and Additional Interest, the Debenture Issuer may commence a new
Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. During any Extension Period, Distributions on the Securities shall be
deferred for a period equal to the Extension Period. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date. Distributions on the Securities must be paid on the dates payable (after
giving effect to any Extension Period) to the extent that the Trust has

I-2

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funds available for the payment of such distributions in the Property Account of
the Trust. The Trust’s funds available for Distribution to the Holders of the
Securities will be limited to payments received from the Debenture Issuer. The
payment of Distributions out of moneys held by the Trust is guaranteed by the
Guarantor pursuant to the Guarantee.

                    (c)          Distributions on the Securities will be payable
to the Holders thereof as they appear on the books and records of the Trust on
the relevant record dates. The relevant record dates shall be fifteen days
before the relevant Distribution Payment Date. Distributions payable on any
Securities that are not punctually paid on any Distribution Payment Date, as a
result of the Debenture Issuer having failed to make a payment under the
Debentures, as the case may be, when due (taking into account any Extension
Period), will cease to be payable to the Person in whose name such Securities
are registered on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Securities are registered on
the special record date or other specified date determined in accordance with
the Indenture.

                    (d)          In the event that there is any money or other
property held by or for the Trust that is not accounted for hereunder, such
property shall be distributed Pro Rata (as defined herein) among the Holders of
the Securities.

          3.       Liquidation Distribution Upon Dissolution. In the event of
the voluntary or involuntary liquidation, dissolution, winding-up or termination
of the Trust (each a “Liquidation”) other than in connection with a redemption
of the Debentures, the Holders of the Securities will be entitled to receive out
of the assets of the Trust available for distribution to Holders of the
Securities, after satisfaction of liabilities to creditors of the Trust (to the
extent not satisfied by the Debenture Issuer), distributions equal to the
aggregate of the stated liquidation amount of $1,000.00 per Security plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the “Liquidation Distribution”), unless in connection with such
Liquidation, the Debentures in an aggregate stated principal amount equal to the
aggregate stated liquidation amount of such Securities, with an interest rate
equal to the Distribution Rate of, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on, and having the same
record date as, such Securities, after paying or making reasonable provision to
pay all claims and obligations of the Trust in accordance with the Statutory
Trust Act, shall be distributed on a Pro Rata basis to the Holders of the
Securities in exchange for such Securities.

          The Sponsor, as the Holder of all of the Common Securities, has the
right at any time to dissolve the Trust (including, without limitation, upon the
occurrence of a Special Event), subject to the receipt by the Debenture Issuer
of prior approval from the Board of Governors of the Federal Reserve System, or
its designated district bank, as applicable, and any successor federal agency
that is primarily responsible for regulating the activities of the Sponsor (the
“Federal Reserve”), if the Sponsor is a bank holding company, or from the Office
of Thrift Supervision and any successor federal agency that is primarily
responsible for regulating the activities of Sponsor, (the “OTS”) if the Sponsor
is a savings and loan holding company, in either case if then required under
applicable capital guidelines or policies of the Federal Reserve or OTS, as
applicable, and, after satisfaction of liabilities to creditors of the Trust,
cause the Debentures to be distributed to the Holders of the Securities on a Pro
Rata basis in accordance with the aggregate stated liquidation amount thereof.

          If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities, the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical, in which event such Holders will
be entitled to receive out of the assets of the Trust available for distribution
to the Holders,

I-3

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after satisfaction of liabilities of creditors of the Trust to the extent not
satisfied by the Debenture Issuer, an amount equal to the Liquidation
Distribution. An early Liquidation of the Trust pursuant to clause (iv) of
Section 7.1(a) of the Declaration shall occur if the Institutional Trustee
determines that such Liquidation is possible by distributing, after satisfaction
of liabilities to creditors of the Trust, to the Holders of the Securities on a
Pro Rata basis, the Debentures, and such distribution occurs.

          If, upon any such Liquidation the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on such Capital Securities shall be paid to the Holders of the Trust
Securities on a Pro Rata basis, except that if an Event of Default has occurred
and is continuing, the Capital Securities shall have a preference over the
Common Securities with regard to such distributions.

          After the date for any distribution of the Debentures upon dissolution
of the Trust (i) the Securities of the Trust will be deemed to be no longer
outstanding, (ii) upon surrender of a Holder’s Securities certificate, such
Holder of the Securities will receive a certificate representing the Debentures
to be delivered upon such distribution, (iii) any certificates representing the
Securities still outstanding will be deemed to represent undivided beneficial
interests in such of the Debentures as have an aggregate principal amount equal
to the aggregate stated liquidation amount with an interest rate identical to
the Distribution Rate of, and bearing accrued and unpaid interest equal to
accrued and unpaid distributions on, the Securities until such certificates are
presented to the Debenture Issuer or its agent for transfer or reissuance (and
until such certificates are so surrendered, no payments of interest or principal
shall be made to Holders of Securities in respect of any payments due and
payable under the Debentures; provided, however that such failure to pay shall
not be deemed to be an Event of Default and shall not entitle the Holder to the
benefits of the Guarantee), and (iv) all rights of Holders of Securities under
the Declaration shall cease, except the right of such Holders to receive
Debentures upon surrender of certificates representing such Securities.

          4.     Redemption and Distribution.

                  (a)          The Debentures will mature on December 15, 2036.
The Debentures may be redeemed by the Debenture Issuer, in whole or in part, at
any Distribution Payment Date on or after the Distribution Payment Date in
September 2011, at the Redemption Price. In addition, the Debentures may be
redeemed by the Debenture Issuer at the Special Redemption Price, in whole but
not in part, at any Distribution Payment Date, upon the occurrence and
continuation of a Special Event within 120 days following the occurrence of such
Special Event at the Special Redemption Price, upon not less than 30 nor more
than 60 days’ notice to holders of such Debentures so long as such Special Event
is continuing. In each case, the right of the Debenture Issuer to redeem the
Debentures is subject to the Debenture Issuer having received prior approval
from the Federal Reserve (if the Debenture Issuer is a bank holding company) or
prior approval from the OTS (if the Debenture Issuer is a savings and loan
holding company), in each case if then required under applicable capital
guidelines or policies of the applicable federal agency.

          “3-Month LIBOR” means the London interbank offered interest rate for
three-month, U.S. dollar deposits determined by the Debenture Trustee in the
following order of priority:

 

 

 

 

           (1)          the rate (expressed as a percentage per annum) for U.S.
dollar deposits having a three-month maturity that appears on Telerate Page 3750
as of 11:00 a.m. (London time) on the related Determination Date (as defined
below). “Telerate Page 3750” means the display designated as “Page 3750” on the
Moneyline Telerate Service or such other page as may replace Page 3750 on that
service or such other service or services as may be nominated by the British
Bankers’ Association as the information vendor for the purpose of displaying
London interbank offered rates for U.S. dollar deposits;

I-4

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          (2)          if such rate cannot be identified on the related
Determination Date, the Debenture Trustee will request the principal London
offices of four leading banks in the London interbank market to provide such
banks’ offered quotations (expressed as percentages per annum) to prime banks in
the London interbank market for U.S. dollar deposits having a three-month
maturity as of 11:00 a.m. (London time) on such Determination Date. If at least
two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations;

 

 

 

          (3)          if fewer than two such quotations are provided as
requested in clause (2) above, the Debenture Trustee will request four major New
York City banks to provide such banks’ offered quotations (expressed as
percentages per annum) to leading European banks for loans in U.S. dollars as of
11:00 a.m. (London time) on such Determination Date. If at least two such
quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations; and

 

 

 

          (4)          if fewer than two such quotations are provided as
requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined
with respect to the Distribution Period immediately preceding such current
Distribution Period.

          If the rate for U.S. dollar deposits having a three-month maturity
that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on
the related Determination Date is superseded on the Telerate Page 3750 by a
corrected rate by 12:00 noon (London time) on such Determination Date, then the
corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.

          The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.

          “Capital Treatment Event” means the receipt by the Debenture Issuer
and the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws, rules or regulations of the
United States or any political subdivision thereof or therein, or as the result
of any official or administrative pronouncement or action or decision
interpreting or applying such laws, rules or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of original issuance of the Debentures, there is more than an
insubstantial risk that the Sponsor will not, within 90 days of the date of such
opinion, be entitled to treat an amount equal to the aggregate liquidation
amount of the Capital Securities as “Tier 1 Capital” (or its then equivalent)
for purposes of the capital adequacy guidelines of the Federal Reserve, as then
in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding
company or otherwise is not subject to the Federal Reserve’s risk-based capital
adequacy guidelines, such guidelines applied to the Sponsor as if the Sponsor
were subject to such guidelines); provided, however, that the inability of the
Sponsor to treat all or any portion of the liquidation amount of the Capital
Securities as Tier l Capital shall not constitute the basis for a Capital
Treatment Event, if such inability results from the Sponsor having cumulative
preferred stock, minority interests in consolidated subsidiaries, or any other
class of security or interest which the Federal Reserve or OTS, as applicable,
may now or hereafter accord Tier 1 Capital treatment in excess of the amount
which may now or hereafter qualify for treatment as Tier 1 Capital under
applicable capital adequacy guidelines; provided further, however, that the
distribution of Debentures in connection with the Liquidation of the Trust shall
not in and of itself constitute a Capital Treatment Event unless such
Liquidation shall have occurred in connection with a Tax Event or an Investment
Company Event.

          “Determination Date” means the date that is two London Banking Days
(i.e., a business day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.

I-5

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          “Investment Company Event” means the receipt by the Debenture Issuer
and the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or written
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Trust is or, within 90 days of the date of such opinion, will be considered
an Investment Company that is required to be registered under the Investment
Company Act which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Debentures.

          “Maturity Date” means December 15, 2036.

          “Redemption Date” shall mean the date fixed for the redemption of
Capital Securities, which shall be any Distribution Payment Date on or after the
Distribution Payment Date in September 2011.

          “Redemption Price” means 100% of the principal amount of the
Debentures being redeemed, plus accrued and unpaid Interest on such Debentures
to the Redemption Date.

          “Special Event” means a Tax Event, an Investment Company Event or a
Capital Treatment Event.

          “Special Redemption Date” means a date on which a Special Event
redemption occurs, which shall be a Distribution Payment Date.

          “Special Redemption Price” means the price set forth in the following
table for any Special Redemption Date that occurs on the date indicated below
(or if such day is not a Business Day, then the next succeeding Business Day),
expressed as the percentage of the principal amount of the Debentures being
redeemed:

 

 

 

Month in which Special
Redemption Date Occurs

 

Special Redemption Price

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

 

 

December 2006

 

104.625%

 

 

 

March 2007

 

104.300%

 

 

 

June 2007

 

104.000%

 

 

 

September 2007

 

103.650%

 

 

 

December 2007

 

103.350%

 

 

 

March 2008

 

103.000%

 

 

 

June 2008

 

102.700%

 

 

 

September 2008

 

102.350%

 

 

 

December 2008

 

102.050%

 

 

 

March 2009

 

101.700%

 

 

 

June 2009

 

101.400%

I-6

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September 2009

 

101.050%

 

 

 

December 2009

 

100.750%

 

 

 

March 2010

 

100.450%

 

 

 

June 2010

 

100.200%

 

 

 

September 2010 and thereafter

 

100.000%

          plus, in each case, accrued and unpaid Interest on such Debentures to
the Special Redemption Date.

          “Tax Event” means the receipt by the Debenture Issuer and the Trust of
an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to or change (including any announced prospective
change) in the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement including any notice or announcement of intent to adopt such
procedures or regulations) (an “Administrative Action”) or judicial decision
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Debenture Issuer or the Trust and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case on or after the date of original issuance of the Debentures, there is more
than an insubstantial risk that: (i) the Trust is, or will be within 90 days of
the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Debentures; (ii) interest payable
by the Debenture Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States federal income tax purposes; or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.

                    (b)          Upon the repayment in full at maturity or
redemption in whole or in part of the Debentures (other than following the
distribution of the Debentures to the Holders of the Securities), the proceeds
from such repayment or payment shall concurrently be applied to redeem Pro Rata
at the applicable Redemption Price or Special Redemption Price, as applicable,
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so repaid or redeemed; provided, however,
that holders of such Securities shall be given not less than 30 nor more than 60
days’ notice of such redemption (other than at the scheduled maturity of the
Debentures).

                    (c)          If fewer than all the outstanding Securities
are to be so redeemed, the Common Securities and the Capital Securities will be
redeemed Pro Rata and the Capital Securities to be redeemed will be redeemed Pro
Rata from each Holder of Capital Securities.

                    (d)          The Trust may not redeem fewer than all the
outstanding Capital Securities unless all accrued and unpaid Distributions have
been paid on all Capital Securities for all quarterly Distribution periods
terminating on or before the date of redemption.

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                    (e)          Redemption or Distribution Procedures.

 

 

 

                        (i)          Notice of any redemption of, or notice of
distribution of the Debentures in exchange for, the Securities (a
“Redemption/Distribution Notice”) will be given by the Trust by mail to each
Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than
60 days before the date fixed for redemption or exchange thereof which, in the
case of a redemption, will be the date fixed for redemption of the Debentures.
For purposes of the calculation of the date of redemption or exchange and the
dates on which notices are given pursuant to this paragraph 4(e)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of such
Securities. Each Redemption/Distribution Notice shall be addressed to the
Holders of such Securities at the address of each such Holder appearing on the
books and records of the Trust. No defect in the Redemption/Distribution Notice
or in the mailing thereof with respect to any Holder shall affect the validity
of the redemption or exchange proceedings with respect to any other Holder.

 

 

 

                        (ii)          If the Securities are to be redeemed and
the Trust gives a Redemption/ Distribution Notice, which notice may only be
issued if the Debentures are redeemed as set out in this paragraph 4 (which
notice will be irrevocable), then, provided that the Institutional Trustee has a
sufficient amount of cash in connection with the related redemption or maturity
of the Debentures, the Institutional Trustee will pay the relevant Redemption
Price or Special Redemption Price, as applicable, to the Holders of such
Securities by check mailed to the address of each such Holder appearing on the
books and records of the Trust on the Redemption Date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required then immediately prior to the close of business on the date of such
deposit Distributions will cease to accrue on the Securities so called for
redemption and all rights of Holders of such Securities so called for redemption
will cease, except the right of the Holders of such Securities to receive the
applicable Redemption Price or Special Redemption Price specified in
paragraph 4(a), but without interest on such Redemption Price or Special
Redemption Price. If payment of the Redemption Price or Special Redemption Price
in respect of any Securities is improperly withheld or refused and not paid
either by the Trust or by the Debenture Issuer as guarantor pursuant to the
Guarantee, Distributions on such Securities will continue to accrue at the
Distribution Rate from the original Redemption Date to the actual date of
payment, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the Redemption Price or Special
Redemption Price. In the event of any redemption of the Capital Securities
issued by the Trust in part, the Trust shall not be required to (i) issue,
register the transfer of or exchange any Security during a period beginning at
the opening of business fifteen days before any selection for redemption of the
Capital Securities and ending at the close of business on the earliest date on
which the relevant notice of redemption is deemed to have been given to all
Holders of the Capital Securities to be so redeemed or (ii) register the
transfer of or exchange any Capital Securities so selected for redemption, in
whole or in part, except for the unredeemed portion of any Capital Securities
being redeemed in part.

 

 

 

                        (iii)          Redemption/Distribution Notices shall be
sent by the Administrators on behalf of the Trust to (A) in respect of the
Capital Securities, the Holders thereof and (B) in respect of the Common
Securities, the Holder thereof.

 

 

 

                        (iv)          Subject to the foregoing and applicable
law (including, without limitation, United States federal securities laws), and
provided that the acquiror is not the Holder of the Common Securities or the
obligor under the Indenture, the Sponsor or any of its

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subsidiaries may at any time and from time to time purchase outstanding Capital
Securities by tender, in the open market or by private agreement.

          5.          Voting Rights - Capital Securities.

                        (a)          Except as provided under paragraphs 5(b)
and 7 and as otherwise required by law and the Declaration, the Holders of the
Capital Securities will have no voting rights. The Administrators are required
to call a meeting of the Holders of the Capital Securities if directed to do so
by Holders of at least 10% in liquidation amount of the Capital Securities.

                        (b)          Subject to the requirements of obtaining a
tax opinion by the Institutional Trustee in certain circumstances set forth in
the last sentence of this paragraph, the Holders of a Majority in liquidation
amount of the Capital Securities, voting separately as a class, have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as holder of the Debentures, to
(i) exercise the remedies available under the Indenture as the holder of the
Debentures, (ii) waive any past default that is waivable under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv) consent on behalf of all the
Holders of the Capital Securities to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required;
provided, however, that, where a consent or action under the Indenture would
require the consent or act of the holders of greater than a simple majority in
aggregate principal amount of Debentures (a “Super Majority”) affected thereby,
the Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Capital Securities outstanding which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding. If
the Institutional Trustee fails to enforce its rights under the Debentures after
the Holders of a Majority in liquidation amount of such Capital Securities have
so directed the Institutional Trustee, to the fullest extent permitted by law, a
Holder of the Capital Securities may institute a legal proceeding directly
against the Debenture Issuer to enforce the Institutional Trustee’s rights under
the Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date the interest or principal is payable (or
in the case of redemption, the Redemption Date or the Special Redemption Date,
as applicable), then a Holder of record of the Capital Securities may directly
institute a proceeding for enforcement of payment, on or after the respective
due dates specified in the Debentures, to such Holder directly of the principal
of or interest on the Debentures having an aggregate principal amount equal to
the aggregate liquidation amount of the Capital Securities of such Holder. The
Institutional Trustee shall notify all Holders of the Capital Securities of any
default actually known to the Institutional Trustee with respect to the
Debentures unless (x) such default has been cured prior to the giving of such
notice or (y) the Institutional Trustee determines in good faith that the
withholding of such notice is in the interest of the Holders of such Capital
Securities, except where the default relates to the payment of principal of or
interest on any of the Debentures. Such notice shall state that such Indenture
Event of Default also constitutes an Event of Default hereunder. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy, the Institutional Trustee shall not take any of the actions described in
clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes.

          In the event the consent of the Institutional Trustee, as the holder
of the Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the Holders of the Securities with
respect to such

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amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; provided, however,
that where a consent under the Indenture would require the consent of a
Super-Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities outstanding which the relevant Super-Majority represents of the
aggregate principal amount of the Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the directions of the
Holders of the Securities unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified as other than a grantor trust for United States federal
income tax purposes.

          A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Event of Default hereunder. Any required approval or direction
of Holders of the Capital Securities may be given at a separate meeting of
Holders of the Capital Securities convened for such purpose, at a meeting of all
of the Holders of the Securities in the Trust or pursuant to written consent.
The Institutional Trustee will cause a notice of any meeting at which Holders of
the Capital Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each Holder
of record of the Capital Securities. Each such notice will include a statement
setting forth the following information (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the Holders of
the Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.

          Notwithstanding that Holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall, for purposes
of such vote or consent, be treated as if such Capital Securities were not
outstanding.

          In no event will Holders of the Capital Securities have the right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Sponsor as the Holder of all of the Common Securities
of the Trust. Under certain circumstances as more fully described in the
Declaration, Holders of Capital Securities have the right to vote to appoint,
remove or replace the Institutional Trustee and the Delaware Trustee.

          6.          Voting Rights - Common Securities.

                        (a)          Except as provided under paragraphs 6(b),
6(c) and 7 and as otherwise required by law and the Declaration, the Common
Securities will have no voting rights.

                        (b)          The Holders of the Common Securities are
entitled, in accordance with Article IV of the Declaration, to vote to appoint,
remove or replace any Administrators.

                        (c)          Subject to Section 6.8 of the Declaration
and only after each Event of Default (if any) with respect to the Capital
Securities has been cured, waived, or otherwise eliminated and subject to the
requirements of the second to last sentence of this paragraph, the Holders of a
Majority in liquidation amount of the Common Securities, voting separately as a
class, may direct the time, method, and place of conducting any proceeding for
any remedy available to the Institutional Trustee, or exercising any trust or
power conferred upon the Institutional Trustee under the Declaration, including
(i) directing the time, method, place of conducting any proceeding for any
remedy available to the Debenture Trustee, or exercising any trust or power
conferred on the Debenture Trustee with respect to the Debentures, (ii) waiving
any past default and its consequences that is waivable under the Indenture, or
(iii) exercising

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any right to rescind or annul a declaration that the principal of all the
Debentures shall be due and payable; provided, however, that, where a consent or
action under the Indenture would require a Super Majority, the Institutional
Trustee may only give such consent or take such action at the written direction
of the Holders of at least the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Notwithstanding this
paragraph 6(c), the Institutional Trustee shall not revoke any action previously
authorized or approved by a vote or consent of the Holders of the Capital
Securities. Other than with respect to directing the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or the Debenture Trustee as set forth above, the Institutional Trustee shall not
take any action described in (i), (ii) or (iii) above, unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified as
other than a grantor trust on account of such action. If the Institutional
Trustee fails to enforce its rights, to the fullest extent permitted by law,
under the Declaration, any Holder of the Common Securities may institute a legal
proceeding directly against any Person to enforce the Institutional Trustee’s
rights under the Declaration, without first instituting a legal proceeding
against the Institutional Trustee or any other Person.

          Any approval or direction of Holders of the Common Securities may be
given at a separate meeting of Holders of the Common Securities convened for
such purpose, at a meeting of all of the Holders of the Securities in the Trust
or pursuant to written consent. The Administrators will cause a notice of any
meeting at which Holders of the Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of the Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.

          No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.

          7.          Amendments to Declaration and Indenture.

                       (a)          In addition to any requirements under
Section 11.1 of the Declaration, if any proposed amendment to the Declaration
provides for, or the Trustees, Sponsor or Administrators otherwise propose to
effect, (i) any action that would adversely affect the powers, preferences or
special rights of the Securities, whether by way of amendment to the Declaration
or otherwise, or (ii) the Liquidation of the Trust, other than as described in
Section 7.1 of the Declaration, then the Holders of outstanding Securities,
voting together as a single class, will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of the Holders of at least a Majority in liquidation amount of the
Securities, affected thereby; provided, however, if any amendment or proposal
referred to in clause (i) above would adversely affect only the Capital
Securities or only the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a Majority in liquidation
amount of such class of Securities.

                       (b)          In the event the consent of the
Institutional Trustee as the holder of the Debentures is required under the
Indenture with respect to any amendment, modification or termination of the
Indenture or the Debentures, the Institutional Trustee shall request the written
direction of the Holders of the Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification, or termination as directed by a Majority in liquidation amount of
the

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Securities voting together as a single class; provided, however, that where a
consent under the Indenture would require a Super Majority, the Institutional
Trustee may only give such consent at the direction of the Holders of at least
the proportion in liquidation amount of the Securities which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding.

                       (c)          Notwithstanding the foregoing, no amendment
or modification may be made to the Declaration if such amendment or modification
would (i) cause the Trust to be classified for purposes of United States federal
income taxation as other than a grantor trust, (ii) reduce or otherwise
adversely affect the powers of the Institutional Trustee or (iii) cause the
Trust to be deemed an Investment Company which is required to be registered
under the Investment Company Act.

                       (d)          Notwithstanding any provision of the
Declaration, the right of any Holder of the Capital Securities to receive
payment of distributions and other payments upon redemption or otherwise, on or
after their respective due dates, or to institute a suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder. For the protection and enforcement
of the foregoing provision, each and every Holder of the Capital Securities
shall be entitled to such relief as can be given either at law or equity.

          8.          Pro Rata. A reference in these terms of the Securities to
any payment, distribution or treatment as being “Pro Rata” shall mean pro rata
to each Holder of the Securities according to the aggregate liquidation amount
of the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities then outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Capital Securities Pro Rata according to the aggregate liquidation amount of the
Capital Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Capital Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of the Common Securities Pro Rata according to the aggregate
liquidation amount of the Common Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Common Securities outstanding.

          9.          Ranking. The Capital Securities rank pari passu with and
payment thereon shall be made Pro Rata with the Common Securities except that,
where an Event of Default has occurred and is continuing, the rights of Holders
of the Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price (or Special Redemption Price) of, any
Common Security, and no other payment on account of redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price (or Special Redemption Price) the
full amount of such Redemption Price (or Special Redemption Price) on all
outstanding Capital Securities then called for redemption, shall have been made
or provided for, and all funds immediately available to the Institutional
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or the Redemption Price (or Special Redemption Price) of, the
Capital Securities then due and payable.

          10.          Acceptance of Guarantee and Indenture. Each Holder of the
Capital Securities and the Common Securities, by the acceptance of such
Securities, agrees to the provisions of the Guarantee, including the
subordination provisions therein and to the provisions of the Indenture.

          11.          No Preemptive Rights. The Holders of the Securities shall
have no preemptive or similar rights to subscribe for any additional securities.

I-12

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          12.          Miscellaneous. These terms constitute a part of the
Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee,
and the Indenture to a Holder without charge on written request to the Sponsor
at its principal place of business.

I-13

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EXHIBIT A-1

FORM OF CAPITAL SECURITY CERTIFICATE

[FORM OF FACE OF SECURITY]

          THIS CAPITAL SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (“DTC”) OR A NOMINEE OF DTC. THIS CAPITAL SECURITY IS
EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER OF
THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF
DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.

          UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC TO ALLIANCE FINANCIAL CAPITAL TRUST II OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED
INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE SPONSOR’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN

A-1-1

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ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM
THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

          THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH
A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON
OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.

          THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

          THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.

          IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

 

 

 

 

 

Certificate Number P-1

15,000 Capital Securities

 

 

[CUSIP NO. [_______] ]

 

 

September 21, 2006

Certificate Evidencing Floating Rate Capital Securities

of

Alliance Financial Capital Trust II

A-1-2

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(liquidation amount $1,000.00 per Capital Security)

          Alliance Financial Capital Trust II, a statutory trust created under
the laws of the State of Delaware (the “Trust”), hereby certifies that Cede &
Co. (the “Holder”) is the registered owner of capital securities of the Trust
representing undivided beneficial interests in the assets of the Trust,
(liquidation amount $1,000.00 per capital security) (the “Capital Securities”).
Subject to the Declaration (as defined below), the Capital Securities are
transferable on the books and records of the Trust in person or by a duly
authorized attorney, upon surrender of this Certificate duly endorsed and in
proper form for transfer. The Capital Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of September 21, 2006, among J. Daniel Mohr, John H.
Watt, Jr. and Jack H. Webb, as Administrators, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Alliance
Financial Corporation, as Sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, including the
designation of the terms of the Capital Securities as set forth in Annex I to
such amended and restated declaration as the same may be amended from time to
time (the “Declaration”). Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is entitled to the
benefits of the Guarantee to the extent provided therein. The Sponsor will
provide a copy of the Declaration, the Guarantee, and the Indenture to the
Holder without charge upon written request to the Sponsor at its principal place
of business.

          Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.

          By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.

          This Capital Security is governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to principles of
conflict of laws.

Signatures appear on following page

A-1-3

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          IN WITNESS WHEREOF, the Trust has duly executed this certificate.

 

 

 

 

ALLIANCE FINANCIAL CAPITAL TRUST II

 

 

 

By:

/s/ J. Daniel Mohr

 

 

--------------------------------------------------------------------------------

 

 

Name: J. Daniel Mohr

 

 

Title: Administrator

CERTIFICATE OF AUTHENTICATION

          This is one of the Capital Securities referred to in the
within-mentioned Declaration.

 

 

 

 

WILMINGTON TRUST COMPANY,

 

as the Institutional Trustee

 

 

 

By:

/s/ Michele C. Harra

 

 

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Authorized Officer

A-1-4

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[FORM OF REVERSE OF CAPITAL SECURITY]

          Distributions payable on each Capital Security will be payable at an
annual rate equal to 7.04% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2006 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in December 2006, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a “Distribution Period”), equal to 3-Month
LIBOR, determined as described below, plus 1.65% (the “Coupon Rate”), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term “Distributions” as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, “Determination Date” means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.

          “3-Month LIBOR” as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date (“Telerate Page 3750” means the display designated as “Page
3750” on the Moneyline Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers’ Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks’ offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks’ offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.

          The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.

          All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or

A-1-5

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.0987655), and all dollar amounts used in or resulting from such calculation
will be rounded to the nearest cent (with one-half cent being rounded upward)).

          Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a “Distribution Payment Date”) (it being
understood that interest accrues for any such non-Business Day), commencing on
the Distribution Payment Date in December 2006. The Debenture Issuer has the
right under the Indenture to defer payments of interest on the Debentures, so
long as no Acceleration Event of Default has occurred and is continuing, by
extending the interest payment period for up to 20 consecutive quarterly periods
(each an “Extension Period”) at any time and from time to time on the
Debentures, subject to the conditions described below, during which Extension
Period no interest shall be due and payable. During any Extension Period,
interest will continue to accrue on the Debentures, and interest on such accrued
interest will accrue at an annual rate equal to the Distribution Rate in effect
for each such Extension Period, compounded quarterly from the date such interest
would have been payable were it not for the Extension Period, to the extent
permitted by law (such interest referred to herein as “Additional Interest”). No
Extension Period may end on a date other than a Distribution Payment Date. At
the end of any such Extension Period, the Debenture Issuer shall pay all
interest then accrued and unpaid on the Debentures (together with Additional
Interest thereon); provided, however, that no Extension Period may extend beyond
the Maturity Date. Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.
Upon the termination of any Extension Period and upon the payment of all accrued
and unpaid interest and Additional Interest, the Debenture Issuer may commence a
new Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. During any Extension Period, Distributions on the Capital Securities
shall be deferred for a period equal to the Extension Period. If Distributions
are deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date. Distributions on the Securities must be paid on the dates payable (after
giving effect to any Extension Period) to the extent that the Trust has funds
available for the payment of such distributions in the Property Account of the
Trust. The Trust’s funds available for Distribution to the Holders of the
Securities will be limited to payments received from the Debenture Issuer. The
payment of Distributions out of moneys held by the Trust is guaranteed by the
Guarantor pursuant to the Guarantee.

          The Capital Securities shall be redeemable as provided in the
Declaration.

A-1-6

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ASSIGNMENT

          FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:

          _____________________________________________________________________

          (Insert assignee’s social security or tax identification number)
___________________

          _____________________________________________________________________

          _____________________________________________________________________

          (Insert address and zip code of assignee) and irrevocably appoints

          _____________________________________________________________________

          agent to transfer this Capital Security Certificate on the books of
the Trust. The agent may substitute another to act for him or her.

 

 

 

Date:

 

 

--------------------------------------------------------------------------------

Signature:

 

 

--------------------------------------------------------------------------------

                    (Sign exactly as your name appears on the other side of this
Capital Security Certificate)

          Signature Guarantee:1

--------------------------------------------------------------------------------

1 Signature must be guaranteed by an “eligible guarantor institution” that is a
bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

A-1-7

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EXHIBIT A-2

FORM OF COMMON SECURITY CERTIFICATE

          THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

          THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH
SECTION 8.1 OF THE DECLARATION.

 

 

 

 

 

Certificate Number C-1

464 Common Securities

 

September 21, 2006

Certificate Evidencing Floating Rate Common Securities

of

Alliance Financial Capital Trust II

          Alliance Financial Capital Trust II, a statutory trust created under
the laws of the State of Delaware (the “Trust”), hereby certifies that Alliance
Financial Corporation (the “Holder”) is the registered owner of common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust (the “Common Securities”). The Common Securities represented
hereby are issued pursuant to, and the designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities shall in all respects be subject to, the provisions of the Amended
and Restated Declaration of Trust of the Trust dated as of September 21, 2006,
among J. Daniel Mohr, John H. Watt, Jr. and Jack H. Webb, as Administrators,
Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as
Institutional Trustee, Alliance Financial Corporation, as Sponsor, and the
holders from time to time of undivided beneficial interest in the assets of the
Trust including the designation of the terms of the Common Securities as set
forth in Annex I to such amended and restated declaration, as the same may be
amended from time to time (the “Declaration”). Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration. The Holder is
entitled to the benefits of the Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture
to the Holder without charge upon written request to the Sponsor at its
principal place of business.

          As set forth in the Declaration, when an Event of Default has occurred
and is continuing, the rights of Holders of Common Securities to payment in
respect of Distributions and payments upon Liquidation, redemption or otherwise
are subordinated to the rights of payment of Holders of the Capital Securities.

          Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.

          By acceptance of this Certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Common Securities as evidence of undivided beneficial ownership in the
Debentures.

          This Common Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.

A-2-1

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          IN WITNESS WHEREOF, the Trust has duly executed this certificate.

 

 

 

 

ALLIANCE FINANCIAL CAPITAL TRUST II

 

 

 

By:

/s/ J. Daniel Mohr

 

 

--------------------------------------------------------------------------------

 

 

Name: J. Daniel Mohr

 

 

Title: Administrator

A-2-2

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[FORM OF REVERSE OF COMMON SECURITY]

          Distributions payable on each Common Security will be payable at an
annual rate equal to 7.04% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in December
2006 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in December 2006, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a “Distribution Period”), equal to 3-Month
LIBOR, determined as described below, plus 1.65% (the “Coupon Rate”), applied to
the stated liquidation amount of $1,000.00 per Common Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term “Distributions” as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, “Determination Date” means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.

          “3-Month LIBOR” as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date (“Telerate Page 3750” means the display designated as “Page
3750” on the Moneyline Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers’ Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks’ offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks’ offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.

          The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.

          All percentages resulting from any calculations on the Common
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or

A-2-3

--------------------------------------------------------------------------------

.0987655), and all dollar amounts used in or resulting from such calculation
will be rounded to the nearest cent (with one-half cent being rounded upward)).

          Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a “Distribution Payment Date”) (it being
understood that interest accrues for any such non-Business Day), commencing on
the Distribution Payment Date in December 2006. The Debenture Issuer has the
right under the Indenture to defer payments of interest on the Debentures, so
long as no Acceleration Event of Default has occurred and is continuing, by
extending the interest payment period for up to 20 consecutive quarterly periods
(each an “Extension Period”) at any time and from time to time on the
Debentures, subject to the conditions described below, during which Extension
Period no interest shall be due and payable. During any Extension Period,
interest will continue to accrue on the Debentures, and interest on such accrued
interest will accrue at an annual rate equal to the Distribution Rate in effect
for each such Extension Period, compounded quarterly from the date such interest
would have been payable were it not for the Extension Period, to the extent
permitted by law (such interest referred to herein as “Additional Interest”). No
Extension Period may end on a date other than a Distribution Payment Date. At
the end of any such Extension Period, the Debenture Issuer shall pay all
interest then accrued and unpaid on the Debentures (together with Additional
Interest thereon); provided, however, that no Extension Period may extend beyond
the Maturity Date. Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.
Upon the termination of any Extension Period and upon the payment of all accrued
and unpaid interest and Additional Interest, the Debenture Issuer may commence a
new Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. During any Extension Period, Distributions on the Common Securities
shall be deferred for a period equal to the Extension Period. If Distributions
are deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date. Distributions on the Securities must be paid on the dates payable (after
giving effect to any Extension Period) to the extent that the Trust has funds
available for the payment of such distributions in the Property Account of the
Trust. The Trust’s funds available for Distribution to the Holders of the
Securities will be limited to payments received from the Debenture Issuer.

          The Common Securities shall be redeemable as provided in the
Declaration.

A-2-4

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ASSIGNMENT

          FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:

          _____________________________________________________________________

          (Insert assignee’s social security or tax identification number)
___________________

          _____________________________________________________________________

          _____________________________________________________________________

          (Insert address and zip code of assignee) and irrevocably appoints

          _____________________________________________________________________

 

 

 

 

 

 

 

_____________________________________________________________________ agent to
transfer this Common Security Certificate on the books of the Trust. The agent
may substitute another to act for him or her.

 

 

 

 

 

Date: 

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

 

 

Signature:

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

 

 

(Sign exactly as your name appears on the other side of this Common Security
Certificate)

 

 

 

 

 

Signature:

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

 

 

(Sign exactly as your name appears on the other side of this Common Security
Certificate)

 

 

 

 

Signature Guarantee2

--------------------------------------------------------------------------------

2 Signature must be guaranteed by an “eligible guarantor institution” that is a
bank, stockbroker, savings and loan association or credit union, meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

A-2-5

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EXHIBIT B

SPECIMEN OF INITIAL DEBENTURE

(See Document No. 17)

B-1

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EXHIBIT C

PLACEMENT AGREEMENT

(See Document No. 1)

C-1

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