<PAGE>
 
                                                                     EXHIBIT 4.6



================================================================================



                       AMENDED AND RESTATED DECLARATION

                                   OF TRUST


                        NGC CORPORATION CAPITAL TRUST I


                           Dated as of May 28, 1997



================================================================================
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------
                                                                            Page
                                                                            ----

                                   ARTICLE I
                        INTERPRETATION AND DEFINITIONS


SECTION 1.1    Definitions.................................................   1

                                 ARTICLE II  
                              TRUST INDENTURE ACT

SECTION 2.1    Trust Indenture Act; Application............................   9
SECTION 2.2    Lists of Holders of Securities..............................   9
SECTION 2.3    Reports by the Property Trustee.............................   9
SECTION 2.4    Periodic Reports to Property Trustee........................  10
SECTION 2.5    Evidence of Compliance with Conditions Precedent............  10
SECTION 2.6    Events of Default; Waiver...................................  10
SECTION 2.7    Event of Default; Notice....................................  11


                                  ARTICLE III
                                 ORGANIZATION

SECTION 3.1    Name........................................................  12
SECTION 3.2    Office......................................................  12
SECTION 3.3    Purpose.....................................................  12
SECTION 3.4    Authority...................................................  13
SECTION 3.5    Title to Property of the Trust..............................  13
SECTION 3.6    Powers and Duties of the Administrative Trustees............  13
SECTION 3.7    Prohibition of Actions by the Trust and the Trustees........  16
SECTION 3.8    Powers and Duties of the Property Trustee...................  17
SECTION 3.9    Certain Duties and Responsibilities of the Property Trustee.  20
SECTION 3.10   Certain Rights of Property Trustee..........................  21
SECTION 3.11   Delaware Trustee............................................  23
SECTION 3.12   Execution of Documents......................................  23
SECTION 3.13   Not Responsible for Recitals or Issuance of Securities......  24
SECTION 3.14   Duration of Trust...........................................  24
SECTION 3.15   Mergers.....................................................  24
SECTION 3.16   Property Trustee May File Proofs of Claim...................  26


                                  ARTICLE IV 
                                    SPONSOR

SECTION 4.1    Sponsor's Purchase of Common Securities.....................  27
SECTION 4.2    Responsibilities of the Sponsor.............................  27
SECTION 4.3    Right to Proceed............................................  27


                                   ARTICLE V
                                   TRUSTEES

SECTION 5.1    Number of Trustees: Appointment of Co-Trustee...............  28
SECTION 5.2    Delaware Trustee............................................  28
SECTION 5.3    Property Trustee; Eligibility...............................  29

                                      -1-
<PAGE>
 
SECTION  5.4   Certain Qualifications of Administrative Trustees
               and Delaware Trustee Generally..............................  29
SECTION  5.5   Administrative Trustees.....................................  30
SECTION  5.6   Delaware Trustee............................................  30
SECTION  5.7   Appointment, Removal and Resignation of Trustees............  30
SECTION  5.8   Vacancies Among Trustees....................................  32
SECTION  5.9   Effect of Vacancies.........................................  32
SECTION  5.10  Meetings....................................................  32
SECTION  5.11  Delegation of Power.........................................  33
SECTION  5.12  Merger, Conversion, Consolidation or Succession 
               to Business.................................................  33


                                  ARTICLE VI 
                                 DISTRIBUTIONS

SECTION  6.1   Distributions...............................................  33


                                 ARTICLE VII 
                            ISSUANCE OF SECURITIES

SECTION  7.1   General Provisions Regarding Securities.....................  34
SECTION  7.2   Execution and Authentication................................  34
SECTION  7.3   Form and Dating.............................................  35
SECTION  7.4   Registrar, Paying Agent and Exchange Agent..................  37
SECTION  7.5   Paying Agent to Hold Money in Trust.........................  37
SECTION  7.6   Replacement Securities......................................  37
SECTION  7.7   Outstanding Capital Securities..............................  38
SECTION  7.8   Capital Securities in Treasury..............................  38
SECTION  7.9   Temporary Securities........................................  38
SECTION  7.10  Cancellation................................................  39
SECTION  7.11  CUSIP Numbers...............................................  39


                                 ARTICLE VIII 
                             DISSOLUTION OF TRUST

SECTION  8.1   Dissolution of Trust........................................  40


                                  ARTICLE IX 
                             TRANSFER OF INTERESTS

SECTION  9.1   Transfer of Securities......................................  41
SECTION  9.2   Transfer Procedures and Restrictions........................  41
SECTION  9.3   Deemed Security Holders.....................................  50
SECTION  9.4   Book Entry Interests........................................  50
SECTION  9.5   Notices to Clearing Agency..................................  51
SECTION  9.6   Appointment of Successor Clearing Agency....................  51


                                  ARTICLE X 
                           LIMITATION OF LIABILITY 
                  OFHOLDERS OF SECURITIES, TRUSTEES OR OTHERS

SECTION 10.1  Liability....................................................  51
SECTION 10.2  Exculpation..................................................  52
SECTION 10.3  Fiduciary Duty...............................................  52

                                      -2-
<PAGE>
 
SECTION 10.4  Indemnification..............................................  53
SECTION 10.5  Outside Businesses...........................................  56
SECTION 10.6  Compensation; Fees...........................................  56


                                  ARTICLE XI
                                  ACCOUNTING

SECTION 11.1  Fiscal Year..................................................  57
SECTION 11.2  Certain Accounting Matters...................................  57
SECTION 11.3  Banking......................................................  57
SECTION 11.4  Withholding..................................................  58


                                  ARTICLE XII
                            AMENDMENTS AND MEETINGS

SECTION 12.1  Amendments...................................................  58
SECTION 12.2  Meetings of the Holders; Action by Written Consent...........  60


                                 ARTICLE XIII
           REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE

SECTION 13.1  Representations and Warranties of Property Trustee...........  61
SECTION 13.2  Representations and Warranties of Delaware Trustee...........  62

                                  ARTICLE XIV
                              REGISTRATION RIGHTS

SECTION 14.1  Registration Rights Agreement................................  62


                                  ARTICLE XV
                                 MISCELLANEOUS

SECTION 15.1  Notices......................................................  63
SECTION 15.2  GOVERNING LAW................................................  64
SECTION 15.3  Intention of the Parties.....................................  64
SECTION 15.4  Headings.....................................................  64
SECTION 15.5  Successors and Assigns.......................................  64
SECTION 15.6  Partial Enforceability.......................................  65
SECTION 15.7  Counterparts.................................................  65
SECTION 15.8  No Recourse..................................................  65

                                      -3-
<PAGE>
 
ANNEX I       TERMS OF SECURITIES.........................................  I-1
EXHIBIT A-1   FORM OF CAPITAL SECURITY CERTIFICATE........................ A1-1
EXHIBIT A-2   FORM OF COMMON SECURITY CERTIFICATE......................... A2-1
EXHIBIT B     SPECIMEN OF DEBENTURE.......................................  B-1
EXHIBIT C     PURCHASE AGREEMENT..........................................  C-1
EXHIBIT D     REGISTRATION RIGHTS AGREEMENT...............................  D-1

                                      -4-
<PAGE>
 
                            CROSS-REFERENCE TABLE*


    Section of
Trust Indenture Act                      Section of
of 1939, as amended                      Declaration
-------------------                      -----------
 
310(a)...........................................  5.3
310(b)...........................................  5.3(c), 5.3( d)
311(a)...........................................  2.2(b)
311(b)...........................................  2.2(b)
312(a)...........................................  2.2(a)
312(b)...........................................  2.2(b)
313..............................................  2.3
314(a)...........................................  2.4; 3.6(j)
314(c)...........................................  2.5
315(a)...........................................  3.9
315(b)...........................................  2.7(a)
315(c)...........................................  3.9(a)
315(d)...........................................  3.9(b)
316(a)...........................................  2.6
316(c)...........................................  3.6(e)
317(a)...........................................  3.8(e); 3.8(h)
317(b)...........................................  3.8(i); 7.5
---------------

*    This Cross-Reference Table does not constitute part of the Declaration and
     shall not affect the interpretation of any of its terms or provisions.

                                      -5-
<PAGE>
 
                             AMENDED AND RESTATED
                             DECLARATION OF TRUST
                                      OF
                        NGC CORPORATION CAPITAL TRUST I


          AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration") dated
and effective as of May 28, 1997, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to this Declaration;

          WHEREAS, the Trustees and the Sponsor established NGC Corporation
Capital Trust I (the "Trust"), a trust created under the Delaware Business Trust
Act pursuant to a Declaration of Trust dated as of May 20, 1997 (the "Original
Declaration"), and a Certificate of Trust filed with the Secretary of State of
the State of Delaware on May 20, 1997, 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 (each as hereinafter defined), and engaging in only those
other activities necessary, advisable or incidental thereto; and

          WHEREAS, the parties hereto, 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 business trust under the Business Trust Act
and that this Declaration constitute the governing instrument of such business
trust, the Trustees declare that all assets contributed to the Trust will be
held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration, and the
parties hereto hereby amend and restate each and every term and provision of the
original Declaration 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;
<PAGE>
 
            (d) all references in this Declaration to Articles and Sections and
     Annexes and Exhibits are to Articles and Sections of and Annexes and
     Exhibits to this Declaration unless otherwise specified;

            (e) a term defined in the Trust Indenture Act has the same meaning
     when used in this Declaration unless otherwise defined in this Declaration
     or unless the context otherwise requires; and

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

            "Administrative Trustee" has the meaning set forth in Section 5.1(b)

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

            "Agent" means any Paying Agent, Registrar or Exchange Agent.

            "Authorized Officer" of a Person means any other Person that is
authorized to legally bind such former Person.

            "Book Entry Interest" means a beneficial interest in a Global
Certificate registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.

            "Business Day" means any day other than a Saturday or a Sunday or a
day on which banking institutions in Chicago, Illinois or Houston, Texas are
authorized or required by law or executive order to close.

            "Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code (S) 3801 et seq., as it may be amended from time to time, or
any successor legislation.

            "Capital Security Beneficial Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).

            "Capital Securities" means, collectively, the Series A Capital
Securities, the Series B Capital Securities, and the Private Exchange Capital
Securities.

            "Capital Securities Guarantee" means, collectively, the Series A
Capital Securities Guarantee and the Series B Capital Securities Guarantee.

                                      -2-
<PAGE>
 
            "Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Capital Securities.

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

            "Closing Date" means the "Closing Date" under the Purchase
Agreement.

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

            "Commission" means the United States Securities and Exchange
Commission as from time to time constituted, or if any time after the execution
of this Declaration such Commission is not existing and performing the duties
now assigned to it under applicable federal securities laws, then the body
performing such duties at such time.

            "Common Securities" has the meaning specified in Section 7.1(a).
  
            "Common Securities Guarantee" means the guarantee agreement dated as
of  May 28, 1997 of the Sponsor in respect of the Common Securities.

            "Common Securities Subscription Agreement" means the subscription
agreement dated as of May 28, 1997 of the Sponsor in respect of the Common
Securities.

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

            "Corporate Trust Office" means the office of the Property Trustee at
which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at One First National Plaza, Suite
0126, Chicago, Illinois 60670.

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

            "Debenture Issuer" means NGC Corporation, a Delaware corporation, or
any successor entity resulting from any consolidation, amalgamation, merger or
other business combination, in its capacity as issuer of the Debentures under
the Indenture.

                                      -3-
<PAGE>
 
            "Debenture Subscription Agreement" means the subscription agreement
dated as of May 28, 1997 of the Trust in respect of the Debentures.

            "Debenture Trustee" means The First National Bank of Chicago, a
national banking association, as trustee under the Indenture until a successor
is appointed thereunder, and thereafter means such successor trustee.

            "Debentures" means, collectively, the Series A Debentures and the
Series B Debentures.

            "Default" means an event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.

            "Definitive Capital Securities" shall have the meaning set forth in
Section 7.3(c).

            "Delaware Trustee" has the meaning set forth in Section 5.2.

            "Direct Action" shall have the meaning set forth in Section 3.8(e).

            "Distribution" means a distribution payable to Holders in accordance
with Section 6.1.

            "DTC" means The Depository Trust Company, the initial Clearing
Agency.

            "Event of Default" in respect of the Securities means an Event of
Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Debentures.

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

            "Exchange Agent" has the meaning set forth in Section 7.4.

            "Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement (i) by the Trust to exchange Series B Capital
Securities for Series A Capital Securities, (ii) by the Debenture Issuer to
exchange Series B Debentures for Series A Debentures and (iii) by the Guarantee
Trustee to exchange the Series B Capital Securities Guarantee for the Series A
Capital Securities Guarantee.

            "Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).

            "Fiscal Year" has the meaning set forth in Section 11.1.

            "Global Capital Security" has the meaning set forth in Section
7.3(a).

                                      -4-
<PAGE>
 
            "Holder" means a Person in whose name a Security is registered, such
Person being a beneficial owner within the meaning of the Business Trust Act.

            "Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.

            "Indenture" means the Indenture dated as of May 28, 1997, among the
Debenture Issuer and the Debenture Trustee, as amended from time to time.

            "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.

            "Legal Action" has the meaning set forth in Section 3.6(g).

            "List of Holders" has the meaning set forth in Section 2.2(a).

            "Liquidated Damages" has the meaning set forth in the Registration
Rights Agreement.

            "Liquidated Damages Agreement" means the Liquidated Damages
Agreement among NGC Corporation, the Trust and the Initial Purchasers named
therein dated May 28, 1997.

            "Majority in liquidation amount" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding 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 of all outstanding Securities of the relevant class.

            "Offering Memorandum" has the meaning set forth in Section
3.6(b)(i).

            "Officers' Certificate" means, with respect to any Person, a
certificate signed by any of the Chairman of the Board, a Vice Chairman of the
Board, the Chief Executive Officer, the President or a Vice President and the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person.  Any Officers' Certificate delivered by the Trust shall be signed
by at least one Administrative Trustee.  Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Declaration shall include:

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

                                      -5-
<PAGE>
 
            (b) a brief statement of the nature and scope of the examination or
     investigation undertaken by each officer in rendering the Officers'
     Certificate;

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

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

            "Opinion of Counsel" means a written opinion of counsel, who may be
an employee of the Sponsor, and who shall be acceptable to the Property Trustee.

            "Paying Agent" has the meaning specified in Section 7.4.

            "Payment Amount" has the meaning specified in Section 6.1.

            "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.

            "PORTAL" has the meaning set forth in Section 3.6(b)(iii).

            "Private Exchange Capital Securities" means the capital securities
of the Trust issued in a Private Exchange (as defined in the Registration Rights
Agreement).

            "Property Trustee" has the meaning set forth in Section 5.3(a).

            "Property Trustee Account" has the meaning set forth in Section
3.8(c)(i).

            "Purchase Agreement" means the Purchase Agreement for the initial
offering and sale of Capital Securities in the form of Exhibit C.

            "QIBs" shall mean qualified institutional buyers as defined in Rule
144A.

            "Quorum" means a majority of the Administrative Trustees or, if
there are only two Administrative Trustees, both of them.

            "Registrar" has the meaning set forth in Section 7.4.

            "Registration Rights Agreement" means the Registration Rights
Agreement dated as of May 28, 1997, by and among the Trust, the Debenture Issuer
and the initial purchasers named therein, as amended from time to time.

                                      -6-
<PAGE>
 
            "Registration Statement" has the meaning set forth in the
Registration Rights Agreement.

            "Regulation S" means Regulation S under the Securities Act, as such
regulation may be amended from time to time, or any similar rule or regulation
hereafter adjusted by the Commission.

            "Regulation S Global Capital Security" has the meaning set forth in
Section 7.3(a).

            "Related Party" means, with respect to the Sponsor, any direct or
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.

            "Responsible Officer" means any officer within the Corporate Trust
Office of the Property Trustee with direct responsibility for the administration
of this Declaration and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

            "Restricted Definitive Capital Securities" has the meaning set forth
in Section 7.3(c).

            "Restricted Capital Security" means a Capital Security required by
Section 9.2 to contain a Restricted Securities Legend.

            "Restricted Securities Legend" has the meaning set forth in Section
9.2(i).

            "Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any
successor rule or regulation.

            "Rule 144" means Rule 144 under the Securities Act, as such rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.

            "Rule 144A" means Rule 144A under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.

            "Securities" or "Trust 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.

            "Securities Guarantees" means the Common Securities Guarantee and
the Capital Securities Guarantee.

                                      -7-
<PAGE>
 
            "Series A Capital Securities" has the meaning specified in Section
7.1(a) and may be alternatively referred to as the 8.316% Subordinated Capital
Income Securities.

            "Series A Capital Securities Guarantee" means the guarantee
agreement dated as of May 28, 1997, by the Sponsor in respect of the Series A
Capital Securities.

            "Series A Debentures" means the Series A 8.316% Subordinated
Deferrable Interest Debentures due June 1, 2027 of the Debenture Issuer issued
pursuant to the Indenture.

            "Series B Capital Securities" has the meaning specified in Section
7.1(a).

            "Series B Capital Securities Guarantee" means the guarantee
agreement to be entered in connection with the Exchange Offer by the Sponsor in
respect of the Series B Capital Securities.

            "Series B Debentures" means the Series B 8.316% Subordinated
Deferrable Interest Debentures due June 1, 2027 of the Debenture Issuer issued
pursuant to the Indenture.

            "Special Event" has the meaning set forth in Section 4(c) of Annex I
hereto.

            "Sponsor" means NGC Corporation, a Delaware corporation, or any
successor entity resulting from any merger, consolidation, amalgamation or other
business combination, in its capacity as sponsor of the Trust.

            "Successor Entity" has the meaning set forth in Section 3.15(b)(i).

            "Successor Property Trustee" has the meaning set forth in Section
3.8(f).

            "Super Majority" has the meaning set forth in Section 2.6(a)(ii).

            "10% in liquidation amount" means, with respect to the Trust
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding 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 of all outstanding Securities of the relevant class.

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

            "Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue as a trustee 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

                                      -8-
<PAGE>
 
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.

            "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.

            "Unrestricted Global Capital Security" has the meaning set forth in
Section 9.2(b).


                                  ARTICLE II
                              TRUST INDENTURE ACT

SECTION 2.1 Trust Indenture Act; Application.
            ---------------------------------

            (a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration in order for this
Declaration to be qualified under the Trust Indenture Act and shall, to the
extent applicable, be governed by such provisions.

            (b) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.

            (c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by (S)(S) 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

            (d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.

SECTION 2.2 Lists of Holders of Securities.
            -------------------------------

            (a) Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i) within 14 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such record date, provided that neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time that the List of Holders does not differ from
the most recent List of Holders given to the Property Trustee by the Sponsor and
the Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee.  The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity),

                                      -9-
<PAGE>
 
provided that the Property Trustee may destroy any List of Holders previously
given to it on receipt of a new List of Holders.

            (b) The Property Trustee shall comply with its obligations under
(S)(S) 311(a), 311(b) and 312(b) of the Trust Indenture Act.

SECTION 2.3 Reports by the Property Trustee.
            --------------------------------

            Within 60 days after May 15 of each year, commencing May 15, 1998,
the Property Trustee shall provide to the Holders of the Capital Securities such
reports as are required by (S) 313 of the Trust Indenture Act, if any, in the
form and in the manner provided by (S) 313 of the Trust Indenture Act. The
Property Trustee shall also comply with the requirements of (S) 313(d) of the
Trust Indenture Act.

SECTION 2.4 Periodic Reports to Property Trustee.
            -------------------------------------
  
            Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such documents, reports and
information as are required by (S) 314 (if any) and the compliance certificate
required by (S) 314 of the Trust Indenture Act in the form, in the manner and at
the times required by (S) 314(a)(4) of the Trust Indenture Act, such compliance
certificate to be delivered annually on or before 120 days after the end of each
fiscal year of the Sponsor.

SECTION 2.5 Evidence of Compliance with Conditions Precedent.
            -------------------------------------------------

            Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration that relate to any of the
matters set forth in (S) 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to (S) 314(c)(1) of the
Trust Indenture Act may be given in the form of an Officers' Certificate.

SECTION 2.6 Events of Default; Waiver.
            --------------------------

            (a) The Holders of a Majority in liquidation amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
and its consequences, provided that, if the underlying Event of Default under
the Indenture:

            (i) is not waivable under the Indenture, the Event of Default under
     the Declaration shall also not be waivable; or

            (ii) requires the consent or vote of greater than a majority in
     aggregate principal amount of the holders of the Debentures (a "Super
     Majority") to be waived under the Indenture, the Event of Default under the
     Declaration may only be waived by the vote of the Holders of at least the
     proportion in aggregate liquidation amount of the Capital Securities

                                      -10-
<PAGE>
 
     that the relevant Super Majority represents of the aggregate principal
     amount of the Debentures outstanding.

The foregoing provisions of this Section 2.6(a) shall be in lieu of (S)
316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.  Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon.  Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.

            (b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:

            (i) is not waivable under the Indenture, except where the Holders of
     the Common Securities are deemed to have waived such Event of Default under
     the Declaration as provided below in this Section 2.6(b), the Event of
     Default under the Declaration shall also not be waivable; or

            (ii) requires the consent or vote of a Super Majority to be waived,
     except where the Holders of the Common Securities are deemed to have waived
     such Event of Default under the Declaration as provided below in this
     Section 2.6(b), the Event of Default under the Declaration may only be
     waived by the vote of the Holders of at least the proportion in aggregate
     liquidation amount of the Common Securities that the relevant Super
     Majority represents of the aggregate principal amount of the Debentures
     outstanding;

provided further, the Holders of Common Securities will be deemed to have waived
any such Event of Default and all Events of Default with respect to the Common
Securities and their consequences if all Events of Default with respect to the
Capital Securities have been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the Holders of
the Capital Securities and only the Holders of the Capital Securities will have
the right to direct the Property Trustee in accordance with the terms of the
Securities.  The foregoing provisions of this Section 2.6(b) shall be in lieu of
(S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such (S)(S)
316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly
excluded from this Declaration and the Securities, as permitted by the Trust
Indenture Act.  Subject to the foregoing provisions of this Section 2.6(b), upon
such waiver, any such default shall cease to exist and any Event of Default with
respect to the Common Securities arising therefrom shall be deemed to have

                                      -11-
<PAGE>
 
been cured for every purpose of this Declaration, but no such waiver shall
extend to any subsequent or other default or Event of Default with respect to
the Common Securities or impair any right consequent thereon.

            (c) A waiver of an Event of Default under the Indenture by the
Property Trustee, at the direction of the Holders of the Capital Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
(S) 316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.

SECTION 2.7 Event of Default; Notice.
            -------------------------

            (a) The Property Trustee shall, within 90 days after the occurrence
of a Default actually known to a Responsible Officer, transmit by mail, first
class postage prepaid, to the Holders, notices of all such Defaults with respect
to the Securities, unless such Defaults have been cured before the giving of
such notice; provided that, except for a Default in the payment of principal of
(or premium, if any) or interest (including Compounded Interest and Additional
Sums (as such terms are defined in the Indenture), if any) or Liquidated Damages
(as defined in the Registration Rights Agreement) on any of the Debentures, the
Property Trustee shall be protected in withholding such notice if and so long as
a Responsible Officer in good faith determines that the withholding of such
notice is in the interests of the Holders.

            (b) The Property Trustee shall not be deemed to have knowledge of
any Default except:

            (i) a Default under Sections 5.01(a) (other than the payment of
     Compounded Interest, Additional Sums and Liquidated Damages) and 5.01(b) of
     the Indenture; or

            (ii) any Default as to which the Property Trustee shall have
     received written notice or of which a Responsible Officer charged with the
     administration of the Declaration shall have actual knowledge.

            (c) Within five Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Event of Default to the Holders of the Capital
Securities, the Administrative Trustees and the Sponsor, unless such Event of
Default shall have been cured or waived.  The Sponsor and the Administrative
Trustees shall file annually with the Property Trustee a certification as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under this Declaration.

                                      -12-
<PAGE>
 
                                  ARTICLE III
                                 ORGANIZATION

SECTION 3.1      Name.
                 -----

            The Trust is named "NGC Corporation Capital Trust I" as such name
may be modified from time to time by the Administrative Trustees following
written notice to the Delaware Trustee, the Property Trustee and the Holders.
The Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrative Trustees.

SECTION 3.2      Office.
                 -------

            The address of the principal office of the Trust is c/o NGC
Corporation, 1000 Louisiana, Suite 5800, Houston, Texas 77002. On ten Business
Days written notice to the Delaware Trustee, the Property Trustee and the
Holders of Securities, the Administrative Trustees may designate another
principal office.

SECTION 3.3      Purpose.
                 --------

            The exclusive purposes and functions of the Trust are (a) to issue
and sell Securities, (b) use the proceeds from the sale of the Securities to
acquire the Debentures, and (c) except as otherwise limited herein, to engage in
only those other activities necessary, advisable or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, mortgage or pledge any of its assets, or otherwise undertake (or
permit to be undertaken) any activity that would cause the Trust not to be
classified for United States federal income tax purposes as a grantor trust.

SECTION 3.4      Authority.
                 ----------

            Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust.  An
action taken by the Administrative Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust.  In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust.  Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.

SECTION 3.5      Title to Property of the Trust.
                 -------------------------------

            Except as provided in Section 3.8 with respect to the Debentures and
the Property Trustee 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.

SECTION 3.6      Powers and Duties of the Administrative Trustees.
                 -------------------------------------------------

                                      -13-
<PAGE>
 
            The Administrative Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:

            (a) to issue and sell the Securities in accordance with this
Declaration; provided, however, that except as contemplated in Section 7.1(a),
(i) the Trust may issue no more than one series of Capital Securities and no
more than one series of Common Securities, (ii) there shall be no interests in
the Trust other than the Securities, and (iii) the issuance of Securities shall
be limited to a simultaneous issuance of both Capital Securities and Common
Securities at the Closing Date;

            (b) in connection with the issue and sale of the Capital Securities
and the consummation of the Exchange Offer to:

            (i) prepare and execute, if necessary, an offering memorandum (the
     "Offering Memorandum") in preliminary and final form prepared by the
     Sponsor, in relation to the offering and sale of Series A Capital
     Securities to qualified institutional buyers in reliance on Rule 144A under
     the Securities Act and to institutional "accredited investors" (as defined
     in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), and outside
     the United States to non-U.S. persons in offshore transactions in reliance
     on Regulation S under the Securities Act, and to execute and file with the
     Commission, at such time as determined by the Sponsor, any Registration
     Statement, including any amendments thereto, as contemplated by the
     Registration Rights Agreement;

            (ii) execute and file any documents prepared by the Sponsor, or take
     any acts as determined by the Sponsor to be necessary in order to qualify
     or register all or part of the Capital Securities in any State in which the
     Sponsor has determined to qualify or register such Capital Securities for
     sale;

            (ii) if deemed necessary or desirable by the Sponsor, execute and
     file an application, prepared by the Sponsor, to permit the Capital
     Securities to trade or be quoted or listed in or on the Private Offerings,
     Resales and Trading through Automated Linkages ("PORTAL") Market or any
     other securities exchange, quotation system or the Nasdaq Stock Market's
     National Market;

            (iv) execute and deliver letters, documents, or instruments with DTC
     and other Clearing Agencies relating to the Capital Securities;

            (v) if required, execute and file with the Commission a registration
     statement on Form 8-A, including any amendments thereto, prepared by the
     Sponsor, relating to the registration of the Capital Securities under
     Section 12(b) of the Exchange Act;

            (vi) execute and enter into the Purchase Agreement and the
     Registration Rights Agreement providing for the sale and registration of
     the Capital Securities; and

                                      -14-
<PAGE>
 
          (vii) execute and enter into the Liquidated Damages Agreement, the
     Debenture Subscription Agreement and the Common Securities Subscription
     Agreement;

          (c) to acquire the Series A Debentures with the proceeds of the sale
of the Series A Capital Securities and the Common Securities and to exchange the
Series A Debentures for a like principal amount of Series B Debentures, pursuant
to the Exchange Offer; provided, however, that the Administrative Trustees shall
cause legal title to the Debentures to be held of record in the name of the
Property Trustee for the benefit of the Holders;

          (d) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of a Special Event;

          (e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of (S) 316(c) of the Trust Indenture Act, 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;

          (f) to take all actions and perform such duties as may be required of
the Administrative Trustees pursuant to the terms of the Securities;

          (g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;

          (h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;

          (i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;

          (j) to give the certificate required by (S) 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;

          (k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;

          (l) to act as, or appoint another Person to act as, Registrar and
Exchange Agent for the Securities or to appoint a Paying Agent for the
Securities as provided in Section 7.4 except for such time as such power to
appoint a Paying Agent is vested in the Property Trustee;

                                      -15-
<PAGE>
 
          (m) to give prompt written notice to the Property Trustee and to
Holders of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;

          (n) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders or to enable the Trust
to effect the purposes for which the Trust was created;

          (o) to take any action, not inconsistent with this Declaration or with
applicable law, that the Administrative Trustees determine in their discretion
to be necessary or desirable in carrying out the activities of the Trust as set
out in this Section 3.6, including, but not limited to:

          (i) causing the Trust not to be deemed to be an Investment Company
     required to be registered under the Investment Company Act;

          (ii) causing the Trust to be classified for United States federal
     income tax purposes as a grantor trust; and

          (iii) cooperating with the Debenture Issuer to ensure that the
     Debentures will be treated as indebtedness of the Debenture Issuer for
     United States federal income tax purposes;

          (p) to take all action necessary to consummate the Exchange Offer or
otherwise cause the Capital Securities to be registered pursuant to an effective
registration statement in accordance with the provisions of the Registration
Rights Agreement;

          (q) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Administrative Trustees, on behalf of
the Trust; and

          (r) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.

          The Administrative Trustees must exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Administrative Trustees shall not take
any action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.

          Subject to this Section 3.6, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.8.

                                      -16-
<PAGE>
 
          The Administrative Trustees shall take all actions on behalf of the
Trust that are not specifically required by this Declaration to be taken by any
other Trustee.

          Any expenses incurred by the Administrative Trustees pursuant to this
Section 3.6 shall be reimbursed by the Debenture Issuer.

 SECTION 3.7        Prohibition of Actions by the Trust and the Trustees.
                    ---------------------------------------------------- 

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

          (i) invest any proceeds received by the Trust from holding the
     Debentures, but shall distribute all such proceeds to Holders 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, except
     as otherwise 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) other than as provided in this Declaration or Annex I, (A)
     direct the time, method and place of conducting any proceeding with respect
     to any remedy available to the Debenture Trustee, or 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, or (C) exercise any right to rescind or annul any declaration
     that the principal of all the Debentures shall be due and payable;

          (viii)  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 an opinion of independent tax counsel experienced
     in such matters to the effect that such amendment, modification or
     termination will not cause more than an insubstantial risk that for United
     States federal income tax purposes the Trust will not be classified as a
     grantor trust;

                                      -17-
<PAGE>
 
          (ix)  take or consent to any action that would result in the placement
     of a lien, pledge, charge, mortgage or other encumbrance on any of the
     Trust property;

          (x) vary the investment (within the meaning of Treasury Regulation
     Section 301.7701-4(c)) of the Trust or of the Holders of Securities; or

          (xi)  after the date hereof, enter into any contract or agreement
     (other than any other depositary agreement or any agreement with any
     securities exchange or automated quotation system) that does not expressly
     provide that the Holders of Capital Securities, in their capacities as
     such, have limited liability (in accordance with the provisions of the
     Business Trust Act) for the liabilities and obligations of the Trust, which
     express provision shall be in substantially the following form, "The
     Holders of the Capital Securities, in their capacities as such, shall not
     be personally liable for any liabilities or obligations of the Trust
     arising out of this Agreement, and the parties hereto hereby agree that the
     Holders of the Capital Securities, in their capacities as such, 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 3.8        Powers and Duties of the Property Trustee.
                    ----------------------------------------- 

          (a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the Trust
and the Holders.  The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.7.  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 Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).

          (c)   The Property Trustee shall:

          (i) establish and maintain a segregated non-interest bearing trust
     account (the "Property Trustee Account") in the name of and under the
     exclusive control of the Property Trustee on behalf of the Holders and,
     upon the receipt of payments of funds made in respect of the Debentures
     held by the Property Trustee, deposit such funds into the Property Trustee
     Account and make payments or cause the Paying Agent to make payments to the
     Holders from the Property Trustee Account in accordance with Section 6.1.
     Funds in the Property Trustee Account shall be held uninvested until
     disbursed in accordance with this Declaration. The Property Trustee Account
     shall be an account that is maintained with a banking institution the
     rating on whose long-term unsecured indebtedness by a "nationally
     recognized statistical rating organization", as that term is defined for
     purposes of Rule 436(g)(2) under the Securities Act, is at least investment
     grade;

                                      -18-
<PAGE>
 
          (ii)  engage in such ministerial activities as shall be necessary or
     appropriate to effect the redemption of the Trust Securities to the extent
     the Debentures are redeemed or mature; and

          (iii)  upon written notice of distribution issued by the
     Administrative Trustees 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 upon the occurrence
     of certain events.

          (d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Securities.

          (e) If an Event of Default has occurred and is continuing, then the
Holders of a Majority in liquidation amount of Capital Securities have the right
to direct the exercise of any trust or power conferred upon the Property Trustee
under this Declaration, including the right to direct the Property Trustee to
exercise the remedies available to it as holder of the Debentures and the
Capital Securities Guarantee.  Subject to Section 3.9(a), the Property Trustee
shall take any Legal Action which arises out of or in connection with an Event
of Default of which a Responsible Officer has actual knowledge or the Property
Trustee's duties and obligations under this Declaration or the Trust Indenture
Act and if the Property Trustee shall have failed to take such Legal Action, the
Holders of the Capital Securities, to the fullest extent permitted by law, may
take such Legal Action, to the same extent as if such Holders of Capital
Securities held an aggregate principal amount of Debentures equal to the
aggregate liquidation amount of such Capital Securities, without first
proceeding against the Property Trustee or the Trust; 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 the principal of or
premium, if any, or interest (including Compounded Interest and Additional Sums,
if any) or Liquidated Damages, if any, on the Debentures on the date such
principal, premium, if any, or interest (including Compounded Interest and
Additional Sums, if any) or Liquidated Damages, if any, is otherwise payable (or
in the case of redemption, on the redemption date), then a Holder of Capital
Securities may directly institute a proceeding for enforcement of payment to
such Holder of the principal of or premium, if any, or interest (including
Compounded Interest and Additional Sums, if any) or Liquidated Damages, if any,
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 Capital Securities to the extent of
any payment made by the Debenture Issuer to such Holder of Capital Securities in
such Direct Action.  Except as provided in the preceding sentences, the Holders
of Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.

          (f) The Property Trustee shall continue to serve as a Trustee until
either:

                                      -19-
<PAGE>
 
          (i) the Trust has been completely liquidated and the proceeds of the
     liquidation distributed to the Holders pursuant to the terms of the
     Securities; or

          (ii)  a successor Property Trustee has been appointed and has accepted
     that appointment in accordance with Section 5.7 (a "Successor Property
     Trustee").

          (g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the Indenture
and, if an Event of Default actually known to a Responsible Officer occurs and
is continuing, the Property Trustee shall, for the benefit of Holders, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to the terms of such Securities.

          (h) The Property Trustee shall be authorized to undertake any actions
set forth in (S) 317(a) of the Trust Indenture Act.

          (i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities and any such Paying Agent
shall comply with (S) 317(b) of the Trust Indenture Act.  Any such additional
Paying Agent may be removed by the Property Trustee at any time the Property
Trustee remains as Paying Agent and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time by the
Property Trustee while the Property Trustee is so acting as Paying Agent.

          (j) Subject to this Section 3.8, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.6.

          Notwithstanding anything expressed or implied to the contrary in this
Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must
exercise the powers set forth in this Section 3.8 in a manner that is consistent
with the purposes and functions of the Trust set out in Section 3.3, and (ii)
the Property Trustee shall not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 3.3.

 SECTION 3.9        Certain Duties and Responsibilities of the Property Trustee.
                    ----------------------------------------------------------- 

          (a) The Property Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and in the Securities and no implied covenants shall be read
into this Declaration against the Property Trustee.  In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6) of
which a Responsible Officer has actual knowledge, the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.

                                      -20-
<PAGE>
 
          (b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

          (i) prior to the occurrence of an Event of Default and after the
     curing or waiving of all such Events of Default that may have occurred:

                (A) the duties and obligations of the Property Trustee shall be
          determined solely by the express provisions of this Declaration and in
          the Securities and the Property Trustee shall not be liable except for
          the performance of such duties and obligations as are specifically set
          forth in this Declaration and in the Securities, and no implied
          covenants or obligations shall be read into this Declaration or the
          Securities against the Property Trustee; and

                (B) in the absence of bad faith on the part of the Property
          Trustee, the Property Trustee may conclusively rely, as to the truth
          of the statements and the correctness of the opinions expressed
          therein, upon any certificates or opinions furnished to the Property
          Trustee and conforming to the requirements of this Declaration;
          provided, however, that in the case of any such certificates or
          opinions that by any provision hereof are specifically required to be
          furnished to the Property Trustee, the Property Trustee shall be under
          a duty to examine the same to determine whether or not they conform to
          the requirements of this Declaration;

          (ii)  the Property Trustee shall not be liable for any error of
     judgment made in good faith by a Responsible Officer, unless it shall be
     proved that the Property Trustee was negligent in ascertaining the
     pertinent facts;

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

          (iv)  no provision of this Declaration shall require the Property
     Trustee to expend or risk its own funds or otherwise incur personal
     financial liability in the performance of any of its duties or in the
     exercise of any of its rights or powers, if it shall have reasonable
     grounds for believing that the repayment of such funds or liability is not
     reasonably assured to it under the terms of this Declaration or indemnity
     reasonably satisfactory to the Property Trustee against such risk or
     liability is not reasonably assured to it;

          (v) the Property Trustee's sole duty with respect to the custody,
     safekeeping and physical preservation of the Debentures and the Property
     Trustee Account shall be to deal with such property in a similar manner as
     the Property Trustee deals with similar 

                                      -21-
<PAGE>
 
     property for its own account, subject to the protections and limitations on
     liability afforded to the Property Trustee under this Declaration and the
     Trust Indenture Act;

          (vi)  the Property Trustee shall have no duty or liability for or with
     respect to the value, genuineness, existence or sufficiency of the
     Debentures or the payment of any taxes or assessments levied thereon or in
     connection therewith;

          (vii)  the Property 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. Money held by the Property Trustee need not be segregated from
     other funds held by it except in relation to the Property Trustee Account
     maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except
     to the extent otherwise required by law; and

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

 SECTION 3.10  Certain Rights of Property Trustee.
               ---------------------------------- 

          (a) Subject to the provisions of Section 3.9:

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

          (ii)  any direction or act of the Sponsor or the Administrative
     Trustees contemplated by this Declaration may be sufficiently evidenced by
     an Officers' Certificate;

          (iii)  whenever in the administration of this Declaration, the
     Property Trustee shall deem it desirable that a matter be proved or
     established before taking, suffering or omitting any action hereunder, the
     Property Trustee (unless other evidence is herein specifically prescribed)
     may, in the absence of bad faith on its part, request and conclusively rely
     upon an Officers' Certificate which, upon receipt of such request, shall be
     promptly delivered by the Sponsor or the Administrative Trustees;

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

          (v) the Property Trustee may consult with counsel or other experts of
     its selection and the advice or opinion of such counsel and experts with
     respect to legal matters 

                                      -22-
<PAGE>
 
     or advice within the scope of such experts' area of expertise shall be full
     and complete authorization and protection in respect of any action taken,
     suffered or omitted by it hereunder in good faith and in accordance with
     such advice or opinion, such counsel may be counsel to the Sponsor or any
     of its Affiliates, and may include any of its employees. The Property
     Trustee shall have the right at any time to seek instructions concerning
     the administration of this Declaration from any court of competent
     jurisdiction;

          (vi)  the Property Trustee shall be under no obligation to exercise
     any of the rights or powers vested in it by this Declaration at the request
     or direction of any Holder, unless such Holder shall have provided to the
     Property Trustee security and indemnity, reasonably satisfactory to the
     Property Trustee, against the costs, expenses (including reasonable
     attorneys' fees and expenses and the expenses of the Property Trustee's
     agents, nominees or custodians) and liabilities that might be incurred by
     it in complying with such request or direction, including such reasonable
     advances as may be requested by the Property Trustee provided, that,
     nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the
     Property Trustee, upon the occurrence of an Event of Default, of its
     obligation to exercise the rights and powers vested in it by this
     Declaration;

          (vii)  the Property Trustee shall not be bound to make any
     investigation into the facts or matters stated in any resolution,
     certificate, statement, instrument, opinion, report, notice, request,
     direction, consent, order, bond, debenture, note, other evidence of
     indebtedness or other paper or document, but the Property Trustee, in its
     discretion, may make such further inquiry or investigation into such facts
     or matters as it may see fit;

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

          (ix)  any action taken by the Property Trustee or its agents hereunder
     shall bind the Trust and the Holders, and the signature of the Property
     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 Property Trustee to so act or as to its compliance with
     any of the terms and provisions of this Declaration, both of which shall be
     conclusively evidenced by the Property Trustee's or its agent's taking such
     action;

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

                                      -23-
<PAGE>
 
     received, and (iii) shall be protected in conclusively relying on or acting
     in accordance with such instructions;

          (xi)  except as otherwise expressly provided by this Declaration, the
     Property Trustee shall not be under any obligation to take any action that
     is discretionary under the provisions of this Declaration; and

          (xii)  the Property Trustee shall not be liable for any action taken,
     suffered, or omitted to be taken by it in good faith, without negligence,
     and reasonably believed by it to be authorized or within the discretion or
     rights or powers conferred upon it by this Declaration.

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

 SECTION 3.11  Delaware Trustee.
               ---------------- 

          Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Trustees (except as required under the Business Trust Act) described in this
Declaration.  Except as set forth in Section 5.2, the Delaware Trustee shall be
a Trustee for the sole and limited purpose of fulfilling the requirements of (S)
3807 of the Business Trust Act.  In the event the Delaware Trustee shall at any
time be required to take any action or perform any duty hereunder, the Delaware
Trustee shall be entitled to the benefits of Section 3.9(b)(ii)-(viii) and
Section 3.10.  No implied covenants or obligations shall be read into this
Declaration against the Delaware Trustee.

 SECTION 3.12  Execution of Documents.
               ---------------------- 

          Except as otherwise required by the Business Trust Act or this
Declaration, any Administrative Trustee or, if there is only one, such
Administrative Trustee is authorized to execute on behalf of the Trust any
documents that the Administrative Trustees have the power and authority to
execute pursuant to Section 3.6; provided that any Registration Statements
contemplated by the Registration Rights Agreement and referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Administrative Trustees.

 SECTION 3.13  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. 

                                      -24-
<PAGE>
 
The Trustees make no representations as to the value or condition of the
property of the Trust or any part thereof. The Trustees make no representations
as to the validity or sufficiency of this Declaration or the Securities.

 SECTION 3.14  Duration of Trust.
               ----------------- 

          The Trust, unless dissolved pursuant to the provisions of Article VIII
hereof, shall have existence up to June 1, 2028.

 SECTION 3.15  Mergers.
               ------- 

          (a) The Trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c) of this Declaration and Section 3 of Annex I.

          (b) The Trust may, at the request of the Sponsor, with the consent of
the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to, a trust organized as
such under the laws of any State; provided that:

          (i) such successor entity (the "Successor Entity") either:

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

                (B) substitutes for the Securities other securities having
          substantially the same terms as the Securities (the "Successor
          Securities") so long as 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 the same powers and duties as the Property Trustee as the
     holder of the Debentures;

          (iii)  the Successor Securities are listed, or any Successor
     Securities will be listed upon notification of issuance, on any national
     securities exchange or with another organization on which the Capital
     Securities are then listed or quoted, if any;

          (iv)  if the Capital Securities (including any Successor Securities)
     are rated by any nationally recognized statistical rating organization
     prior to such transaction, such merger, consolidation, amalgamation,
     replacement, conveyance, transfer or lease does not 

                                      -25-
<PAGE>
 
     cause the Capital Securities (including any Successor Securities), or if
     the Debentures are so rated, the Debentures, to be downgraded by any
     nationally recognized statistical rating organization;

          (v) such merger, conversion, consolidation, amalgamation, replacement,
     conveyance, transfer or lease does not adversely affect the rights,
     preferences and privileges of the Holders (including the holders of any
     Successor Securities) in any material respect (other than with respect to
     any dilution of such Holders' interests in the new entity);

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

          (vii)  prior to such merger, consolidation, amalgamation, replacement,
     conveyance, transfer or lease, the Sponsor has received an opinion of an
     independent counsel to the Trust experienced in such matters to the effect
     that:

                (A) such merger, consolidation, amalgamation, replacement,
          conveyance, transfer or lease does not adversely affect the rights,
          preferences and privileges of the Holders (including the holders of
          any Successor Securities) in any material respect (other than with
          respect to any dilution of the Holders' interest in the new entity);

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

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

          (viii)  the Sponsor or any permitted successor or assignee owns all of
     the common securities of such Successor Entity and guarantees the
     obligations of such Successor Entity under the Successor Securities at
     least to the extent provided by the Capital Securities Guarantee and the
     Common Securities Guarantee;

          (ix)  such Successor Entity expressly assumes all of the obligations
     of the Trust with respect to the Trustee; and

          (x) there shall have been furnished to the Property Trustee an
     Officers' Certificate and an Opinion of Counsel, each to the effect that
     all conditions precedent in this Declaration to such transaction have been
     satisfied.

          (c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge 

                                      -26-
<PAGE>
 
with or into, convert into, or be replaced by, or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to, any
other Person or permit any other Person to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Trust or the Successor Entity not
to be classified as a grantor trust for United States federal income tax
purposes or would cause the Holders of the Securities not to be treated as
owning an undivided interest in the Debentures.

 SECTION 3.16  Property Trustee May File Proofs of Claim.
               ----------------------------------------- 

     In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:

          (a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Securities (or, if the
Securities are original issue discount Securities, such portion of the
liquidation amount as may be specified in the terms of such Securities) and to
file such other papers or documents as may be necessary or advisable in order to
have the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding, and

          (b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.

     Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or compensation affecting the
Securities or the rights of any Holder thereof to authorize the Property Trustee
to vote in respect of the claim of any Holder in any such proceeding.

                                      -27-
<PAGE>

                                  ARTICLE IV
                                    SPONSOR
 
 SECTION 4.1   Sponsor's Purchase of Common Securities.
               --------------------------------------- 

          At the Closing Date, the Sponsor will purchase all of the Common
Securities then issued by the Trust, in an amount equal to at least 3% of the
total capital of the Trust, at the same time as the Series A Capital Securities
are issued and sold.

 SECTION 4.2   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 the
following activities:

          (a) to prepare the Offering Memorandum and to prepare for filing by
the Trust with the Commission any Registration Statement, including any
amendments thereto, as contemplated by the Registration Rights Agreement;

          (b) to determine the States in which to take appropriate action 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;

          (c) if deemed necessary or desirable by the Sponsor, to prepare for
filing by the Trust an application to permit the Capital Securities to trade or
be quoted or listed in or on the PORTAL market, or any other securities
exchange, quotation system or the Nasdaq Stock Market's National Market;

          (d) if deemed necessary or desirable by the Sponsor, to prepare for
filing by the Trust with the Commission a registration statement on Form 8-A,
including any amendments thereto, relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act;

          (e) to negotiate the terms of the Purchase Agreement and the
Registration Rights Agreement providing for the sale and registration of the
Capital Securities; and

          (f) to negotiate the terms of the Liquidated Damages Agreement, the
Debenture Subscription Agreement and the Common Securities Agreement.

 SECTION 4.3   Right to Proceed.
               ---------------- 

          The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on the
Capital Securities is attributable to the failure of the Company to pay interest
or principal on the Debentures, to institute a proceeding directly against the
Debenture Issuer for enforcement of its payment obligations on the Debentures.

                                      -28-
<PAGE>
 
                                   ARTICLE V
                                   TRUSTEES

 SECTION 5.1   Number of Trustees: Appointment of Co-Trustee.
               --------------------------------------------- 

          The number of Trustees initially shall be five (5), 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 Holders of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities;

provided, however, that, the number of Trustees shall in no event be less than
two (2); provided further that (1) one Trustee shall satisfy the requirements of
the Delaware Trustee pursuant to Section 5.2; (2) there shall be at least one
Trustee who is an officer of the Sponsor (an "Administrative Trustee"); and (3)
one Trustee shall be the Property Trustee for so long as this Declaration is
required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements.  Notwithstanding the above, unless an Event of Default shall have
occurred and be continuing, at any time or times, for the purpose of meeting the
legal requirements of the Trust Indenture Act or of any jurisdiction in which
any part of the Trust's property may at the time be located, the Holders of a
Majority in liquidation amount of the Common Securities acting as a class at a
meeting of the Holders of the Common Securities, and the Administrative Trustees
shall have power to appoint one or more Persons either to act as a co-trustee,
jointly with the Property Trustee, of all or any part of the Trust's property,
or to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in such capacity any property, title, right or power deemed
necessary or desirable, subject to the provisions of this Declaration.  In case
an Event of Default has occurred and is continuing, the Property Trustee alone
shall have power to make any such appointment of a co-trustee.

 SECTION 5.2   Delaware Trustee.
               ---------------- 

          If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:

          (a) a natural person who is a resident of the State of Delaware; or

          (b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,

                                      -29-
<PAGE>
 
provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.

 SECTION 5.3   Property Trustee; Eligibility.
               ----------------------------- 

          (a) There shall at all times be one Trustee (the "Property Trustee")
which shall act as Property Trustee which shall:

          (i) not be an Affiliate of the Sponsor; and

          (ii)  be a Person organized and doing business under the laws of the
     United States of America or any State or Territory thereof or of the
     District of Columbia, or a Person permitted by the Commission to act as an
     institutional trustee under the Trust Indenture Act, authorized under such
     laws to exercise corporate trust powers, having a combined capital and
     surplus of at least 50 million U.S. dollars ($50,000,000), and subject to
     supervision or examination by Federal, State, Territorial or District of
     Columbia authority. If such Person 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 5.3(a)(ii), the combined capital and surplus of such corporation
     shall be deemed to be its combined capital and surplus as set forth in its
     most recent report of condition so published.

          (b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.7(c).

          (c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of (S) 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in (S) 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of (S) 310(b) of the Trust Indenture Act.

          (d) The Capital Securities Guarantee and the Indenture shall be deemed
to be specifically described in this Declaration for purposes of clause (i) of
the first proviso contained in (S) 310(b) of the Trust Indenture Act.

          (e) The initial Property Trustee shall be:

                The First National Bank of Chicago
                One First National Plaza, Suite 0126
                Chicago, Illinois  60670-0126
                Attention:    Corporate Trust Services Division

 SECTION 5.4   Certain Qualifications of Administrative Trustees and Delaware
               --------------------------------------------------------------
               Trustee Generally.
               ------------------ 

                                      -30-
<PAGE>
 
          Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.

 SECTION 5.5   Administrative Trustees.
               ----------------------- 

          The initial Administrative Trustees shall be:

                     John U. Clarke
                     Robert D. Doty
                     Robert T. Ray

          (a) Except as expressly set forth in this Declaration and except if a
meeting of the Administrative Trustees is called with respect to any matter over
which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.

          (b) An Administrative Trustee shall have the authority set forth in
Section 3.12 to execute on behalf of the Trust any documents which the
Administrative Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6 provided that any Registration Statements
contemplated by the Registration Rights Agreement and referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Administrative Trustees.

 SECTION 5.6   Delaware Trustee.
               ---------------- 

          The initial Delaware Trustee shall be:

                First Chicago Delaware Inc.
                300 King Street
                Wilmington, Delaware  19801
                Attention:    Michael J. Majchrzak

 SECTION 5.7   Appointment, Removal and Resignation of Trustees.
               ------------------------------------------------ 

          (a) Subject to Section 5.7(b) of this Declaration and to Section 6(b)
of Annex I hereto, Trustees may be appointed or removed without cause at any
time:

          (i) until the issuance of any Securities, by written instrument
     executed by the Sponsor;

          (ii)  unless an Event of Default shall have occurred and be continuing
     after the issuance of any Securities, by vote of the Holders of a Majority
     in liquidation amount of the Common Securities voting as a class at a
     meeting of the Holders of the Common Securities; and

                                      -31-
<PAGE>
 
          (iii)  if an Event of Default shall have occurred and be continuing
     after the issuance of the Securities, with respect to the Property Trustee
     or the Delaware Trustee, by vote of Holders of a Majority in liquidation
     amount of the Capital Securities voting as a class at a meeting of Holders
     of the Capital Securities.

          (b)  (i)  The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.7(a) until a Successor Property Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Property Trustee and delivered to the Administrative Trustees
and the Sponsor; and

          (ii)  the Trustee that acts as Delaware Trustee shall not be removed
     in accordance with this Section 5.7(a) until a successor Trustee possessing
     the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
     "Successor Delaware Trustee") has been appointed and has accepted such
     appointment by written instrument executed by such Successor Delaware
     Trustee and delivered to the Administrative Trustees and the Sponsor.

          (c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:

          (i) No such resignation of the Trustee that acts as the Property
     Trustee shall be effective:

                (A) until a Successor Property Trustee has been appointed and
          has accepted such appointment by instrument executed by such Successor
          Property Trustee and delivered to the Trust, the Sponsor and the
          resigning Property Trustee; or

                (B) until the assets of the Trust have been completely
          liquidated and the proceeds thereof distributed to the Holders; and

          (ii)  no such resignation of the Trustee that acts as the Delaware
     Trustee shall be effective until a Successor Delaware Trustee has been
     appointed and has accepted such appointment by instrument executed by such
     Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
     resigning Delaware Trustee.

          (d) The Holders of the Common Securities or, if an Event of Default
shall have occurred and be continuing after the issuance of the Securities, the
Holders of the Capital Securities shall use their best efforts to promptly
appoint a Successor Delaware Trustee or Successor Property Trustee, as the case
may be, if the Property Trustee or the Delaware Trustee delivers an instrument
of resignation in accordance with this Section 5.7.

                                      -32-
<PAGE>
 
          (e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.7 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Property Trustee or Successor Delaware Trustee.  Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.

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

          (g) At the time of resignation or removal of the Property Trustee or
the Delaware Trustee, the Debenture Issuer shall pay to such Trustee any amounts
that may be owed to such Trustee pursuant to Section 10.4.

 SECTION 5.8   Vacancies Among Trustees.
               ------------------------ 

          If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur.  A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy.  The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.7.

 SECTION 5.9   Effect of Vacancies.
               ------------------- 

          The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate or annul the Trust.  Whenever a vacancy in
the number of Administrative Trustees shall occur, until such vacancy is filled
by the appointment of an Administrative Trustee in accordance with Section 5.7,
the Administrative Trustees in office, regardless of their number, shall have
all the powers granted to the Administrative Trustees and shall discharge all
the duties imposed upon the Administrative Trustees by this Declaration.

 SECTION 5.10  Meetings.
               -------- 

          If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee.  Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees 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 such meeting.  Notice
of any telephonic meetings of the Administrative Trustees or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 

                                      -33-
<PAGE>
 
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 an Administrative Trustee at a meeting shall constitute a
waiver of notice of such meeting except where an Administrative Trustee attends
a meeting for the express purpose of objecting to the transaction of any
activity on the ground that the meeting has not been lawfully called or
convened. Unless provided otherwise in this Declaration, any action of the
Administrative Trustees may be taken at a meeting by vote of a majority of the
Administrative Trustees 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 Administrative
Trustees. In the event there is only one Administrative Trustee, any and all
action of such Administrative Trustee shall be evidenced by a written consent of
such Administrative Trustee.

 SECTION 5.11  Delegation of Power.
               ------------------- 

          (a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and

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

 SECTION 5.12  Merger, Conversion, Consolidation or Succession to Business.
               ----------------------------------------------------------- 

     Any Person into which the Property Trustee or the Delaware Trustee or any
Administrative Trustee that is not a natural person, as the case may be, 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 Property
Trustee or the Delaware Trustee or the Administrative Trustees, as the case may
be, shall be a party, or any Person succeeding to all or substantially all the
corporate trust business of the Property Trustee or the Delaware Trustee or the
Administrative Trustees, as the case may be, shall be the successor of the
Property Trustee or the Delaware Trustee or the Administrative Trustees, as the
case may be, hereunder, provided such Person shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto.


                                  ARTICLE VI
                                 DISTRIBUTIONS

 SECTION 6.1   Distributions.
               ------------- 

                                      -34-
<PAGE>
 
          Holders shall receive Distributions in accordance with the applicable
terms of the relevant Holder's Securities.  If and to the extent that the
Debenture Issuer makes a payment of interest (including Compounded Interest and
Additional Sums), premium and/or principal on the Debentures held by the
Property Trustee or Liquidated Damages or any other payments pursuant to the
Registration Rights Agreement or the Liquidated Damages Agreement with respect
to the Debentures held by the Property Trustee (the amount of any such payment
being a "Payment Amount"), the Property Trustee shall and is directed, to the
extent funds are available for that purpose, to make a distribution (a
"Distribution") of the Payment Amount to Holders.


                                  ARTICLE VII
                            ISSUANCE OF SECURITIES

 SECTION 7.1   General Provisions Regarding Securities.
               --------------------------------------- 

          (a) The Administrative Trustees shall on behalf of the Trust issue one
class of subordinated capital income securities representing undivided
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I (the "Series A Capital Securities") and one class of common
securities representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Annex I (the "Common Securities").
Annex I is hereby incorporated in and made a part of this Declaration.  The
Administrative Trustees shall on behalf of the Trust issue one class of
subordinated capital income securities representing undivided beneficial
interests in the Trust having such terms as set forth in Annex I (the "Series B
Capital Securities") in exchange for the Series A Capital Securities accepted
for exchange in the Exchange Offer (and if required pursuant to the Registration
Rights Agreement, the Private Exchange Capital Securities), which Series B
Capital Securities shall not bear the legends required by Section 9.2(i) unless
the Holder of such Series A Capital Securities is either (A) a broker-dealer who
purchased such Series A Capital Securities directly from the Trust for resale
pursuant to Rule 144A or any other available exemption under the Securities Act,
(B) a Person participating in the distribution of the Series A Capital
Securities or (C) a Person who is an affiliate (as defined in Rule 144A) of the
Trust.  The Trust shall issue no securities or other interests in the assets of
the Trust other than the Trust Securities.

          (b) 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.

          (c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable undivided beneficial interests in the assets of Trust.

          (d) Every Person, by virtue of having become a Holder or a Capital
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.

                                      -35-
<PAGE>
 
          (e) Holders of the Securities shall not have any preemptive or similar
rights.

 SECTION 7.2   Execution and Authentication.
               ---------------------------- 

          (a) The Securities shall be signed on behalf of the Trust by an
Administrative Trustee by manual or facsimile signature.  In case any
Administrative Trustee of the Trust who shall have signed any of the Securities
shall cease to be such Administrative Trustee before the Securities so signed
shall be delivered by the Trust, such Securities nevertheless may be delivered
as though the person who signed such Securities had not ceased to be such
Administrative Trustee; and any Securities may be signed on behalf of the Trust
by such persons who, at the actual date of execution of such Security, shall be
the Administrative Trustees of the Trust, although at the date of the execution
and delivery of the Declaration any such person was not such an Administrative
Trustee.

          (b) One Administrative Trustee shall sign the Capital Securities for
the Trust by manual or facsimile signature.  Unless otherwise determined by the
Trust, such signature shall, in the case of Common Securities, be a manual
signature.

          A Capital Security shall not be valid until authenticated by the
manual or facsimile signature of an authorized signatory of the Property
Trustee.  The signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration.

          Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Capital Securities for
original issue.  The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in the Terms in Annex I hereto except
as provided in Section 7.6.

          The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Capital Securities.  An authenticating agent may
authenticate Capital Securities whenever the Property Trustee may do so.  Each
reference in this Declaration to authentication by the Property Trustee includes
authentication by such agent.  An authenticating agent has the same rights as
the Property Trustee to deal with the Sponsor or an Affiliate.

 SECTION 7.3   Form and Dating.
               --------------- 

          The Capital Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Securities 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 representing the Securities may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by their execution thereof.  The
Securities may have letters, CUSIP or other 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 Trust).  The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Property 

                                      -36-
<PAGE>
 
Trustee in writing. Each Capital Security shall be dated 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 Property Trustee and
the Sponsor, by their execution and delivery of this Declaration, expressly
agree to such terms and provisions and to be bound thereby.

          (a) Global Securities.  Securities offered and sold to QIBs in
reliance on Rule 144A or offered and sold outside the United States to non-U.S.
persons in offshore transactions in reliance on Regulation S, as provided in the
Purchase Agreement, shall be issued in the form of one or more permanent global
Securities in definitive, fully registered form without distribution coupons
with the appropriate global legends and applicable Restricted Securities Legend
set forth in Exhibit A-1 hereto (respectively, a "Rule 144A Global Capital
Security" or "Regulation S Global Capital Security," each a "Global Capital
Security" and collectively, the "Global Capital Securities"), which shall be
deposited on behalf of the purchasers of the Capital Securities represented
thereby with the Property Trustee, as custodian for the Clearing Agency, and
registered in the name of the Clearing Agency or a nominee of the Clearing
Agency, duly executed by the Trust and authenticated by the Property Trustee as
hereinafter provided.  The number of Capital Securities represented by the Rule
144A Global Capital Security and the Regulation S Global Capital Security may
from time to time be increased or decreased by adjustments made on the records
of the Property Trustee and the Clearing Agency or its nominee as hereinafter
provided.

          (b) Book-Entry Provisions.  This Section 7.3(b) shall apply only to
the Rule 144A Global Capital Security, the Regulation S Global Capital Security
and such other Capital Securities in global form as may be authorized by the
Trust to be deposited with or on behalf of the Clearing Agency.

          The Trust shall execute and the Property Trustee shall, in accordance
with this Section 7.3, authenticate and make available for delivery initially
one or more Rule 144A Global Capital Securities and one or more Regulation S
Global Capital Securities that (i) shall be registered in the name of Cede & Co.
or other nominee of such Clearing Agency and (ii) shall be delivered by the
Trustee to such Clearing Agency or pursuant to such Clearing Agency's written
instructions or held by the Property Trustee as custodian for the Clearing
Agency.

          Members of, or participants in, the Clearing Agency ("Participants")
shall have no rights under this Declaration with respect to any Rule 144A Global
Capital Security or any Regulation S Global Capital Security held on their
behalf by the Clearing Agency or by the Property Trustee as the custodian of the
Clearing Agency or under such Rule 144A Global Capital Security or any
Regulation S Global Capital Security, and the Clearing Agency may be treated by
the Trust, the Property Trustee and any agent of the Trust or the Property
Trustee as the absolute owner of such Rule 144A Global Capital Security or any
Regulation S Global Capital Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust, the
Property Trustee or any agent of the Trust or the Property Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Clearing Agency or impair, as between the Clearing Agency and its
Participants, the operation of customary practices of such Clearing 

                                      -37-
<PAGE>
 
Agency governing the exercise of the rights of a holder of a beneficial interest
in any Rule 144A Global Capital Security or any Regulation S Global Capital
Security.

          (c) Definitive Capital Securities.  Except as provided in Section 7.9
or 9.2(f)(i), owners of beneficial interests in a Rule 144A Global Capital
Security or any Regulation S Global Capital Security will not be entitled to
receive physical delivery of certificated Capital Securities ("Definitive
Capital Securities").  Purchasers of Securities (other than QIBs) who are
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) will receive Capital Securities in the form of individual
certificates in definitive, fully registered form without distribution coupons
and with the Restricted Securities Legend set forth in Exhibit A-1 hereto
("Restricted Definitive Capital Securities"); provided, however, that upon
transfer of such Restricted Definitive Capital Securities to a QIB, such
Restricted Definitive Capital Securities will, unless the Rule 144A Global
Capital Security has previously been exchanged, be exchanged for an interest in
a Rule 144A Global Capital Security pursuant to the provisions of Section 9.2.
Restricted Definitive Capital Securities will bear the Restricted Securities
Legend set forth on Exhibit A-1 unless removed in accordance with this Section
7.3 or Section 9.2.

          (d) Authorized Denominations.  The Capital Securities are issuable
only in denominations of $1,000 and any integral multiple thereof.

 SECTION 7.4   Registrar, Paying Agent and Exchange Agent.
               ------------------------------------------ 

          The Trust shall maintain in the Borough of Manhattan, The City of New
York, (i) an office or agency where Capital Securities may be presented for
registration of transfer ("Registrar"), (ii) an office or agency where Capital
Securities may be presented for payment ("Paying Agent") and (iii) an office or
agency where Securities may be presented for exchange ("Exchange Agent").  The
Registrar shall keep a register of the Capital Securities and of their transfer.
The Trust may appoint the Registrar, the Paying Agent and the Exchange Agent and
may appoint one or more co-registrars, one or more additional paying agents and
one or more additional exchange agents in such other locations as it shall
determine.  The term "Registrar" includes any additional registrar, "Paying
Agent" includes any additional paying agent and the term "Exchange Agent"
includes any additional exchange agent.  The Trust may change any Paying Agent,
Registrar, co-registrar or Exchange Agent without prior notice to any Holder.
The Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Administrative Trustees.  The Trust shall notify the
Property Trustee of the name and address of any Agent not a party to this
Declaration.  If the Trust fails to appoint or maintain another entity as
Registrar, Paying Agent or Exchange Agent, the Property Trustee shall act as
such.  The Trust or any of its Affiliates may act as Paying Agent, Registrar, or
Exchange Agent.  The Trust shall act as Paying Agent, Registrar, and Exchange
Agent for the Common Securities.

          The Trust initially appoints the Property Trustee's New York Affiliate
as Registrar and Paying Agent for the Capital Securities.

 SECTION 7.5   Paying Agent to Hold Money in Trust.
               ----------------------------------- 

                                      -38-
<PAGE>
 
          The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of liquidation amounts or Distributions, and will notify the
Property Trustee if there are insufficient funds for such purpose.  While any
such insufficiency continues, the Property Trustee may require a Paying Agent to
pay all money held by it to the Property Trustee.  The Trust at any time may
require a Paying Agent to pay all money held by it to the Property Trustee and
to account for any money disbursed by it.  Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money.  If the Trust or the Sponsor or
an Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent.

 SECTION 7.6   Replacement Securities.
               ---------------------- 

          If a Holder claims that a Security owned by it has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, the Trust shall issue and the Property Trustee shall, upon
written order of the Trust, authenticate a replacement Security if the Property
Trustee's and the Trust's requirements, as the case may be, are met.  An
indemnity bond must be provided by the Holder which, in the judgment of the
Property Trustee, is sufficient to protect the Trustees, the Sponsor, the Trust
or any authenticating agent from any loss which any of them may suffer if a
Security is replaced.  The Trust may charge such Holder for its expenses in
replacing a Security.  Every replacement Security issued and authenticated in
accordance with this Section 7.6 shall represent an undivided beneficial
interest in the Trust.

 SECTION 7.7   Outstanding Capital Securities.
               ------------------------------ 

          The Capital Securities outstanding at any time are all the Capital
Securities authenticated by the Property Trustee except for those canceled by
it, those delivered to it for cancellation, and those described in this Section
as not outstanding.

          If a Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.

          If Capital Securities are considered paid in accordance with the terms
of this Declaration, they cease to be outstanding and Distributions on them
shall cease to accumulate.

          A Capital Security does not cease to be outstanding because one of the
Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.

 SECTION 7.8   Capital Securities in Treasury.
               ------------------------------ 

                                      -39-
<PAGE>
 
          In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Securities
which a Responsible Officer of the Property Trustee actually knows are so owned
shall be so disregarded.

 SECTION 7.9   Temporary Securities.
               -------------------- 

          (a) Until Definitive Capital Securities are ready for delivery, the
Trust may prepare and, in the case of the Capital Securities, the Property
Trustee shall authenticate temporary Securities.  Temporary Securities shall be
substantially in the form of Definitive Capital Securities but may have
variations that the Trust considers appropriate for temporary Securities.
Without unreasonable delay, the Trust shall prepare and, in the case of the
Capital Securities, the Property Trustee shall authenticate Definitive Capital
Securities in exchange for temporary Securities.

          (b) A Global Capital Security deposited with the Clearing Agency or
with the Property Trustee as custodian for the Clearing Agency pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form of
Definitive Capital Securities only if such transfer complies with Section 9.2
and (i) the Clearing Agency notifies the Sponsor that it is unwilling or unable
to continue as Clearing Agency for such Global Capital Security or if at any
time such Clearing Agency ceases to be a "clearing agency" registered under the
Exchange Act and a clearing agency is not appointed by the Sponsor within 90
days of such notice, (ii) a Default or an Event of Default has occurred and is
continuing or (iii) the Administrative Trustees, on behalf of the Trust at its
sole discretion elects to cause the issuance of Definitive Capital Securities.

          (c) Any Global Capital Security that is transferable to the beneficial
owners thereof in the form of Definitive Capital Securities pursuant to this
Section 7.9 shall be surrendered by the Clearing Agency to the Property Trustee
located in the Borough of Manhattan, The City of New York, to be so transferred,
in whole or from time to time in part, without charge, and the Property Trustee
shall authenticate and make available for delivery, upon such transfer of each
portion of such Global Capital Security, an equal aggregate liquidation amount
of Securities of authorized denominations in the form of certificated Capital
Securities.  Any portion of a Global Capital Security transferred pursuant to
this Section shall be registered in such names as the Clearing Agency shall
direct.  Any Capital Security in the form of Definitive Capital Securities
delivered in exchange for an interest in the Global Capital Security shall,
except as otherwise provided by Sections 7.3 and 9.2, bear the Restricted
Securities Legend set forth in Exhibit A-1 hereto.

          (d) Subject to the provisions of Section 7.9(c), the Holder of a
Global Capital Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.

                                      -40-
<PAGE>
 
          (e) In the event of the occurrence of any of the events specified in
Section 7.9(b), the Trust will promptly make available to the Property Trustee a
reasonable supply of certificated Capital Securities in fully registered form
without distribution coupons.

 SECTION 7.10  Cancellation.
               ------------ 

          The Trust at any time may deliver Capital Securities to the Property
Trustee for cancellation.  The Registrar, Paying Agent and Exchange Agent shall
forward to the Property Trustee any Capital Securities surrendered to them for
registration of transfer, redemption, exchange or payment.  The Property Trustee
shall promptly cancel all Capital Securities, surrendered for registration of
transfer, redemption, exchange, payment, replacement or cancellation and shall
dispose of canceled Capital Securities in accordance with its customary
procedures unless the Trust otherwise directs.  The Trust may not issue new
Capital Securities to replace Capital Securities that it has paid or that have
been delivered to the Property Trustee for cancellation or that any Holder has
exchanged.

 SECTION 7.11  CUSIP Numbers.
               ------------- 

          The Trust in issuing the Capital Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders of Capital
Securities; provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.  The Sponsor will promptly notify the Property Trustee
of any change in the CUSIP numbers.


                                  ARTICLE VII
                             DISSOLUTION OF TRUST

 SECTION 8.1   Dissolution of Trust.
               -------------------- 

          (a) The Trust shall automatically dissolve:

          (i) upon the bankruptcy of the Sponsor;

          (ii)  upon the filing of a certificate of dissolution or liquidation
     or its equivalent with respect to the Sponsor; or the revocation of the
     Sponsor's charter and the expiration of 90 days after the date of
     revocation without a reinstatement thereof;

          (iii)  following the distribution of a Like Amount of the Debentures
     to the Holders, provided that, the Property Trustee has received written
     notice from the Sponsor directing the Property Trustee to dissolve the
     Trust (which direction is optional, and except

                                      -41-
<PAGE>
 
     as otherwise expressly provided below, within the discretion of the
     Sponsor) and provided, further, that such direction and such distribution
     is conditioned on the Administrative Trustees' receipt of an opinion of an
     independent tax counsel experienced in such matters, which opinion may rely
     on published rulings of the Internal Revenue Service, to the effect that
     the Holders will not recognize any gain or loss for United States federal
     income tax purposes as a result of the dissolution of the Trust and the
     distribution of Debentures;

          (iv)  upon the entry of a decree of judicial dissolution of the Trust
     by a court of competent jurisdiction;

          (v) 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

          (vi)  the expiration of the term of the Trust provided in Section
     3.14.

          (b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a), after the winding up of the affairs of the Trust
is completed the Administrative Trustees shall execute and file a certificate of
cancellation with the Secretary of State of the State of Delaware.

          (c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.


                                  ARTICLE IX
                             TRANSFER OF INTERESTS

 SECTION 9.1   Transfer of Securities.
               ---------------------- 

          (a) 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 law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.

          (b) The Administrative Trustees shall provide for the registration of
Capital Securities and of the transfer of Capital Securities, which will be
effected without charge but only upon payment (with such indemnity as the
Administrative Trustees 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 Capital Securities, the Administrative Trustees shall cause
one or more new Capital Securities to be issued in the name of the designated
transferee or transferees.  Every Capital Security surrendered for registration
of transfer shall be accompanied by a written instrument of transfer in form
satisfactory to the Administrative Trustees and the Registrar duly executed by
the Holder or such Holder's attorney duly authorized in writing.  Each Capital
Security surrendered for 

                                      -42-
<PAGE>
 
registration of transfer shall be canceled by the Property Trustee. A transferee
of a Capital Security shall be entitled to the rights and subject to the
obligations of a Holder hereunder upon the receipt by such transferee of a
Capital Security. By acceptance of a Capital Security, each transferee shall be
deemed to have agreed to be bound by this Declaration.

          (c) For so long as the Trust Securities remain outstanding, the
Sponsor will covenant (i) to directly or indirectly maintain 100% direct or
indirect ownership of the Common Securities; provided, however, that any
permitted successor of the Sponsor under the Indenture may succeed to the
Sponsor's ownership of such Common Securities, (ii) to use its reasonable
efforts to cause the Trust (x) to remain a business trust, except in connection
with the distribution of Debentures to the Holders of Trust Securities in
dissolution and liquidation of the Trust, the redemption of all of the Trust
Securities, or certain mergers, conversions, consolidations or amalgamations,
each as permitted by this Declaration, and (y) to otherwise continue to be
classified as a grantor trust for United States federal income tax purposes and
(iii) to use its reasonable efforts to cause each Holder of Trust Securities to
be treated as owning an undivided beneficial interest in the Debentures.

 SECTION 9.2   Transfer Procedures and Restrictions.
               ------------------------------------ 

          (a) General.  Except as otherwise provided in Section 9.2(b), if
Capital Securities are issued upon the registration of transfer, exchange or
replacement of Capital Securities bearing the Restricted Securities Legend set
forth in Exhibit A-1 hereto, or if a request is made to remove such Restricted
Securities Legend on Capital Securities, the Capital Securities so issued shall
bear the Restricted Securities Legend, or the Restricted Securities Legend shall
not be removed, as the case may be, unless there is delivered to the Trust and
the Property Trustee such evidence satisfactory to the Sponsor, which shall
include an Opinion of Counsel, as may be reasonably required by the Sponsor,
that neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof are made pursuant to an exception from
the registration requirements of the Securities Act or, with respect to
Restricted Definitive Capital Securities, that such Securities are not
"restricted" within the meaning of Rule 144.  Upon provision of such
satisfactory evidence, the Property Trustee, at the written direction of the
Trust, shall authenticate and deliver Capital Securities that do not bear the
legend.

          (b) Transfers After Effectiveness of a Registration Statement.  After
the effectiveness of a Registration Statement with respect to any Capital
Securities (including a shelf registration statement with respect to the resale
of the Private Exchange Capital Securities), all requirements pertaining to
legends on such Capital Securities will cease to apply (other than the legend
requiring that transfers of Capital Securities be made in blocks having an
aggregate liquidation amount of not less than $100,000), and beneficial
interests in a Capital Security in global form without legends will be available
to transferees of such Capital Securities, upon exchange of the transferring
Holder's Restricted Definitive Capital Security or directions to transfer such
Holder's beneficial interest in the Rule 144A Global Capital Security or the
Regulation S Global Capital Security as the case may be.  No such transfer or
exchange of a Restricted Definitive Capital Security or of an interest in the
Rule 144A Global Capital Security or the Regulation S Global Capital 

                                      -43-
<PAGE>
 
Security shall be effective unless the transferor delivers to the Trust a
certificate in a form substantially similar to that attached hereto as the form
of "Assignment" in Exhibit A-1. Except as otherwise provided in Section 9.2(m),
after the effectiveness of a Registration Statement, the Trust shall issue and
the Property Trustee, upon a written order of the Trust signed by one
Administrative Trustee, shall authenticate a Capital Security in global form
without the Restricted Securities Legend (the "Unrestricted Global Capital
Security") for deposit with the Clearing Agency or its custodian to evidence
transfers of beneficial interests from the (i) Rule 144A Global Capital Security
or the Regulation S Global Capital Security and (ii) Restricted Definitive
Capital Securities.

          (c) Transfer and Exchange of Definitive Capital Securities.  When
Definitive Capital Securities are presented to the Registrar or co-Registrar.

          (x)  to register the transfer of such Definitive Capital Securities;
     or

          (y)  to exchange such Definitive Capital Securities which became
     mutilated, destroyed, defaced, stolen or lost, for an equal number of
     Definitive Capital Securities,

the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Capital Securities surrendered for
registration of transfer or exchange:

          (i) shall be duly endorsed or accompanied by a written instrument of
     transfer in form reasonably satisfactory to the Administrative Trustees and
     the Registrar or co-registrar, duly executed by the Holder thereof or his
     attorney duly authorized in writing; and

          (ii)  in the case of Definitive Capital Securities that are Restricted
     Definitive Capital Securities:

               (A) if such Restricted Capital Securities are being delivered to
     the Registrar by a Holder for registration in the name of such Holder,
     without transfer, shall be accompanied by a certification from such Holder
     to that effect; or

               (B) if such Restricted Capital Securities are being transferred,
     shall be accompanied by:  (i) a certification from the transferor in a form
     substantially similar to that attached hereto as the form of "Assignment"
     in Exhibit A-1, and (ii) if the Trust or Registrar so requests, evidence
     reasonably satisfactory to it as to the compliance with the restrictions
     set forth in the Restricted Securities Legend.

          (d) Restrictions on Transfer of a Definitive Capital Security for a
Beneficial Interest in a Global Capital Security.  A Definitive Capital Security
may not be exchanged for a beneficial interest in a Global Capital Security
except upon satisfaction of the requirements set forth below.  Upon receipt by
the Property Trustee of a Definitive Capital Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Property Trustee and the Administrative Trustees, together with:

                                      -44-
<PAGE>
 
          (i) if such Definitive Capital Security is a Restricted Capital
     Security, a certification (in a form substantially similar to that attached
     hereto as the form of "Assignment" in Exhibit A-1); and

          (ii) whether or not such Definitive Capital Security is a Restricted
     Capital Security, written instructions directing the Property Trustee to
     make, or to direct the Clearing Agency to make, an adjustment on its books
     and records with respect to the appropriate Global Capital Security to
     reflect an increase in the number of the Capital Securities represented by
     such Global Capital Security,

then the Property Trustee shall cancel such Definitive Capital Security and
cause, or direct the Clearing Agency to cause, the aggregate number of Capital
Securities represented by the appropriate Global Capital Security to be
increased accordingly.  If no Global Capital Securities are then outstanding,
the Trust shall issue and the Property Trustee shall authenticate, upon written
order of any Administrative Trustee, an appropriate number of Capital Securities
in global form.

          (e) Transfer and Exchange of Global Capital Securities.  Subject to
Section 9.2(f), the transfer and exchange of Global Capital Securities or
beneficial interests therein shall be effected through the Clearing Agency, in
accordance with this Declaration (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Clearing Agency therefor.

          (f) Transfer of a Beneficial Interest in a Global Capital Security for
a Definitive Capital Security.

          (i) Any Person having a beneficial interest in a Global Capital
     Security may upon request, but only upon 20 days' prior notice to the
     Property Trustee, and if accompanied by the information specified below,
     exchange such beneficial interest for a Definitive Capital Security
     representing the same number of Capital Securities.  Upon receipt by the
     Property Trustee from the Clearing Agency or its nominee on behalf of any
     Person having a beneficial interest in a Global Capital Security of written
     instructions or such other form of instructions as is customary for the
     Clearing Agency or the Person designated by the Clearing Agency as having
     such a beneficial interest in a Restricted Capital Security and a
     certification from the transferor (in a form substantially similar to that
     attached hereto as the form of "Assignment" in Exhibit A-1), which may be
     submitted by facsimile, then the Property Trustee will cause the aggregate
     number of Capital Securities represented by Global Capital Securities to be
     reduced on its books and records and, following such reduction, the Trust
     will execute and the Property Trustee will authenticate and make available
     for delivery to the transferee a Definitive Capital Security.

          (ii)  Definitive Capital Securities issued in exchange for a
     beneficial interest in a Global Capital Security pursuant to this Section
     9.2(f) shall be registered in such names and in such authorized
     denominations as the Clearing Agency, pursuant to instructions from its
     Clearing Agency Participants or otherwise, shall instruct the Property
     Trustee in writing. 

                                      -45-
<PAGE>
 
     The Property Trustee shall deliver such Capital Securities to the Persons
     in whose names such Capital Securities are so registered in accordance with
     such instructions of the Clearing Agency.

          (g) Restrictions on Transfer and Exchange of Global Capital
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in subsection (h) of this Section 9.2 and subsection
(b) of Section 7.9), a Global Capital Security may not be transferred as a whole
except by the Clearing Agency to a nominee of the Clearing Agency or another
nominee of the Clearing Agency or by the Clearing Agency or any such nominee to
a successor Clearing Agency or a nominee of such successor Clearing Agency.

     Prior to the expiration of the restricted period, as contemplated by
Regulation S, beneficial interests in the Regulation S Global Capital Security
may be exchanged for beneficial interests in the Rule 144A Global Capital
Security only if such exchange occurs in connection with a transfer of the
Capital Securities pursuant to Rule 144A and the transferor first delivers to
the Property Trustee a written certificate (in a form substantially similar to
that attached hereto as the "Form of Assignment" in Exhibit A-1) to the effect
that the Capital Securities are being transferred pursuant to and in compliance
with Rule 144A under the Securities Act.

          (h) Authentication of Definitive Capital Securities.  If at any time:

          (i) there occurs a Default or an Event of Default which is continuing,
     or

          (ii)  the Trust, in its sole discretion, notifies the Property Trustee
     in writing that it elects to cause the issuance of Definitive Capital
     Securities under this Declaration,

then an Administrative Trustee on behalf of the Trust will execute, and the
Property Trustee, upon receipt of a written order of the Trust signed by one
Administrative Trustee requesting the authentication and delivery of Definitive
Capital Securities to the Persons designated by the Trust, will authenticate and
make available for delivery Definitive Capital Securities, equal in number to
the number of Capital Securities represented by the Global Capital Securities,
in exchange for such Global Capital Securities.

          (i)   Legend.

          (i) Except as permitted by the following paragraph (ii), each Capital
     Security certificate evidencing the Global Capital Securities and the
     Definitive Capital Securities (and all Capital Securities issued in
     exchange therefor or substitution thereof) shall bear a legend (the
     "Restricted Securities Legend") in substantially the following form:

          THE CAPITAL SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
     STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW.  NEITHER THIS
     CAPITAL SECURITY NOR 

                                      -46-
<PAGE>
 
     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 CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
     OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE
     (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE
     LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH NGC
     CORPORATION (THE "COMPANY") OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER
     OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY
     (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
     DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL
     SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
     ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
     INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
     ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
     NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
     (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
     UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
     (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
     SUBPARAGRAPH (A)(1), (2), (3) OR (7) 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 UNDER THE
     SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY PRIOR TO
     ANY SUCH OFFER, SALE OR 

                                      -47-
<PAGE>
 
     TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
     AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY
     TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D) or (E) TO REQUIRE THAT A
     CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THIS
     CAPITAL SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE TRUST.

     THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
     REPRESENTS AND WARRANTS THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT OR
     OTHER PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
     AS AMENDED ("ERISA") OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
     AS AMENDED, OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
     REASON OF ANY SUCH PLAN'S INVESTMENT IN THE ENTITY AND IS NOT PURCHASING OR
     HOLDING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OR (ii) IT IS
     ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38,
     90-1 or 84-14 WITH RESPECT TO SUCH PURCHASE AND HOLDING.

     SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
     CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
     THIS LEGEND.

and in addition, in the case of the Regulation S Global Capital Security:

     THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND
     MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
     ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES
     ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
     ACT IS AVAILABLE.

          (ii)  Upon any sale or transfer of a Restricted Capital Security
     (including any Restricted Capital Security represented by a Global Capital
     Security) pursuant to an effective registration statement under the
     Securities Act or pursuant to Rule 144 under the Securities Act after such
     registration statement ceases to be effective:

                (A) in the case of any Restricted Capital Security that is a
          Definitive Capital Security, the Registrar shall permit the Holder
          thereof to exchange such 

                                      -48-
<PAGE>
 
          Restricted Capital Security for a Definitive Capital Security that
          does not bear the Restricted Securities Legend and rescind any
          restriction on the transfer of such Restricted Capital Security; and

               (B) in the case of any Restricted Capital Security that is
          represented by a Global Capital Security, the Registrar shall permit
          the Holder of such Global Capital Security to exchange such Global
          Capital Security for another Global Capital Security that does not
          bear the Restricted Securities Legend.

          (iii)  Each Capital Security certificate evidencing the Global Capital
     Securities and the Definitive Capital Securities (and all Capital
     Securities issued in exchange therefor or substitution thereof) also shall
     bear a legend in substantially the following form:

     THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
     HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL
     SECURITIES). ANY SUCH TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A
     LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF
     NO LEGAL EFFECT WHATSOEVER. 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 OF SUCH CAPITAL SECURITIES, AND
     SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH
     CAPITAL SECURITIES.

          (j) Cancellation or Adjustment of Global Capital Security. At such
     time as all beneficial interests in a Global Capital Security have either
     been exchanged for Definitive Capital Securities to the extent permitted by
     this Declaration or redeemed, repurchased or canceled in accordance with
     the terms of this Declaration, such Global Capital Security shall be
     canceled by the Property Trustee. At any time prior to such cancellation,
     if any beneficial interest in a Global Capital Security is exchanged for
     Definitive Capital Securities, Capital Securities represented by such
     Global Capital Security shall be reduced and an adjustment shall be made on
     the books and records of the Clearing Agency and the Registrar, to reflect
     such reduction.

          (k) Obligations with Respect to Transfers and Exchanges of Capital
     Securities.

          (i) To permit registrations of transfers and exchanges, an
     Administrative Trustee on behalf of the Trust shall execute and the
     Property Trustee shall authenticate Definitive Capital Securities and
     Global Capital Securities at the Registrar's or co-registrar's request in
     accordance with the terms of this Declaration.

                                      -49-
<PAGE>
 
          (ii)  Registrations of transfers or exchanges will be effected without
     charge, but only upon payment (with such indemnity as the Trust or the
     Sponsor may require) in respect of any tax or other governmental charge
     that may be imposed in relation to it.

          (iii)  The Registrar or co-registrar shall not be required to register
     the transfer of or exchange of (a) Capital Securities during a period
     beginning at the opening of business 15 days before the day of mailing of a
     notice of redemption or any notice of selection of Capital Securities for
     redemption and ending at the close of business on the day of such mailing;
     or (b) any Capital Security so selected for redemption in whole or in part,
     except the unredeemed portion of any Capital Security being redeemed in
     part.

          (iv)  Prior to the due presentation for registration of transfer of
     any Capital Security, the Trust, the Property Trustee, the Paying Agent,
     the Registrar or any co-registrar may deem and treat the Person in whose
     name a Capital Security is registered as the absolute owner of such Capital
     Security for the purpose of receiving Distributions on such Capital
     Security (subject to Section 2(c) of Annex I) and for all other purposes
     whatsoever, and none of the Trust, the Property Trustee, the Paying Agent,
     the Registrar or any co-registrar shall be affected by notice to the
     contrary.

          (v) 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.

          (l) No Obligation of the Property Trustee.

          (i) The Property Trustee shall have no responsibility or obligation to
     any beneficial owner of a Global Capital Security, a Participant in the
     Clearing Agency or other Person with respect to the accuracy of the records
     of the Clearing Agency or its nominee or of any Clearing Agency Participant
     thereof, with respect to any ownership interest in the Capital Securities
     or with respect to the delivery to any Clearing Agency Participant,
     beneficial owner or other Person (other than the Clearing Agency) of any
     notice (including any notice of redemption) or the payment of any amount,
     under or with respect to such Capital Securities.  All notices and
     communications to be given to the Holders and all payments to be made to
     Holders under the Capital Securities shall be given or made only to or upon
     the order of the registered Holders (which shall be the Clearing Agency or
     its nominee in the case of a Global Capital Security).  The rights of
     beneficial owners in any Global Capital Security shall be exercised only
     through the Clearing Agency subject to the applicable rules and procedures
     of the Clearing Agency.  The Property Trustee may conclusively rely and
     shall be fully protected in relying upon information furnished by the
     Clearing Agency or any agent thereof with respect to its Clearing Agency
     Participants and any beneficial owners.

                                      -50-
<PAGE>
 
          (ii)  The Property Trustee and the Registrar shall have no obligation
     or duty to monitor, determine or inquire as to compliance with any
     restrictions on transfer imposed under this Declaration or under applicable
     law with respect to any transfer of any interest in any Capital Security
     (including any transfers between or among Clearing Agency Participants or
     beneficial owners in any Global Capital Security) other than to require
     delivery of such certificates and other documentation or evidence as are
     expressly required by, and to do so if and when expressly required by, the
     terms of this Declaration, and to examine the same to determine substantial
     compliance as to form with the express requirements hereof.

          (m) Exchange of Series A Capital Securities for Series B Capital
     Securities or Private Exchange Capital Securities. The Series A Capital
     Securities may be exchanged for Series B Securities pursuant to the terms
     of the Exchange Offer. In addition, the Series A Capital Securities may be
     exchanged in a Private Exchange (as defined in the Registration Rights
     Agreement) for Private Exchange Capital Securities under the circumstances
     described in the Registration Rights Agreement. The Property Trustee shall
     make the exchange as follows:

          The Sponsor shall present the Property Trustee with an Officers'
     Certificate certifying the following:

           (A) upon issuance of the Series B Capital Securities or the Private
               Exchange Capital Securities, as the case may be, the transactions
               contemplated by the Exchange Offer or the Private Exchange (as
               defined in the Registration Rights Agreement) have been
               consummated; and

           (B) the number of Series A Capital Securities properly tendered in
               the Exchange Offer and the Private Exchange that are represented
               by a Global Capital Security and the number of Series A Capital
               Securities properly tendered in the Exchange Offer and the
               Private Exchange that are represented by Definitive Capital
               Securities, the name of each Holder of such Definitive Capital
               Securities, the liquidation amount of Capital Securities properly
               tendered in the Exchange Offer or the Private Exchange, as the
               case may be, by each such Holder and the name and address to
               which Definitive Capital Securities for Series B Capital
               Securities or Private Exchange Capital Securities, as the case
               may be, shall be registered and sent for each such Holder.

          The Property Trustee, upon receipt of (i) such Officers' Certificate
and (ii) an Opinion of Counsel (x) to the effect that the Series B Capital
Securities or Private Exchange Capital Securities, as the case may be, have been
registered under Section 5 of the Securities Act and the Indenture has been
qualified under the Trust Indenture Act and (y) with respect to the matters set
forth in Section 3(p) of the Registration Rights Agreement, shall authenticate
(A) a Global Capital 

                                      -51-
<PAGE>
 
Security representing Series B Capital Securities or Private Exchange Capital
Securities, as the case may be, in aggregate liquidation amount equal to the
aggregate liquidation amount of Series A Capital Securities represented by a
Global Capital Security indicated in such Officers' Certificate as having been
properly tendered and (B) Definitive Capital Securities representing Series B
Capital Securities registered in the names of, and in the liquidation amounts
indicated in such Officers' Certificate.

          If, upon consummation of the Exchange Offer or the Private Exchange,
less than all the outstanding Series A Capital Securities shall have been
properly tendered and not withdrawn, the Property Trustee shall make an
endorsement on the Global Capital Security representing Series A Capital
Securities indicating the reduction in the number and aggregate liquidation
amount represented thereby as a result of the Exchange Offer or the Private
Exchange, as the case may be.

          The Trust shall deliver such Definitive Capital Securities
representing Series B Capital Securities or the Private Exchange Capital
Securities, as the case may be, to the Holders thereof as indicated in such
Officers' Certificate.

          (n) Minimum Transfers.  Capital Securities may only be transferred in
minimum blocks of $100,000 aggregate liquidation amount.  Any transfer of
Capital Securities in a block having an aggregate liquidation amount of less
than $100,000 shall be deemed to be void and of no legal effect whatsoever.  Any
such transferee shall be deemed not to be a 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.

 SECTION 9.3   Deemed Security Holders.
               ----------------------- 

          The Trustees may treat the Person in whose name any Security shall be
registered on the books and records of the Trust as the sole owner of such
Security 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 Security on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.

 SECTION 9.4   Book Entry Interests.
               -------------------- 
 
          Global Capital Securities shall initially be registered on the books
and records of the Trust in the name of Cede & Co., the nominee of the Clearing
Agency, and no Capital Security Beneficial Owner will receive a definitive
Capital Security Certificate representing such Capital Security Beneficial
Owner's interests in such Global Capital Securities, except as provided in
Section 9.2 and Section 7.9.  Unless and until definitive, fully registered
Capital Securities certificates have been issued to the Capital Security
Beneficial Owners pursuant to Section 9.2 and Section 7.9:

          (a) the provisions of this Section 9.4 shall be in full force and
     effect;

                                      -52-
<PAGE>
 
          (b) the Trust and the Trustees shall be entitled to deal with the
     Clearing Agency for all purposes of this Declaration (including the payment
     of Distributions on the Global Capital Securities and receiving approvals,
     votes or consents hereunder) as the Holder of the Capital Securities and
     the sole holder of the Global Certificates and shall have no obligation to
     the Capital Security Beneficial Owners;

          (c) to the extent that the provisions of this Section 9.4 conflict
     with any other provisions of this Declaration, the provisions of this
     Section 9.4 shall control; and

          (d) the rights of the Capital Security Beneficial Owners shall be
     exercised only through the Clearing Agency and shall be limited to those
     established by law and agreements between such Capital Security Beneficial
     Owners and the Clearing Agency and/or the Clearing Agency Participants and
     the Clearing Agency receive and transmit payments of Distributions on the
     Global Certificates to such Clearing Agency Participants, provided, that
     solely for the purposes of determining whether the Holders of the requisite
     amount of Capital Securities have voted on any matter provided for in this
     Declaration, so long as Definitive Capital Security certificates have not
     been issued, the Trustees may conclusively rely on, and shall be protected
     in relying on, any written instrument (including a proxy) delivered to the
     Trustees by the Clearing Agency setting forth the Capital Security
     Beneficial Owners' votes or assigning the right to vote on any matter to
     any other Persons either in whole or in part. DTC will make book entry
     transfers among the Clearing Agency Participants.

 SECTION 9.5   Notices to Clearing Agency.
               -------------------------- 

          Whenever a notice or other communication to the Capital Security
Holders is required under this Declaration, the Trustees shall give all such
notices and communications specified herein to be given to the Holders of Global
Capital Securities to the Clearing Agency, and shall have no notice obligations
to the Capital Security Beneficial Owners.

 SECTION 9.6   Appointment of Successor Clearing Agency.
               ---------------------------------------- 

          If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Capital Securities, the Administrative
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Capital Securities.


                                   ARTICLE X
                          LIMITATION OF LIABILITY OF
                   HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

 SECTION 10.1  Liability.
               --------- 

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

                                      -53-
<PAGE>
 
          (i) personally liable for the return of any portion of the capital
     contributions (or any return thereon) of the Holders which shall be made
     solely from assets of the Trust; and

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

          (b) The Debenture Issuer shall be liable for all of the debts and
obligations of the Trust (other than in respect of the payment of principal,
interest and premium, if any, on the Securities) to the extent not satisfied out
of the Trust's assets.

          (c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders
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 10.2  Exculpation.
               ----------- 

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

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


 SECTION 10.3  Fiduciary Duty.
               -------------- 

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

                                      -54-
<PAGE>
 
Property Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of such Indemnified Person.

          (b) Unless otherwise expressly provided herein:

          (i) whenever a conflict of interest exists or arises between any
     Covered Person and any Indemnified Person; or

          (ii)  whenever this Declaration or any other agreement contemplated
     herein or therein provides that an Indemnified Person shall act in a manner
     that is, or provides terms that are, fair and reasonable to the Trust or
     any Holder of Securities,

the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles.  In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.

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

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

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

 SECTION 10.4  Indemnification.
               --------------- 

          (a)  (i)  The Debenture Issuer shall indemnify, to the full extent
     permitted by law, any Company Indemnified Person who was or is a party or
     is threatened to be made a party to any threatened, pending or completed
     action, suit or proceeding, whether civil, criminal, administrative or
     investigative (other than an action by or in the right of the Trust) by
     reason of the fact that he is or was a Company Indemnified Person against
     expenses (including attorneys' fees and expenses), judgments, fines and
     amounts paid in settlement actually and reasonably incurred by him in
     connection with such action, suit or proceeding if he acted in good faith
     and in a manner he reasonably believed to be in or not opposed to the best
     interests of the Trust, and, with respect to any criminal action or
     proceeding, had no 

                                      -55-
<PAGE>
 
     reasonable cause to believe his conduct was unlawful. The termination of
     any action, suit or proceeding by judgment, order, settlement, conviction,
     or upon a plea of nolo contendere or its equivalent, shall not, of itself,
     create a presumption that the Company Indemnified Person did not act in
     good faith and in a manner which he reasonably believed to be in or not
     opposed to the best interests of the Trust, and, with respect to any
     criminal action or proceeding, had reasonable cause to believe that his
     conduct was unlawful.

          (ii)  The Debenture Issuer shall indemnify, to the full extent
     permitted by law, any Company Indemnified Person who was or is a party or
     is threatened to be made a party to any threatened, pending or completed
     action or suit by or in the right of the Trust to procure a judgment in its
     favor by reason of the fact that he is or was a Company Indemnified Person
     against expenses (including attorneys' fees 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 and
     except that no such indemnification shall be made in respect of any claim,
     issue or matter as to which such Company Indemnified Person shall have been
     adjudged to be liable to the Trust unless and only to the extent that the
     Court of Chancery of Delaware or the court in which such action or suit was
     brought shall determine upon application that, despite the adjudication of
     liability but in view of all the circumstances of the case, such Person is
     fairly and reasonably entitled to indemnity for such expenses which such
     Court of Chancery or such other court shall deem proper.

          (iii)  To the extent that a Company Indemnified Person shall be
     successful on the merits or otherwise (including dismissal of an action
     without prejudice or the settlement of an action without admission of
     liability) in defense of any action, suit or proceeding referred to in
     paragraphs (i) and (ii) of this Section 10.4(a), 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) actually and
     reasonably incurred by him in connection therewith.

          (iv)  Any indemnification under paragraphs (i) and (ii) of this
     Section 10.4(a) (unless ordered by a court) shall be made by the Debenture
     Issuer only as authorized in the specific case upon a determination that
     indemnification of the Company Indemnified Person is proper in the
     circumstances because he has met the applicable standard of conduct set
     forth in paragraphs (i) and (ii). Such determination shall be made (1) by
     the Administrative Trustees by a majority vote of a Quorum consisting of
     such Administrative Trustees who were not parties to such action, suit or
     proceeding, (2) if such a Quorum is not obtainable, or, even if obtainable,
     if a Quorum of disinterested Administrative Trustees so directs, by
     independent legal counsel in a written opinion, or (3) by the Common
     Security Holder of the Trust.

          (v) Expenses (including attorneys' fees and expenses) incurred by a
     Company Indemnified Person in defending a civil, criminal, administrative
     or investigative action, suit or proceeding referred to in paragraphs (i)
     and (ii) of this Section 10.4(a) shall, to the fullest extent permitted by
     law, be paid by the Debenture Issuer in advance of the final disposition 

                                      -56-
<PAGE>
 
     of such action, suit or proceeding upon receipt of an undertaking by or on
     behalf of such Company Indemnified Person to repay such amount if it shall
     ultimately be determined that he is not entitled to be indemnified by the
     Debenture Issuer as authorized in this Section 10.4(a). Notwithstanding the
     foregoing, no advance shall be made by the Debenture Issuer if a
     determination is reasonably and promptly made (i) by the Administrative
     Trustees by a majority vote of a Quorum of disinterested Administrative
     Trustees, (ii) if such a Quorum is not obtainable, or, even if obtainable,
     if a Quorum of disinterested Administrative Trustees so directs, by
     independent legal counsel in a written opinion or (iii) the Common Security
     Holder of the Trust, that, based upon the facts known to the Administrative
     Trustees, counsel or the Common Security Holder at the time such
     determination is made, such Company Indemnified Person acted in bad faith
     or in a manner that such Person did not believe to be in or not opposed to
     the best interests of the Trust, or, with respect to any criminal
     proceeding, that such Company Indemnified Person believed or had reasonable
     cause to believe his conduct was unlawful. In no event shall any advance be
     made in instances where the Administrative Trustees, independent legal
     counsel or Common Security Holder reasonably determine that such Person
     deliberately breached his duty to the Trust or its Common or Capital
     Security Holders.

          (vi)  The indemnification and advancement of expenses provided by, or
     granted pursuant to, the other paragraphs of this Section 10.4(a) shall not
     be deemed exclusive of any other rights to which those seeking
     indemnification and advancement of expenses may be entitled under any
     agreement, vote of stockholders or disinterested directors of the Debenture
     Issuer 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
     10.4(a) shall be deemed to be provided by a contract between the Debenture
     Issuer and each Company Indemnified Person who serves in such capacity at
     any time while this Section 10.4(a) is in effect. Any repeal or
     modification of this Section 10.4(a) shall not affect any rights or
     obligations then existing.

          (vii)  The Debenture Issuer or the Trust may purchase and maintain
     insurance on behalf of any Person who is or was a Company Indemnified
     Person against any liability asserted against him and incurred by him in
     any such capacity, or arising out of his status as such, whether or not the
     Debenture Issuer would have the power to indemnify him against such
     liability under the provisions of this Section 10.4(a).

          (viii)  For purposes of this Section 10.4(a), references to "the
     Trust" shall include, in addition to the resulting or surviving entity, any
     constituent entity (including any constituent of a constituent) absorbed in
     a consolidation or merger, so that any person who is or was a director,
     trustee, officer or employee of such constituent entity, or is or was
     serving at the request of such constituent entity as a director, trustee,
     officer, employee or agent of another entity, shall stand in the same
     position under the provisions of this Section 10.4(a) with respect to the
     resulting or surviving entity as he would have with respect to such
     constituent entity if its separate existence had continued.

                                      -57-
<PAGE>
 
          (ix)  The indemnification and advancement of expenses provided by, or
     granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
     when authorized or ratified, continue as to a person who has ceased to be a
     Company Indemnified Person and shall inure to the benefit of the heirs,
     executors and administrators of such a person.

          (b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee or the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee or the Delaware Trustee (each of the Persons in (i) through
(iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense including taxes (other than taxes based on the income
of such Fiduciary Indemnified Person) incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.  The provisions of this
Section 10.4(b) shall survive the resignation or removal of the Property Trustee
or the Delaware Trustee and the satisfaction and discharge of this Declaration.

          (c) The Debenture Trustee agrees to pay the Property Trustee and the
Delaware Trustee, from time to time, such compensation for all services rendered
by the Property Trustee and the Delaware Trustee hereunder as may be mutually
agreed upon in writing by the Sponsor and the Property Trustee or the Delaware
Trustee, as the case may be, and, except as otherwise expressly provided herein,
to reimburse the Property Trustee and the Delaware Trustee upon its or their
request for all reasonable expenses, disbursements and advances incurred or made
by the Property Trustee or the Delaware Trustee, as the case may be, in
accordance with the provisions of this Declaration, except any such expense,
disbursement or advance as may be attributable to its or their negligence or bad
faith.

 SECTION 10.5  Outside Businesses.
               ------------------ 

          Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee (subject to Section 5.3(c)) 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 shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper.  No Covered Person, the Sponsor, the
Delaware Trustee, or the Property Trustee shall be obligated to present any
particular investment or other opportunity to the Trust even if such opportunity
is of a character that, if presented to the Trust, could be taken by the Trust,
and any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular investment
or other opportunity.  Any Covered Person, the Delaware Trustee and the Property
Trustee may engage or be interested in any financial or other transaction with
the Sponsor or any 

                                      -58-
<PAGE>
 
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 10.6  Compensation; Fees.
               ------------------ 

          The Debenture Issuer 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 in writing 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 or bad faith.

          The provisions of this Section 10.6 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 10.6.


                                  ARTICLE XI
                                  ACCOUNTING

 SECTION 11.1  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 11.2  Certain Accounting Matters.
               -------------------------- 

          (a) At all times during the existence of the Trust, the Administrative
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each transaction
of the Trust.  The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied.  The books of account and the records of the Trust shall
be examined by and reported upon as of the end of each Fiscal Year of the Trust
by a firm of independent certified public accountants selected by the
Administrative Trustees.

                                      -59-
<PAGE>
 
          (b) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders, any 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 Administrative Trustees shall endeavor to
deliver all such information statements within 30 days after the end of each
Fiscal Year of the Trust.

          (c) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.

 SECTION 11.3  Banking.
               ------- 

          The Trust may maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Trustee Account and no other funds of the Trust shall be deposited
in the Property Trustee Account.  The sole signatories for such accounts shall
be designated by the Administrative Trustees; provided, however, that the
Property Trustee shall designate the signatories for the Property Trustee
Account.

 SECTION 11.4  Withholding.
               ----------- 

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


                                  ARTICLE XII
                            AMENDMENTS AND MEETINGS

 SECTION 12.1  Amendments.
               ---------- 

                                      -60-
<PAGE>
 
          (a) Except as otherwise provided in this Declaration (including
Section 7 of the Annex I hereto) or by any applicable terms of the Securities,
this Declaration may only be amended by a written instrument approved and
executed by the Administrative Trustees (or if there are more than two
Administrative Trustees a majority of the Administrative Trustees); and

          (i) if the amendment affects the rights, powers, duties, obligations
     or immunities of the Property Trustee, also by the Property Trustee; and

          (ii)  if the amendment affects the rights, powers, duties, obligations
     or immunities of the Delaware Trustee, also by the Delaware Trustee.

          (b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:

          (i) unless the Property 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

                (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
          that all conditions precedent, if any, in this Declaration to the
          execution and delivery of such amendment have been satisfied,

provided, however, that the Property Trustee shall not be required to sign any
such amendment which affects the rights, powers, duties, obligations or
immunities of the Property Trustee; and

          (ii)  to the extent the result of such amendment would be to:

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

                (B) reduce or otherwise adversely affect the powers of the
          Property Trustee in contravention of the Trust Indenture Act; or

                (C) cause the Trust to be deemed to be an Investment Company
          required to be registered under the Investment Company Act;

          (c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any 

                                      -61-
<PAGE>
 
Holder may be effected only with such additional requirements as may be set
forth in the terms of such Securities;

          (d) Section 9.1(c) and this Section 12.1 shall not be amended without
the consent of all of the Holders;

          (e) Article Four shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Securities; and

          (f) The rights of the holders of the Common Securities under Article
Five to increase or decrease the number of, and appoint and remove Trustees
shall not be amended without the consent of the Holders of a Majority in
liquidation amount of the Common Securities; and

          (g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders to:

          (i) cure any ambiguity, correct or supplement any provision in this
     Declaration that may be inconsistent with any other provision of this
     Declaration or to make any other provisions with respect to matters or
     questions arising under this Declaration which shall not be inconsistent
     with the other provisions of the Declaration;

          (ii)  to modify, eliminate or add to any provisions of the Declaration
     to such extent as shall be necessary to ensure that the Trust will be
     classified for United States federal income tax purposes as a grantor trust
     at all times that any Securities are outstanding or to ensure that the
     Trust will not be required to register as an Investment Company under the
     Investment Company Act; and

          (iii)  pursuant to Section 5.7 hereof, to evidence the acceptance of
     the appointment of a successor Trustee or to fill a vacancy created by an
     increase in the number of Administrative Trustees;

provided, however, that in each case such action shall not adversely affect in
any material respect the interests of the Holders, and any amendments of this
Declaration shall become effective when notice thereof is given to the Holders.

 SECTION 12.2  Meetings of the Holders; Action by Written Consent.
               -------------------------------------------------- 

          (a) Meetings of the Holders of any class of Securities may be called
at any time by the Administrative Trustees (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, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading.  The Administrative Trustees
shall call a meeting of the Holders of such class if directed to do so by the
Holders of at least 10% in liquidation amount of such class of Securities.  Such
direction shall be given by delivering to the Administrative Trustees one or
more notices in writing stating that the signing Holders wish to call a meeting
and indicating 

                                      -62-
<PAGE>
 
the general or specific purpose for which the meeting is to be called. Any
Holders calling a meeting shall specify in writing the Security Certificates
held by the Holders exercising the right to call a meeting and only those
Securities specified shall be counted for purposes of determining whether the
required percentage set forth in the second sentence of this paragraph has been
met.

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

          (i) notice of any such meeting shall be given to all the Holders
     having a right to vote thereat at least seven days and not more than 60
     days before the date of such meeting. Whenever a vote, consent or approval
     of the Holders is permitted or required under this Declaration or the rules
     of any stock exchange on which the Capital Securities are listed or
     admitted for trading, such vote, consent or approval may be given at a
     meeting of the Holders.  Any action that may be taken at a meeting of the
     Holders may be taken without a meeting if a consent in writing setting
     forth the action so taken is signed by the Holders 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 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 entitled to vote
     who have not consented in writing. The Administrative Trustees may specify
     that any written ballot submitted to the Security Holder for the purpose of
     taking any action without a meeting shall be returned to the Trust within
     the time specified by the Administrative Trustees;

          (ii)  each Holder may authorize any Person to act for it by proxy on
     all matters in which a Holder 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 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 were stockholders of a
     Delaware corporation;

          (iii)  each meeting of the Holders shall be conducted by the
     Administrative Trustees or by such other Person that the Administrative
     Trustees may designate; and

          (iv)  unless the Business Trust Act, this Declaration, the terms of
     the Securities, the Trust Indenture Act or the listing rules of any stock
     exchange on which the Capital Securities are then listed or trading,
     otherwise provides, the Administrative Trustees, in their sole discretion,
     shall establish all other provisions relating to meetings of Holders,
     including notice of the time, place or purpose of any meeting at which any
     matter is to be voted on by any Holders, waiver of any such notice, action
     by consent without a meeting, the establishment of a record date, quorum
     requirements, voting in person or by proxy or any other matter with respect
     to the exercise of any such right to vote.

                                      -63-
<PAGE>
 
                                 ARTICLE XIII
                      REPRESENTATIONS OF PROPERTY TRUSTEE
                             AND DELAWARE TRUSTEE

 SECTION 13.1  Representations and Warranties of Property Trustee.
               -------------------------------------------------- 

          The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:

          (a) The Property Trustee is a Delaware banking corporation, a national
banking association or a bank or trust company organized under the laws of any
State of the United States or the District of Columbia, in any case with trust
powers 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 Property Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee.  This Declaration has been duly executed and
delivered by the Property Trustee and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);

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

          (d) No consent, approval or authorization of, or registration with or
notice to, any applicable state or federal banking authority is required for the
execution, delivery or performance by the Property Trustee of this Declaration;
and

          (e) The Property Trustee satisfies the requirements set forth in
Section 5.3(a).

 SECTION 13.2  Representations and Warranties of Delaware Trustee.
               -------------------------------------------------- 

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

                                      -64-
<PAGE>
 
          (a) The Delaware Trustee is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with corporate 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 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 constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);

          (c) No consent, approval or authorization of, or registration with or
notice to, any federal banking authority is required for the execution, delivery
or performance by the Delaware Trustee of this Declaration; and

          (d) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware and is a Person that satisfies for
the Trust section 3807(a) of the Business Trust Act.


                                  ARTICLE XIV
                              REGISTRATION RIGHTS

 SECTION 14.1  Registration Rights Agreement.
               ----------------------------- 

          The Holders of the Capital Securities, the Debentures and the Capital
Securities Guarantee are entitled to the benefits of a Registration Rights
Agreement.  In certain limited circumstances set forth in the Registration
Rights Agreement, the Debenture Issuer shall be required to pay Liquidated
Damages with respect to the Debentures and the Trust shall be required to pay
Additional Distributions on the Capital Securities.  Unless otherwise stated,
the term "Distribution", as used in this Declaration, includes such Liquidated
Damages.


                                  ARTICLE XV
                                 MISCELLANEOUS

 SECTION 15.1  Notices.
               ------- 

          All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, overnight courier service or confirmed telecopy, as
follows:

                                      -65-
<PAGE>
 
          (a) if given to the Trust, in care of the Administrative Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Property Trustee, the Delaware Trustee and the
Holders):

                NGC Corporation Capital Trust I
                c/o NGC Corporation
                1000 Louisiana, Suite 5800
                Houston, Texas  77002

                Attention:    John U. Clarke
                              Administrative Trustee
                Telecopy:     (713) 767-8322

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

                First Chicago Delaware Inc.
                300 King Street
                Wilmington, Delaware  19801
                Attention:    Michael J. Majchrzak

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

                The First National Bank of Chicago
                One First National Plaza, Suite 0126
                Chicago, Illinois  60670-0126
                Attention:    Corporate Trust Services Division
                Telecopy:     (312) 407-1708


          (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 to the Property Trustee and the Trust):

                NGC Corporation
                1000 Louisiana
                Houston, Texas  77002

                Attention:    Kenneth E. Randolph
                Telecopy:     (713) 507-6808
 
          (e) if given to any other Holder, at the address set forth on the
books and records of the Trust.

                                      -66-
<PAGE>
 
          All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

 SECTION 15.2  GOVERNING LAW.
               ------------- 

          THIS DECLARATION AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THE HOLDERS OF THE SECURITIES SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.

 SECTION 15.3  Intention of the Parties.
               ------------------------ 

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

 SECTION 15.4  Headings.
               -------- 

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

 SECTION 15.5  Successors and Assigns.
               ---------------------- 

          Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.

 SECTION 15.6  Partial Enforceability.
               ---------------------- 

          If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.

 SECTION 15.7  Counterparts.
               ------------ 

          This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though 

                                      -67-
<PAGE>
 
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.

 SECTION 15.8  No Recourse.
               ----------- 

     The Trust's obligations hereunder are intended to be the obligations of the
Trust and no recourse for the payment of Distributions (including Additional
Distributions, if applicable) on, and the Redemption Price of, Securities, as
applicable, or for any claim upon the Securities or otherwise in respect
thereof, shall be had against any Holder of Capital Securities or any Affiliate
of a Holder of Capital Securities, solely by reason of such Person being a
Holder of Capital Securities or an Affiliate of a Holder of Capital Securities,
it being understood that the Holders of Capital Securities, solely by reason of
being a Holder of Capital Securities, have limited liability (in accordance with
the provisions of the Business Trust Act) for the liabilities and obligations of
the Trust.  Nothing contained in this Section 15.8 shall be construed to limit
the exercise or enforcement, in accordance with the terms of this Declaration,
the Capital Securities Guarantee, the Common Securities Guarantee and the
Indenture, of rights and remedies against the Trust or the Sponsor.
 

                                      -68-
<PAGE>
 
          IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.


                            ------------------------------------------
                            John U. Clarke,  as Administrative Trustee
                  
                  
                            ------------------------------------------
                            Robert D. Doty,  as Administrative Trustee
                  
                  
                            ------------------------------------------
                            Robert T. Ray,  as Administrative Trustee
                  
                  
                            FIRST CHICAGO DELAWARE INC.
                            as Delaware Trustee
                  
                            By:
                  
                  
                            ------------------------------------------
                            Name:
                            Title:
                  
                            THE FIRST NATIONAL BANK OF CHICAGO
                            as Property Trustee
                  
                  
                            By: 
                                --------------------------------------
                                Name:
                                Title:
                  
                            NGC CORPORATION
                            as Sponsor and Debenture Issuer
                  
                  
                            By: 
                                --------------------------------------
                                Name:
                                Title:


                                      -69-
<PAGE>
 
                                    ANNEX I


                                   TERMS OF
                      SERIES A/SERIES B/PRIVATE EXCHANGE
                 8.316% SUBORDINATED CAPITAL INCOME SECURITIES
                           8.316% COMMON SECURITIES


          Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of May 28, 1997 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Securities are set out below (each
capitalized term used but not defined herein has the meaning set forth in the
Declaration or, if not defined in such Declaration, as defined in the Offering
Memorandum referred to below in Section 2(c) of this Annex I):

          1. Designation and Number.
             ---------------------- 

          (a) Capital Securities.  200,000 Series A Capital Securities of the
Trust and 200,000 Series B Capital Securities of the Trust, and 200,000 Private
Exchange Capital Securities, with an aggregate liquidation amount at any time
outstanding with respect to the assets of the Trust of Two hundred million
dollars ($200,000,000), and each with a liquidation amount with respect to the
assets of the Trust of $1,000 per security, are hereby designated for the
purposes of identification only as "Series A 8.316% Subordinated Capital Income
Securities," and "Series B 8.316% Subordinated Capital Income Securities," and
"8.316% Private Exchange Subordinated Capital Income Securities," respectively
(collectively, the "Capital Securities").  The 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 or to conform to the rules
of any exchange or quotation system on or in which the Capital Securities are
listed, traded or quoted.

          (b) Common Securities.  6,200 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of Six
million two hundred thousand dollars ($6,200,000) and a liquidation amount with
respect to the assets of the Trust of $1,000 per security, are hereby designated
for the purposes of identification only as "8.316% Common Securities" (the
"Common Securities").  The certificates evidencing the Common Securities shall
be substantially in the form of Exhibit A-2 to the Declaration, with such
changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice.

          2. Distributions.
             ------------- 

          (a) Distributions payable on each Security will be fixed at a rate per
annum of 8.316% (the "Coupon Rate") of the liquidation amount of $1,000 per
Security (the "Liquidation Amount"), such rate being the rate of interest
payable on the Debentures to be held by the Property 

                                      -1-
<PAGE>
 
Trustee. Distributions in arrears for more than one semiannual period will bear
additional distributions thereon compounded semiannually at the Coupon Rate (to
the extent permitted by applicable law). Pursuant to the Registration Rights
Agreement, in certain limited circumstances the Debenture Issuer will be
required to pay Liquidated Damages (as defined in the Registration Rights
Agreement) with respect to the Debentures. The term "Distributions", as used
herein, includes distributions of any such Liquidated Damages payable unless
otherwise stated. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the Property Trustee and to the extent
the Property Trustee has funds on hand legally available therefor.

          (b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or
duly provided for or, if no Distributions have been paid or duly provided for,
from May 28, 1997, and will be payable semiannually in arrears on June 1 and
December 1 of each year, commencing on December 1, 1997 (each, a "Distribution
Date"), except as otherwise described below.  Distributions will be computed on
the basis of a 360-day year consisting of twelve 30-day months and, for any
period less than a full calendar month, on the basis of the actual number of
days elapsed in such month.  As long as no Event of Default has occurred and is
continuing under the Indenture, the Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment period
at any time and from time to time on the Debentures for a period not exceeding
10 consecutive semiannual periods, including the first such semiannual period
during such period (each an "Extension Period"), during which Extension Period
no interest shall be due and payable on the Debentures, provided that no
Extension Period shall end on a date other than an Interest Payment Date for the
Debentures or extend beyond the Maturity Date of the Debentures.  As a
consequence of such deferral, Distributions will also be deferred.  Despite such
deferral, Distributions will continue to accumulate with additional
Distributions thereon (to the extent permitted by applicable law but not at a
rate greater than the rate at which interest is then accruing on the Debentures)
at the Coupon Rate compounded semiannually during any such Extension Period.
Prior to the termination of any such Extension Period, the Debenture Issuer may
further defer payments of interest by further extending such Extension Period;
provided that such Extension Period, together with all such previous and further
extensions within such Extension Period, may not exceed 10 consecutive
semiannual periods, including the first semiannual period during such Extension
Period, end on a date other than an Interest Payment Date or extend beyond the
Maturity Date of the Debentures.  Payments of accumulated Distributions will be
payable to Holders as they appear on the books and records of the Trust on the
first record date after the end of the Extension Period.  Upon the termination
of any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.

          (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 close of
business on the 15th day of the month preceding the month in which the relevant
Distribution Date occurs, which Distribution Dates correspond to the interest
payment dates on the Debentures.  Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment in respect of the
Global Capital Securities will be made as described under the heading
"Description of Capital Securities -- Form, 

                                      -2-
<PAGE>
 
Denomination, Book-Entry Procedures and Transfer" in the Offering Memorandum
dated May 22, 1997, of the Debenture Issuer and the Trust relating to the
Securities and the Debentures. Payments in respect of Capital Securities held in
certificated form will be made by check mailed to the Holder entitled thereto.
The relevant record dates for the Common Securities shall be the same as the
record dates for the Capital Securities. Distributions payable on any Securities
that are not punctually paid on any Distribution Date, as a result of the
Debenture Issuer having failed to make a payment under the Debentures, will
cease to be payable to the Holder 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. If any date on which Distributions
are payable on the Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay), except that if such next succeeding Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day with the same force and effect as if made on the date
such payment was originally payable.

          (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.

          3. Liquidation Distribution Upon Dissolution.
             ----------------------------------------- 

          In the event of any dissolution of the Trust or the Sponsor otherwise
gives notice of its election to dissolve the Trust pursuant to Section
8.1(a)(iii) of the Declaration, the Trust shall be liquidated by the
Administrative Trustees as expeditiously as the Administrative Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the Holders a Like
Amount (as defined below) of the Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
Holders will be entitled to receive Pro Rata out of the assets of the Trust
legally available for distribution to Holders, after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the liquidation amount of $1,000 per Security plus accumulated and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution").

          "Like Amount" means (i) with respect to a redemption of the
Securities, Securities having a Liquidation Amount equal to the principal amount
of Debentures to be paid in accordance with their terms and (ii) with respect to
a distribution of Debentures upon the liquidation of the Trust, Debentures
having a principal amount equal to the Liquidation Amount of the Securities of
the Holder to whom such Debentures are distributed.

          If, upon any such liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets on hand legally
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Securities shall be paid on a Pro
Rata basis.

                                      -3-
<PAGE>
 
          4. Redemption and Distribution.
             --------------------------- 

          (a) Upon the repayment of the Debentures in whole or in part, at
maturity or upon early redemption, the proceeds from such repayment shall be
simultaneously applied by the Property Trustee (subject to the Property Trustee
having received written notice no later than 45 days prior to such repayment) to
redeem a Like Amount of the Securities at a redemption price equal to (i) in the
case of the repayment of the Debentures at maturity, the Maturity Redemption
Price (as defined below), (ii) in the case of the optional redemption of the
Debentures upon the occurrence and continuation of a Special Event, the Special
Event Redemption Price (as defined below) and (iii) in the case of the optional
redemption of the Debentures in whole or in part at any time other than upon the
occurrence and continuation of a Special Event, the Optional Redemption Price
(as defined below).  The Maturity Redemption Price, the Special Event Redemption
Price and the Optional Redemption Price are referred to collectively as the
"Redemption Price".  Holders will be given not less than 30 nor more than 60
days' notice of such redemption.

          (b)  (i)  The "Maturity Redemption Price", with respect to a
redemption of Securities, shall mean an amount equal to the principal of and
accrued and unpaid interest on the Debentures as of the maturity date thereof.

          (ii)  In the case of an optional redemption, if fewer than all the
outstanding Securities are to be so redeemed, the Securities to be redeemed will
be determined as described in Section 4(f)(ii) below.

          The Debenture Issuer shall have the right (subject to the conditions
in the Indenture) to elect to redeem the Debentures in whole at any time or in
part from time to time, upon not less than 30 days' and not more than 60 days'
notice, at a prepayment price (the "Optional Prepayment Price") equal to the
greater of (i) 100% of the principal amount of the Debentures to be so prepaid
plus accrued and unpaid interest thereon (including Additional Sums and
Liquidated Damages, if any) to the date of prepayment and (ii) the sum of the
present values of the remaining scheduled payments of principal of the
Debentures to be so prepaid and interest thereon (including Additional Sums and
Liquidated Damages, if any) discounted to the date of prepayment, on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months),
at the Treasury Rate (as defined herein) plus 25 basis points plus accrued
interest thereon to the date of prepayment.

          "Comparable Treasury Issue" means the United States Treasury security
selected by the Reference Treasury Dealer as having a maturity comparable to the
remaining term of the Debentures to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Debentures.

          "Treasury Rate" means, with respect to any prepayment date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming 

                                      -4-
<PAGE>
 
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such prepayment
date.

          "Comparable Treasury Price" means, with respect to any prepayment
date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, the average of
the Reference Treasury Dealer Quotations for such prepayment date.

          "Reference Treasury Dealer Quotations" means, with respect to the
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by the Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third business day preceding such prepayment date.

          "Reference Treasury Dealer" means Lehman Brothers Inc. and its
successors; provided however, that if Lehman Brothers Inc. shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.

          Upon such a prepayment of the Debentures, the proceeds from such
prepayment shall be applied by the Property Trustee to redeem a Like Amount of
the Securities, upon not less than 30 nor more than 60 days' notice of a date of
redemption to the holders of the Securities at a redemption price which shall be
equal to the Optional Prepayment Price in respect of the Debentures.

          (c) If at any time an Investment Company Event or a Tax Event (each as
defined below, and each a "Special Event") occurs, the Debenture Issuer shall
have the right (subject to the conditions set forth in the Indenture) at any
time upon not less than 30 nor more than 60 days' notice, to redeem the
Debentures in whole, but not in part, within the 90 days following the
occurrence of such Special Event (the "90 Day Period"), and, simultaneous with
such redemption, to cause a Like Amount of the Securities to be redeemed by the
Trust at the Special Event Redemption Price on a Pro Rata basis.

          "Investment Company Event" means the receipt by the Sponsor and the
Trust of an Opinion of Counsel from counsel experienced in such matters to the
effect that, as a result of the occurrence of a change in law or regulation or a
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, which amendment or change is effective or which
pronouncement or decision is announced on or after May 22, 1997, there is more
than an insubstantial risk that the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company 

                                      -5-
<PAGE>
 
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
Capital Securities.

          "Tax Event" shall occur upon receipt by the Sponsor and the Trust of
an Opinion of Counsel from 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 or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after May 22,
1997, 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.

          The "Make-Whole Amount" shall be equal to the greater of (a) 100% of
the principal amount of the Debentures or (b) the sum, as determined by the
Reference Treasury Dealer, of the present values of the remaining scheduled
payments of principal and interest on the Debentures, discounted to the date of
prepayment on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued and
unpaid interest thereon (including Additional Sums and Liquidated Damages, if
any) to the date of prepayment.

          "Adjusted Treasury Rate" means, with respect to any prepayment date,
the rate per annum equal to (i) the yield, under the heading which represents
the average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity date corresponding to June 1, 2027 (the "Stated Maturity Date") (if no
maturity date is within three months before or after the Stated Maturity Date,
yields for the two published maturities most closely corresponding to the Stated
Maturity Date shall be interpolated and the Adjusted Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date plus (i) 1.03% if such
prepayment date occurs prior to June 1, 1998 and (ii) 0.50% in all other cases.

          "Special Event Redemption Price" shall mean, with respect to a
redemption of Securities, a price equal to the Make-Whole Amount.

                                      -6-
<PAGE>
 
          (d)  On and from the date fixed by the Administrative Trustees for any
distribution of Debentures and liquidation of the Trust:  (i) the Securities
will no longer be deemed to be outstanding, (ii) the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee), as the Holder of the
Capital Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution and any
certificates representing Securities not held by the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee) will be deemed to
represent beneficial interests in a Like Amount of Debentures until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.

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

          (f) The procedure with respect to redemptions or distributions of
Securities shall be as follows:

          (i)  Notice of any redemption of, or notice of distribution of
     Debentures in exchange for, the Securities (a "Redemption/Distribution
     Notice") will be given by the Trust by mail to each Holder 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 Section 4(f)(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.  Each
     Redemption/Distribution Notice shall be addressed to the Holders at the
     address of each such Holder appearing in the books and records of the
     Trust.  No defect in the Redemption/Distribution Notice or in the mailing
     of either thereof with respect to any Holder shall affect the validity of
     the redemption or exchange proceedings with respect to any other Holder.

          (ii)  In the event that fewer than all the outstanding Securities are
     to be redeemed, the particular Securities to be redeemed shall be selected
     on a Pro Rata basis (based upon Liquidation Amounts) not more than 60 days
     prior to the date fixed for redemption from the outstanding Capital
     Securities not previously called for redemption, provided, however, that
     with respect to Holders that would be required to hold less than 100 but
     more than zero Securities as a result of such pro rata redemption, the
     Trust shall redeem Securities of each such Holder so that after such
     redemption such Holder shall hold either 100 Securities or such Holder no
     longer holds any Securities and shall use such method (including, without
     limitation, by lot) as the Trust shall deem fair and appropriate, provided,
     further, that any such proration may be made on the basis of the aggregate
     Liquidation Amount of Securities held by each Holder thereof and may be
     made by making such adjustments as the Trust deems fair and appropriate in
     order that only Securities in denominations of $1,000 or integral multiples
     thereof shall be redeemed. In respect of Capital Securities registered in
     the name of and held of record by the Clearing Agency or its nominee (or
     any successor Clearing 

                                      -7-
<PAGE>
 
     Agency or its nominee) or any nominee, the distribution of the proceeds of
     such redemption will be made to the Clearing Agency and disbursed by such
     Clearing Agency in accordance with the procedures applied by such agency or
     nominee.

          (iii)  If Securities are to be redeemed and the Trust gives a
     Redemption/Distribution Notice, (which notice will be irrevocable), then
     (A) with respect to Capital Securities issued in book-entry form, by 12:00
     noon, New York City time, on the redemption date, provided that the
     Debenture Issuer has paid the Property Trustee a sufficient amount of cash
     in connection with the related redemption or maturity of the Debentures by
     10:00 a.m., New York City time, on the maturity date or the date of
     redemption, as the case requires, the Property Trustee will deposit
     irrevocably with the Clearing Agency or its nominee (or successor Clearing
     Agency or its nominee) funds sufficient to pay the applicable Redemption
     Price with respect to such Capital Securities and will give the Clearing
     Agency irrevocable instructions and authority to pay the Redemption Price
     to the relevant Clearing Agency Participants, and (B) with respect to
     Capital Securities issued in certificated form and Common Securities,
     provided that the Debenture Issuer has paid the Property Trustee a
     sufficient amount of cash in connection with the related redemption or
     maturity of the Debentures, the Property Trustee will pay the relevant
     Redemption Price to the Holders by check mailed to the address of the
     relevant Holder appearing on the books and records of the Trust on the
     redemption date.  If a Redemption/Distribution Notice shall have been given
     and funds deposited as required, if applicable, then immediately prior to
     the close of business on the date of such deposit, or on the redemption
     date, as applicable, Distributions will cease to accumulate on the
     Securities so called for redemption and all rights of Holders so called for
     redemption will cease, except the right of the Holders of such Securities
     to receive the Redemption Price, but without interest on such Redemption
     Price, and such Securities shall cease to be outstanding.

          (iv)  Payment of accumulated and unpaid Distributions on the
     Redemption Date of the Securities will be subject to the rights of Holders
     on the close of business on a regular record date in respect of a
     Distribution Date occurring on or prior to such Redemption Date.

          Neither the Administrative Trustees nor the Trust shall be required to
register or cause to be registered the transfer of (i) any Securities beginning
on the opening of business 15 days before the day of mailing of a notice of
redemption and ending at the close of business on the day of such mailing or
(ii) any Securities selected for redemption except the unredeemed portion of any
Security being redeemed.  If any date fixed for redemption of Securities is not
a Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
next succeeding Business Day falls in the next calendar year, such payment shall
be made on the immediately preceding Business Day, with the same force and
effect as if made on such date fixed for redemption.  If payment of the
Redemption Price in respect of any Securities is improperly withheld or refused
and not paid either by the Property Trustee or by the Sponsor as guarantor
pursuant to the relevant Securities Guarantee, Distributions on such Securities
will continue to accumulate from the original redemption date to the actual date
of payment, in which 

                                      -8-
<PAGE>
 
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the Redemption Price.

          (v)  Redemption/Distribution Notices shall be sent by the Property
     Trustee on behalf of the Trust to (A) in respect of the Capital Securities,
     the Clearing Agency or its nominee (or any successor Clearing Agency or its
     nominee) if the Global Certificates have been issued or, if Definitive
     Capital Security Certificates have been issued, to the Holder thereof, and
     (B) in respect of the Common Securities to the Holder thereof.

          (vi)  Subject to the foregoing and applicable law (including, without
     limitation, United States federal securities laws and banking laws),
     provided the acquiror is not the Holder of the Common Securities or the
     obligor under the Indenture, the Sponsor or any of its 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 Sections 5(b), 6(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights.

          (b) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a majority in liquidation amount
of all outstanding Capital Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Capital Securities.  The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Capital Securities except by subsequent vote of such Holders.  Subject to
Section 2.7 of the Declaration, the Property Trustee shall notify each Holder of
Capital Securities of any notice of default with respect to the Debentures.  In
addition to obtaining the foregoing approvals of such Holders of the Capital
Securities, prior to taking any of the foregoing actions, the Trustees shall
obtain an opinion of counsel experienced in such matters to the effect that the
Trust will not be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such action.

     If an Event of Default under the Declaration has occurred and is
continuing, then the Holders of a Majority in liquidation amount of Capital
Securities have the right to direct the exercise of any trust or power conferred
upon the Property Trustee under this Declaration, including the right to direct
the Property Trustee to exercise the remedies available to it as holder of the
Debentures and the Capital Securities Guarantee.  If an Event of Default under
the Declaration has occurred and is 

                                      -9-
<PAGE>
 
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or in the case of redemption, on the redemption date), then a Holder of
Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or premium, if any, or interest on a
Like Amount of Debentures (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Common Securities Holder will be subrogated to the rights of such
Holder of Capital Securities to the extent of any payment made by the Debenture
Issuer to such Holder of Capital Securities in such Direct Action. In addition,
if the Property Trustee fails to take legal action for an Event of Default of
which the Trustee has knowledge, the Holders of the Capital Securities may, to
the fullest extent permitted by law, take such legal action, to the same extent
as if such Holders of Capital Securities held a Like Amount of Debentures,
without first proceeding against the Property Trustee or the Trust.

          Any approval or direction of Holders of Capital Securities may be
given at a separate meeting of Holders of Capital Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent.  The Property Trustee will cause a notice of any
meeting at which Holders of 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 Capital 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 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 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 be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.

          6. Voting Rights - Common Securities.
             --------------------------------- 

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

          (b) Unless an Event of Default shall have occurred and be continuing,
any Trustee may be removed at any time by the holder of the Common Securities.
If an Event of Default has occurred and is continuing, the Property Trustee and
the Delaware Trustee may be removed at such time by the holders of a Majority in
liquidation amount of the outstanding Capital Securities.  In no event will the
holders of the Capital Securities have the right to vote to appoint, remove or
replace, or increase or decrease the number of, the Administrative Trustees,
which voting rights are vested exclusively in the Sponsor as the holder of the
Common Securities.  No resignation or 

                                      -10-
<PAGE>
 
removal of a Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Declaration.

          (c) So long as any Debentures are held by the Property Trustee, the
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in liquidation amount
of all outstanding Common Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Common Securities.  The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities except by subsequent vote of such Holders.  Subject to
Section 2.7 of the Declaration, the Property Trustee shall notify each Holder of
Common Securities of any notice of default with respect to the Debentures.  In
addition to obtaining the foregoing approvals of such Holders of the Common
Securities, prior to taking any of the foregoing actions, the Trustees shall
obtain an opinion of counsel experienced in such matters to the effect that the
Trust will not be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such action.

          If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (or in the case of redemption, on the redemption date), then a Holder of
Common Securities may institute a Direct Action for enforcement of payment to
such Holder of the principal of or premium, if any, or interest on a Like Amount
of Debentures on or after the respective due date specified in the Debentures.
In connection with such Direct Action, the rights of the Common Securities
Holder will be subordinated to the rights of such Holder of Capital Securities
to the extent of any payment made by the Debenture Issuer to such Holder of
Common Securities in such Direct Action.  Except as provided in the second
preceding sentence, the Holders of Common Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.

          Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent.  The Administrative Trustees will cause a notice of any meeting
at which Holders of Common Securities are entitled to vote, or of any matter
upon which action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of 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.

                                      -11-
<PAGE>
 
          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.
             ------------------------- 

          In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor,
the Property Trustee and the Administrative Trustees, without the consent of the
Holders (i) to cure any ambiguity, correct or supplement any provisions in the
Declaration that may be inconsistent with any other provisions, or to make any
other provisions with respect to matters or questions arising under the
Declaration which shall not be inconsistent with the other provisions of the
Declaration, or (ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
be classified for United States federal income tax purposes as a grantor trust
at all times that any Securities are outstanding or to ensure that the Trust
will not be required to register as an "Investment Company" under the Investment
Company Act; provided, however, that in each case such action shall not
adversely affect in any material respect the interests of any Holder.  Any
amendments of the Declaration pursuant to the immediately preceding sentence
shall become effective when notice thereof is given to the Holders.  Under the
circumstances referred to in Section 12.1(c) of the Declaration, the Declaration
also may be amended by the Trustees and the Sponsor with (i) the consent of
Holders representing a Majority in liquidation amount of all outstanding
Securities, and (ii) receipt by the Trustees of an Opinion of Counsel to the
effect that such amendment or the exercise of any power granted to the Trustees
in accordance with such amendment will not affect the Trust's status as a
grantor trust for United States federal income tax purposes or the Trust's
exemption from status as an Investment Company under the Investment Company Act,
provided that, without the consent of each Holder of Trust Securities, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.

          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
according to the aggregate liquidation amount of the Securities held by the
relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration 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 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 Common
Securities pro rata according to the aggregate liquidation amount of Common
Securities held by the relevant Holder relative to the aggregate 

                                      -12-
<PAGE>
 
liquidation amount of all Common Securities outstanding. In any such proration,
the Trust may make such adjustments as may be appropriate in order that only
securities in authorized denominations shall be redeemed (subject to the minimum
block requirements of Section 9.2(n) of the Declaration).

          9. Ranking.
             ------- 

          The Capital Securities rank pari passu with the Common Securities and
payment thereon shall be made Pro Rata with the Common Securities, except that,
if an Event of Default under the Declaration occurs and is continuing, no
payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Capital Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and other payments to
which they are entitled at such time.

          10. Acceptance of Securities Guarantee and Indenture.
              ------------------------------------------------ 

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

          11. No Preemptive Rights.
              -------------------- 

          The Holders shall have no preemptive or similar rights to subscribe
for any additional securities.

          12. Miscellaneous.
              ------------- 

          These terms constitute a part of the Declaration.

          The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee, the Common Securities Guarantee (as may be appropriate)
and the Indenture (including any supplemental indenture) to a Holder without
charge upon written request to the Sponsor at its principal place of business.

                                      -13-
<PAGE>
 
                                  EXHIBIT A-1

           FORM OF SUBORDINATED CAPITAL INCOME SECURITY CERTIFICATE

                          [FORM OF FACE OF SECURITY]

          [IF THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT: THIS
CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY.  THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY 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
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

          UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

          [IF THIS CAPITAL SECURITY IS A RESTRICTED CAPITAL SECURITY, INSERT:
THE CAPITAL SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW.  NEITHER THIS CAPITAL
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 CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO 

                                      -1-
<PAGE>
 
YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON
WHICH NGC CORPORATION (THE "COMPANY") OR ANY "AFFILIATE" OF THE COMPANY WAS THE
OWNER OF THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY)
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
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
UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D) OR
(E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
REVERSE OF THIS CAPITAL SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO
THE TRUST.

          [IF THIS CAPITAL SECURITY IS A REGULATION S GLOBAL SECURITY, INSERT:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS
AVAILABLE.]

          THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT OR
OTHER PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA") OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF
ANY SUCH PLAN'S INVESTMENT IN THE ENTITY AND IS NOT PURCHASING OR HOLDING SUCH
SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OR (ii) IT IS ELIGIBLE FOR THE

                                      -2-
<PAGE>
 
EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 WITH
RESPECT TO SUCH PURCHASE AND HOLDING.

          THE CAPITAL SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 (100 CAPITAL
SECURITIES).  ANY SUCH TRANSFER OF CAPITAL SECURITIES IN A BLOCK HAVING A
LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER.  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 OF SUCH CAPITAL SECURITIES, AND SUCH TRANSFEREE
SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH CAPITAL SECURITIES.

          SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.

                                      -3-
<PAGE>
 
Number of Series A                       Aggregate Liquidation
Capital Securities                       Amount: _____________

___________________                      CUSIP NO. ___________


         Certificate Evidencing Subordinated Capital Income Securities

                                      of

                        NGC Corporation Capital Trust I

           Series ___ 8.316% Subordinated Capital Income Securities
               (liquidation amount $1,000 per Capital Security)

          NGC Corporation Capital Trust I, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of  [$_________ in
aggregate liquidation amount of Capital Securities of the Trust]/1/ [the
aggregate liquidation amount of Capital Securities of the Trust specified in
Schedule A hereto]/2/ representing undivided beneficial interests in the assets
of the Trust designated the Series __ 8.316% Capital Securities (liquidation
amount $1,000 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 designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Capital Securities represented hereby are issued and shall
in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of May 28, 1997, as the same may be
amended from time to time (the "Declaration"), including the designation of the
terms of the Capital Securities as set forth in Annex I to the Declaration.
Capitalized terms used but not defined herein shall have the meaning given them
in the Declaration.  The Sponsor will provide a copy of the Declaration, the
Capital Securities Guarantee, the Common Securities Guarantee (as may be
appropriate), and the Indenture (including any supplemental indenture) to a
Holder without charge upon written request to the Trust at its principal place
of business.

          Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.


----------------------------
/1/  Insert in Definitive Capital Securities only.
/2/  Insert in Global Capital Securities only.

                                      -4-
<PAGE>
 
          By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Capital Securities
as evidence of indirect beneficial ownership in the Debentures.

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

Dated:


                         NGC CORPORATION CAPITAL TRUST I


                         By:________________________________
                            Name:
                            Administrative Trustee


               PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION

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



                                    The First National Bank of Chicago,
                                    as Property Trustee


                                    By:_________________________
                                         Authorized Signatory


                                      -5-
<PAGE>
 
                         [FORM OF REVERSE OF SECURITY]

          Distributions payable on each Capital Security will be fixed at a rate
per annum of 8.316% (the "Coupon Rate") of the liquidation amount of $1,000 per
Capital Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee.  Distributions in arrears for more than one
semiannual period will bear interest thereon compounded semiannually at the
Coupon Rate (to the extent permitted by applicable law).  Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures.  The term
"Distributions", as used herein, includes distributions of any such Liquidated
Damages payable unless otherwise stated.  A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds on hand legally
available therefor.

          Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or
duly provided for or, if no Distributions have been paid or duly provided for,
from May 28, 1997, and will be payable semiannually in arrears, on June 1 and
December 1 of each year, commencing on December 1, 1997, except as otherwise
described below.  Distributions will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period less than a full calendar
month, on the basis of the actual number of days elapsed in such month.  As long
as no Event of Default has occurred and is continuing under the Indenture, the
Debenture Issuer has the right under the Indenture to defer payments of interest
by extending the interest payment period at any time and from time to time on
the Debentures for a period not exceeding 10 consecutive calendar semiannual
periods, including the first such semiannual period during such period (each an
"Extension Period"), during which Extension Period no interest shall be due and
payable on the Debentures, provided that no Extension Period shall end on a date
other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures.  As a consequence of such deferral,
Distributions will also be deferred.  Despite such deferral, Distributions will
continue to accumulate with additional Distributions thereon (to the extent
permitted by applicable law but not at a rate greater than the rate at which
interest is then accruing on the Debentures) at the Coupon Rate compounded
semiannually during any such Extension Period.  Prior to the termination of any
such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; provided that such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 10 consecutive semiannual periods,
including the first semiannual period during such Extension Period, end on a
date other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures.  Payments of accumulated Distributions will be
payable to Holders as they appear on the books and records of the Trust on the
first record date after the end of the Extension Period.  Upon the termination
of any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.

                                      -6-
<PAGE>
 
          The Property Trustee may, at the direction of the Sponsor, at any time
dissolve the Trust and, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, cause the Debentures to be distributed to
the holders of the Securities in liquidation of the Trust or, simultaneous with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.

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

                                      -7-
<PAGE>
 
                                  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***
-------------------------
***  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 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
     Registrar in addition to, or in substitution for, STAMP, all in accordance
     with the Securities and Exchange Act of 1934, as amended.

                                      -8-
<PAGE>
 
   [Include the following if the Capital Security bears a Restricted Capital
   Securities Legend -

In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:

CHECK ONE BOX BELOW

<TABLE>
<CAPTION>

     <S>    <C>    <C>
         
     (1)    [ ]    exchanged for the undersigned's own account without transfer;
                   or

     (2)    [ ]    transferred pursuant to and in compliance with Rule 144A
                   under the Securities Act of 1933, as amended; or
         
     (3)    [ ]    transferred to a non-U.S. person pursuant to an offshore
                   transaction in compliance with Rule 904 of Regulation S under
                   the Securities Act of 1933, as amended; or
                  
     (4)    [ ]    transferred to an institutional "accredited investor" within
                   the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
                   501 under the Securities Act of 1933, as amended, that is
                   acquiring the Capital Securities 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 of 1933, as amended; or
         
     (5)    [ ]    transferred pursuant to and in compliance with Rule 144 under
                   the Securities Act of 1933, as amended;
         
     (6)    [ ]    transferred pursuant to another available exemption from the
                   registration requirements of the
         
                   Securities Act of 1933, as amended; or 
         
     (7)    [ ]    transferred pursuant to an effective registration statement
                   under the Securities Act of 1933, as amended.

</TABLE>

Unless one of the boxes is checked, the Registrar will refuse to register any of
the Capital Securities evidenced by this certificate in the name of any Person
other than the registered Holder thereof; provided, however, that if box (3),
(4), (5) or (6) is checked, the Registrar may require, prior to registering any
such transfer of the Capital Securities, such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, as
amended; provided, further, that (i) if box (2) is checked, the transferee must
also certify in the form attached hereto that it is a "qualified institutional
buyer" as defined in Rule 144A or (ii) if box (3) or (4) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in the form attached to the Offering Memorandum of the Trust,
dated May 22, 1997.


                                              ___________________________ 
                                              Signature]

                                      -9-
<PAGE>
 
                                 Schedule A*




     The initial number of Capital Securities evidenced by the Certificate to
which this Schedule is attached is _______ (having an aggregate liquidation
amount of $______).  The notations in the following table evidence decreases and
increases in the number of Capital Securities evidenced by such Certificate.

<TABLE>
<CAPTION>
Decrease in Number          Increase in Number        Number of Capital                          
of Capital Securities       of Capital Securities     Securities Remaining   Notation by Registrar 
                                                      After Such Decrease
                                                      or Increase
----------------------------------------------------------------------------------------------
<S>                       <C>                         <C>                    <C>
 
 
 
 
 
 
 
 
 
 
 
 
 
</TABLE>

__________________________
*  Append to Global Capital Securities only.


                                     -10-
<PAGE>
 
                 CERTIFICATE OF QUALIFIED INSTITUTIONAL BUYER



     The undersigned transferee of Capital Securities hereby certifies that (i)
the undersigned is a "qualified institutional buyer" (a "QIB") as defined in
Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), (ii) the undersigned is aware that the transfer of the
Capital Securities to the undersigned is being made in reliance on Rule 144A,
(iii) the undersigned is acquiring the Capital Securities for its own account or
for the account of another QIB over which the undersigned exercises its sole
investment discretion, (iv) the undersigned acknowledges that it has received
such information regarding NGC Corporation as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and (v)
the undersigned is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.

     The undersigned also understands and acknowledges that the Capital
Securities have not been registered under the Securities Act or any other
applicable securities law, are being offered for resale in transactions not
requiring registration under the Securities Act and may not be offered, sold,
pledged or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities laws,
pursuant to an exemption therefrom or in a transaction not subject thereto and,
in each case, in compliance with the terms of the Capital Securities and the
terms of the Amended and Restated Declaration of Trust of NGC Corporation
Capital Trust I, dated as of May 28, 1997, as the same may be amended from time
to time.



                                              _________________________
                                              Signature

                                     -11-
<PAGE>
 
                                  EXHIBIT A-2

                      FORM OF COMMON SECURITY CERTIFICATE

          THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW.  NEITHER THIS COMMON 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, REGISTRATION.

 

                                     A2-1
<PAGE>
 
Number of Common Securities                  Aggregate Liquidation
_________________________                    Amount:  ____________

Certificate Number
CS-____________

                   Certificate Evidencing Common Securities

                                      of

                        NGC Corporation Capital Trust I


                           8.316% Common Securities
                (liquidation amount $1,000 per Common Security)


          NGC Corporation Capital Trust I, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
______________________ (the "Holder") is the registered owner of __________
common securities of the Trust representing undivided beneficial interests in
the assets of the Trust designated the 8.316% Common Securities (liquidation
amount $1,000 per Common Security) (the "Common Securities").  Subject to the
limitations in Section 9.1(c) of the Declaration (as defined below), the Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer.  The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued and shall in all respects be subject to
the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of May 28, 1997, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common Securities
as set forth in Annex I to the Declaration.  Capitalized terms used but not
defined herein shall have the meaning given them in the Declaration.  The
Sponsor will provide a copy of the Declaration, the Common Securities Guarantee,
the Capital Securities Guarantee (as may be appropriate) and the Indenture
(including any supplemental indenture) to a Holder without charge upon written
request to the Sponsor at its principal place of business.

          Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.

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

          IN WITNESS WHEREOF, the Trust has executed this certificate this ___
day of __________, ____.

                                     A2-2
<PAGE>
 
                              NGC Corporation Capital Trust I


                              By:________________________________
                                  Name:
                                  Administrative Trustee



                                     A2-3
<PAGE>
 
                         [FORM OF REVERSE OF SECURITY]

          Distributions payable on each Common Security will be fixed at a rate
per annum of 8.316% (the "Coupon Rate") of the liquidation amount of $1,000 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee.  Distributions in arrears for more than one
semiannual period will bear interest thereon compounded semiannually at the
Coupon Rate (to the extent permitted by applicable law).  Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures.  The term
"Distributions", as used herein, includes distributions of any such Liquidated
Damages payable unless otherwise stated.  A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds available therefor.

          Distributions on the Common Securities will be cumulative, will accrue
from the most recent date to which Distributions have been paid or duly provided
for or, if no Distributions have been paid or duly provided for, from May 28,
1997, and will be payable semiannually in arrears, on June 1 and December 1 of
each year, commencing on December 1, 1997, except as otherwise described below.
Distributions will be computed on the basis of a 360-day year consisting of
twelve 30-day months and, for any period less than a full calendar month, on the
basis of the actual number of days elapsed in such month.  As long as no Event
of Default has occurred and is continuing under the Indenture, the Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period at any time and from time to time on the
Debentures for a period not exceeding 10 consecutive calendar semiannual
periods, including the first such semiannual period during such period (each an
"Extension Period"), during which Extension Period no interest shall be due and
payable on the Debentures, provided that no Extension Period shall end on a date
other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures.  As a consequence of such deferral,
Distributions will also be deferred.  Despite such deferral, Distributions will
continue to accumulate with additional Distributions thereon (to the extent
permitted by applicable law but not at a rate greater than the rate at which
interest is then accruing on the Debentures) at the Coupon Rate compounded
semiannually during any such Extension Period.  Prior to the termination of any
such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; provided that such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 10 consecutive semiannual periods,
including the first semiannual period during such Extension Period, or end on a
date other than an Interest Payment Date for the Debentures or extend beyond the
Maturity Date of the Debentures.  Payments of accrued Distributions will be
payable to Holders as they appear on the books and records of the Trust on the
first record date after the end of the Extension Period.  Upon the termination
of any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.

          The Property Trustee may, at the direction of the Sponsor, at any time
dissolve the Trust and, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, cause 

                                     A2-4
<PAGE>
 
the Debentures to be distributed to the holders to the Securities in liquidation
of the Trust or, simultaneous with any redemption of the Debentures, cause a
Like Amount of the Securities to be redeemed by the Trust.

          Under certain circumstances, the right of the holders of the Common
Securities shall be subordinate to the rights of the holders of the Capital
Securities (as defined in the Declaration), as provided in the Declaration.

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

                                     A2-5
<PAGE>
 
                             _____________________


                                  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)

                                     A2-6
<PAGE>
 
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:

CHECK ONE BOX BELOW
<TABLE>
<CAPTION>
 
     <S>   <C>      <C>
         
     (1)   [ ]      exchanged for the undersigned's own account without
                    transfer; or

     (2)   [ ]      transferred pursuant to and in compliance with Rule 144A
                    under the Securities Act of 1933, as amended; or
         
     (3)   [ ]      transferred to a non-U.S. person pursuant to an offshore
                    transaction in compliance with Rule 904 of Regulation S
                    under the Securities Act of 1933, as amended; or
         
     (4)   [ ]      transferred to an institutional "accredited investor" within
                    the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
                    501 under the Securities Act of 1933, as amended, that is
                    acquiring the Common Securities 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 of 1933, as amended; or
         
     (5)   [ ]      transferred pursuant to and in compliance with Rule 144
                    under the Securities Act of 1933, as amended;
         
     (6)   [ ]      transferred pursuant to another available exemption from the
                    registration requirements of the Securities Act of 1933, as
                    amended; or
                    
     (7)   [ ]      transferred pursuant to an effective registration statement,
                    under the Securities Act of 1933, as amended.

</TABLE>

Unless one of the boxes is checked, the Registrar will refuse to register any of
the Common Securities evidenced by this certificate in the name of any Person
other than the registered Holder thereof; provided, however, that if box (3),
(4), (5) or (6) is checked, the Registrar may require, prior to registering any
such transfer of the Common Securities, such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, as
amended; provided, further, that (i) if box (2) is checked, the transferee must
also certify in the form attached hereto that it is a "qualified institutional
buyer" as defined in Rule 144A or (ii) if box (3) or (4) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in the form attached to the Offering Memorandum of the Trust,
dated May 22, 1997 (as modified to reflect the transfer of Common Securities).
 
                                              ________________________ 
                                              Signature

                                     A2-7
<PAGE>
  
                 CERTIFICATE OF QUALIFIED INSTITUTIONAL BUYER



     The undersigned transferee of Common Securities hereby certifies that (i)
the undersigned is a "qualified institutional buyer" (a "QIB") as defined in
Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, as amended
(the Securities Act), (ii) the undersigned is aware that the transfer of the
Common Securities to the undersigned is being made in reliance on Rule 144A and
(iii) the undersigned is acquiring the Common Securities for its own account or
for the account of another QIB over which the undersigned exercises its sole
investment discretion.

     The undersigned also understands and acknowledges that the Common
Securities have not been registered under the Securities Act or any other
applicable securities law, are being offered for resale in transactions not
requiring registration under the Securities Act and may not be offered, sold,
pledged or otherwise transferred except in compliance with the registration
requirements of the Securities Act or any other applicable securities laws,
pursuant to an exemption therefrom or in a transaction not subject thereto and,
in each case, in compliance with the terms of the Common Securities and the
terms of the Amended and Restated Declaration of Trust of NGC Corporation
Capital Trust I, dated as of May 28, 1997, as the same may be amended from time
to time.



                                              __________________________
                                              Signature

                                     A2-8

<PAGE>
 
 
                                   EXHIBIT B

                             SPECIMEN OF DEBENTURE





                                     -B-1-

<PAGE>
 
 
                                   EXHIBIT C

                              PURCHASE AGREEMENT




                                     -C-1-

<PAGE>
 
                                   EXHIBIT D



                         REGISTRATION RIGHTS AGREEMENT


VEHOU05:50445.1


                                     -D-1-